FDIC chief weighs 'all options' to restock fund
WASHINGTON - The head of the Federal Deposit Insurance Corp. says she is "considering all options, including borrowing from Treasury," to replenish the dwindling fund that insures bank deposits.
WASHINGTON - The head of the Federal Deposit Insurance Corp. says she is "considering all options, including borrowing from Treasury," to replenish the dwindling fund that insures bank deposits.
"I never say never," FDIC Chairwoman Sheila Bair told an audience at Georgetown University yesterday.
Bair's remarks go beyond what she said just three weeks ago. She had been asked then about tapping the Treasury after the fund that insures regular deposit accounts up to $250,000 hit its lowest point since 1992, at the height of the savings-and-loan crisis. "Not at this point in time," she said Aug. 27.
The FDIC estimates bank failures will cost the fund $70 billion through 2013.
The FDIC's fund has slipped to 0.22 percent of insured deposits, below a congressionally mandated minimum of 1.15 percent. The $10.4 billion in the fund at the end of June was down from $13 billion at the end of March, and $45.2 billion in the second quarter of 2008.
The FDIC board will meet at the end of the month and will likely put out several options, Bair said yesterday. Those include tapping a Treasury credit line, assessing fees on banks in advance, and again increasing the fees that banks must pay.
"We don't want to stress the industry too much at this time," she said.
Congress in May more than tripled the amount the FDIC could borrow from the Treasury if needed to restore the insurance fund, to $100 billion from $30 billion.
The FDIC then adopted a new system of special fees paid by U.S. financial institutions that shifted more of the burden to bigger banks to help replenish the insurance fund.
Bair had earlier promised a reduction in fees charged to banks if the Treasury credit line could be expanded.
The FDIC emergency premium, to be collected from all federally insured institutions, is 5 cents for every $100 of a bank's assets minus its so-called Tier 1, or regulatory capital, as of June 30. A measure of a bank's health, Tier 1 capital includes common and preferred stock as well as intangible assets such as tax losses that can be used to reduce future earnings.
In addition, the FDIC raised the regular insurance premiums for banks to between 12 and 16 cents for every $100 in deposits starting in April, from a range of 12 to 14 cents.
