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FDIC could seek bailout from banks
2009-09-22
WASHINGTON - Healthy big banks may lend billions to shore up the government fund that insures regular deposit accounts, according to a report Tuesday. The fund maintained by the Federal Deposit Insurance Corp. has suffered major losses from bank failures during the financial crises. The fund is at its lowest point since 1992, at the height of the savings-and-loan crisis. The bank loans would allow the FDIC to avoid using a credit line with the Treasury that FDIC Chairman Sheila Bair is reluctant to tap, The New York Times reported, citing senior regulators. Bankers and lobbyists strongly support the plan. Another possibility for replenishing the fund, which insures deposit accounts of up to $250,000, is a special assessment on banks, but that would hit profits at a time when the industry has just started to stabilize. The FDIC may settle on a hybrid plan: borrowing from healthy banks and levying a fee industrywide. A spokesman for the agency did not immediately return a call for comment Tuesday morning. The FDIC estimates bank failures will cost the fund around $70 billion through 2013. Ninety-four banks have failed so far this year. Hundreds more are expected to fall in coming years largely because of souring loans for commercial real estate. 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 is down from $13 billion at the end of March, and $45.2 billion in the second quarter of 2008. Bair last week said the FDIC board would meet at the end of the month to consider options including taking Treasury funds, assessing fees on banks in advance and again increasing the fees they must pay. "We don't want to stress the industry too much at this time, when they're still in the process of recovery," 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. The move cut by about two-thirds the amount of special fees to be levied on banks and thrifts compared with an earlier plan, which had prompted a wave of protests by small and community banks. 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. Banks and thrifts paid an average premium of 6.3 cents last year. 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.
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