Banks' FDIC payouts may rise Banks can expect to pay 30% more next year, Taylor says.

November 25, 1991|By New York Times

WASHINGTON -- Premiums that banks pay to the deposit insurance fund are likely to rise sharply next year, perhaps as much as 30 percent, the new chairman of the Federal Deposit Insurance Corp. says.

William Taylor, who replaced L. William Seidman as chairman of the FDIC a month ago, also said Federal regulators have begun to slow their seizures of troubled U.S. banks because of a depletion of the deposit insurance fund.

Taylor said that the premiums may rise to 30 cents for every $100. Only five months ago, the premiums rose to 23 cents for every $100, a jump of 92 percent from 1990 levels.

The FDIC oversees the deposit insurance fund, which stands behind more than $2 trillion in bank deposits and is used for rescuing financially troubled banks.

The inability to deal promptly with large weak banks raises the cost of rescuing them. As big depositors move elsewhere seeking greater safety, the banks have fewer reserves when the government eventually takes them over.

And the higher premiums for deposit insurance are passed on to banks' shareholders, as reduced profits, and to customers, who receive lower interest on deposits and pay higher rates for loans and other services.

Taylor, in a wide-ranging interview last week, seemed pessimistic about the banking industry and the real estate markets, in which banks have invested heavily.

"Is it going to get worse before it gets better?" he asked. "Probably. I hope not, but probably."

Congress has been struggling to approve $70 billion in taxpayer loans to keep the deposit insurance fund afloat, and House and Senate conferees, who were to meet today, were expected to adopt a stripped-down bill bereft of all the Bush administration's sweeping proposals to overhaul the banking industry.

Taylor has been waiting in the wings to spend the money. Already, he said, federal regulators have apparently begun to slow their seizures of troubled U.S. banks because of the condition of the insurance fund. As recently as last month senior FDIC officials were saying that was not so.

"There's a general inhibition by the fact that the FDIC doesn't have much money," Taylor said.

Asked about the impact on other regulatory agencies, which consult with the FDIC about whether to seize banks, he said: "No orders have gone out or directives. But people throughout the organization say, 'We've got this $6 billion bank or $7 billion bank. Should we close it? We don't have any money.' The answer is: Probably yes, it has slowed it down."

The insurance fund administered by the FDIC stands behind more than $2 trillion in bank deposits. It currently has about $2 billion on hand, and is expected to be out of money by the end of next month.

When he succeeded Seidman, who retired after six years as head of the FDIC, many people said Taylor had signed on to the most difficult job in Washington.

Taylor, 52, arrived from the Federal Reserve Board, where he served as the head of the bank supervision division and the right-hand man and friend of the board's chairman, Alan Greenspan. Despite the added responsibilities, his new post pays him $35,000 less than his $150,000 salary at the Federal Reserve.

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