Big Institutions Come out against FDIC Reform Bills
Blackwell, Rob, American Banker
Make no mistake, says Eugene A. Miller, the chairman of Detroit-based Comerica Inc.: Large banks oppose deposit insurance reform.
Most big-bank executives have declined to express their views on the subject; some are waiting until the bills have advanced further in the House or Senate. But Mr. Miller said they quietly endorse the position of the Financial Services Roundtable, of which he is also the chairman.
"The banks I talk to -- the larger banks -- are not in favor of any type of a change right now in the system," Mr. Miller said. "They've been opposed to it right from the very beginning."
But most of the heavy lifting to stop the bills has been left to his trade group, whose members are drawn from the chief executives of the 100 largest banks, securities firms, and insurance companies. (Next week, at the group's annual meeting in Scottsdale, Ariz., the banker is scheduled to relinquish the reins to Edward B. Rust Jr. of State Farm Insurance Cos.)
Mr. Miller and the group steadfastly oppose all but a few of the bills' provisions as risks to the banking system. These include the proposed increases, sought by community banks, to the deposit insurance limits, including a 30% hike in general coverage, to $130,000 per account.
Such increases would be ill advised and risk repeating past mistakes, Mr. Miller said. Echoing arguments made by Federal Reserve Chairman Alan Greenspan, he said that the last increase -- in 1980, from $40,000 -- contributed to the savings and loan crisis.
"We are treading on thin ice," Mr. Miller said. "I'm afraid by increasing the coverage we are going to do the same thing again."
Furthermore, Mr. Miller knocked the provisions that would cover 80% of excess in-state municipal deposits up to a $5 million cap. The coverage increase would encourage municipalities to pay less attention to the health of the institutions in which they place their money, he said.
Mr. Miller said his bank has often been called upon to absorb municipal accounts held at troubled institutions. "I've been in this business now for 47 years, and I can't tell you how many times I had to bail out people when state regulators came to me and said, 'We have municipal deposits at this bank, and they are having problems.' "
If the municipal-deposits provision is adopted, he said, municipalities will chase high rates, "and the banks that are paying those rates could be extending their risk side again -- so to me that is not a very good solution."
But Mr. …