Banking Industry Would Pay Price for Reforms in Deposit Insurance

By Blackwell, Rob | American Banker, June 13, 2000 | Go to article overview

Banking Industry Would Pay Price for Reforms in Deposit Insurance


Blackwell, Rob, American Banker


In the debate over deposit insurance reform, the focus to date has been on the benefits. The two insurance funds may be merged, with coverage doubled to $200,000 per account. The size of the funds may be capped so institutions could eventually stop paying premiums. The Federal Deposit Insurance Corp. may be forced to refund some money it has already collected from banks and thrifts. But Congress rarely awards such gifts without some strings. Topping the list of trade-offs are higher premiums and added consumer protections in the form of tighter privacy controls, increased punishment for predatory lenders, and stricter Community Reinvestment Act compliance. Diane M. Casey, president of America's Community Bankers, raised the issue in a recent interview. "If you go to $200,000 and that safety net is there, what's the price?" Ms. Casey said. "You've got two prices. One is an actual premium and the other cost is what new regulatory burdens would come with it." Ms. Casey said that if coverage is increased, Congress might revisit the issue of lifeline banking, or low-cost checking accounts to low-income people. "If the banks ask for double the coverage and don't want to pay higher premiums, they will be faced with a laundry list of items to pay for it," said Bert Ely, an Alexandria, Va.-based independent financial consultant with Ely & Co. Banks may be forced to get a customer's written permission before sharing his financial information -- the "opt-in" privacy formula advocated by the White House, he said. Plans to rein in predatory lenders could also be attached. If consumer advocates successfully lobby for new protections or services, Karen M. Thomas, director of regulatory affairs for the Independent Community Bankers of America, said her members would still probably support legislation expanding deposit insurance coverage. "A lot of our members feel even if they have to pay for it, this is something that is going to benefit them over the long term," she said. Community bankers expect higher coverage would lead to more deposits, which could be used to fund more loans. More insurance also could convince customers to keep their money in hometown banks rather than invest it in large banks considered "too big to fail." "In a world of ever-larger financial conglomerates adequate levels of deposit insurance are critical for community banks to attract the funds they need in order to lend in their communities," she said. "Inflation has eroded the value of deposit insurance in half." Edward L. Yingling, lead lobbyist for the American Bankers Association, said it may be possible to win a clean deposit insurance reform bill, noting the industry won passage of the 1994 interstate banking law without any trade-offs. But he acknowledged that pushing for deposit insurance reform does involve both political and economic risks. "There definitely is a political risk," he said Monday. "The risks are the usual assortment of consumer issues like lifeline banking and CRA and then privacy is a risk on every bill these days." To keep unwanted provisions out of the legislation, the industry needs to position deposit insurance reform as beneficial to consumers and local communities, as well as a way to strengthen the entire financial system, Mr. Yingling said. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Banking Industry Would Pay Price for Reforms in Deposit Insurance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.