WASHINGTON -- The chairman of Federal Deposit Insurance Corp., L. William Seidman, said yesterday that the government's fund that protects bank deposits, already at its lowest level in history, would probably lose $5 billion next year, moving it perilously closer to insolvency.
That is the most dire portrait yet drawn by the government of the fund's problems. The fund has incurred increasing losses, paying out more than it has received in premiums from banks, as the government has had to compensate depositors at banks that have failed in recent years.
Such a loss next year, on top of expected losses this year of at least $4 billion, would leave the fund with about $4 billion. And much of that money might not be readily available in cash.
Mr. Seidman also predicted that 170 to 200 banks would probably fail next year, comparable to the number of failures expected this year.
His remarks, made on the NBC News program "Meet the Press" and in an interview later, went beyond recent glum forecasts about the fund by the General Accounting Office and the Congressional Budget Office.
His projections, the first official estimates for 1991, are based on "inside information from our examiners in the field," he said.
"It's a fund that's so weak that it needs to be recapitalized," Mr. Seidman said in the interview. "Nineteen ninety-one is not going to be a good year."
Mr. Seidman and Treasury Secretary Nicholas F. Brady, who also appeared on "Meet the Press," said that the cost of shoring up the declining fund would be borne by banks and not by taxpayers.
The government is already deeply involved in a bailout of the savingsand loan industry that the administration currently estimates could cost taxpayers as much as $130 billion, excluding interest payments.
But the banking industry is currently suffering a serious decline in earnings, and many economists suggest that the federal government must change how it regulates the nation's banks.
The administration is preparing a package of proposals scheduled to be released next month for overhauling the banking system. Among them will be recommendations on fixing the insurance fund, largely by increasing the contributions from banks.
In June, the insurance fund had 60 cents for every $100 in deposits covered. Mr. Seidman's prediction yesterday means that the fund could be down to about 18 cents for every $100 in deposits by the end of next year.
Experts have generally agreed that the minimum safe level for the fund should be $1.25 for every $100 in deposits, based on actuarial calculations of the problems the fund could encounter.
Last week, Mr. Seidman increased his estimates of losses for 1990 to at least $4 billion, from $3 billion. He said yesterday that 80 percent of the losses reflected anticipated bank failures in the coming months.
Today, a House banking subcommittee will release a report that paints an even bleaker picture of the deposit insurance fund. That report is based on economic projections for the next three years.
Mr. Seidman said his estimate is "not based on an economic model or anything like that."
If Mr. Seidman's forecast is correct, 1991 would be the fourth consecutive year of losses and the worst year in the history of the deposit-insurance fund, even though premiums will be increased by 62.5 percent on Jan. 1.
In September, regulators decided to increase bank premiums in January to 19.5 cents for each $100 in deposits , from 12 cents.