You knew FDIC regulators were talented, but did you know they can milk cows? Or, rather, they can pay for cows to be milked?
NPR reported today that due to the failure of New Frontier Bank in Greeley, Colorado, farmers who had loans with the bank were in danger of losing their crops and their cattle.
Therefore, the FDIC stepped in to pay for the cows.
FDIC on the Ground and Acting
It is easy to think of a government agency like the FDIC as a bunch of suits, disengaged from reality and living on taxpayer funds. But what the FDIC is doing today with banks is actually very hands on.
In the case of New Frontier, the bank had about $800 billion of agricultural loans out to farmers. More like lines of credit, these loans are commonly used to fund operations.
In other words, when New Frontier goes bankrupt, so can a lot of farmers who depend on that bank for working capital. That could result in a lot of dead animals and wasted opportunity.
These are the kind of situations the FDIC travels into town to visit. So far, the FDIC has spent $35 million on the New Frontier dilemma.
Bad Loans Sold Off to Investors at Auction
The FDIC is not a bank, though, and does not intend to stay around to collect on those $800 billion in loans. Instead, loans are auctioned off to investors, who then negotiate with borrowers.
If you have deposit accounts such as CDs, savings accounts, or money market accounts, it’s wise to realize the importance of the FDIC.
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