WASHINGTON -- Raising the specter of another huge taxpayer bailout, the White House has estimated that the program that insures bank deposits will show a deficit sometime next year, government officials said yesterday.
And after that, they said, the hole will only grow deeper.
The projection by the Office of Management and Budget, made in the budget request the White House will send to Congress on Feb. 4, is the first official estimate to become public that suggests that the bank insurance fund could be insolvent as early as 1992.
The White House projection is that by the end of next year, the fund will have a deficit of $4 billion and that by 1995 the shortfall will be $23 billion.
A taxpayer rescue could be averted through increased industry contributions, but the insurance fund's troubles would still be felt by bank depositors and other customers through increased fees and lower rates paid on deposits.
The fund has posted three consecutive years of losses, and is now at its lowest ratio of insurance to deposits since its creation in 1934.
Because of the growing number of failures of large banks, the fund is expected to show record losses for both last year and this year, totaling $9 billion. That would leave it with about $4 billion by the end of this year.
Administration officials have struggled to distinguish the plight of the fund and the commercial banking industry from that of the nation's savings and loans.
The bailout of that industry could cost taxpayers as much as $500 billion over 40 years.
But the latest estimates on the bank fund and the failure of the banking industry to agree on a solution provide the strongest indication so far that a bailout to protect bank deposits may also be needed.
"The Treasury is looking at a budget that has a black hole and saying our first job is to fill that black hole," a bank lobbyist said.
Industry representatives have been meeting with regulators and Treasury officials this week to try to find a way to rebuild the insurance fund through industry contributions in a way that would not cripple banks, many of which have been posting anemic profits.
"They are still far from any agreement," said L. William Seidman, chairman of the Federal Deposit Insurance Corp.
He added that within the next month, the FDIC would probably be considering another increase in the premiums that banks pay to the insurance fund.
On Jan. 1, the premium paid by banks to the fund rose to 19.5 cents for every $100 in deposits, from 12 cents.
Lobbyists are predicting that it could soon be increased to at least 23 cents. For the first nine months of 1990, the industry earned about 60 cents for each $100 in deposits.
The White House estimate is based on the expectation that the premium will increase to 23 cents, an 18 percent jump over the current payments and a 92 percent rise over the 12 cents paid last year.
Its projections for losses are based upon an economic model that compares the capital and quality of assets of banks with the trends shown by similar institutions that failed.
A similar method has been used by the Congressional Budget Office, which will present its latest forecasts on the health of the insurance fund at a congressional hearing Tuesday.