Academic journal article Journal of Accountancy

Congress Recapitalizes Thrift Fund

Academic journal article Journal of Accountancy

Congress Recapitalizes Thrift Fund

Article excerpt

The omnibus appropriations bill of 1996, approved by Congress and President Clinton on September 30, recapitalizes the Savings Association Insurance Fund (SAIF) through a special assessment on SAIF-insured institutions. The special assessment results in a $0.657 fee for every $100 of thrift deposits held on March 31, 1995, or $4.7 billion. Banks and savings institutions had to report the special assessment, which was due November 29, 1996, as a third-quarter expense. The money is expected to recapitalize the SAIF to prepare it for a merger with the Bank Insurance Fund (BIF) by 1999.

Federal Deposit Insurance Corporation (FDIC) Chairman Ricki Heller said the legislation was good for both banks and depositors. "By recapitalizing the SAlE Congress has fixed a structural defect in the deposit insurance system that threatened not only the SAIF but the strength of the deposit insurance system as well," she said.

Also under the BIF-SAIF provisions in the appropriations act. banks and savings institutions must contribute to paying off the $780 million annual interest payments on $8 billion of Financing Corporation (FICO) bonds that were issued in the late 1980s to bail out the savings and loan industry by recapitalizing the defunct Federal Savings and Loan Insurance Corporation. Beginning January 1, 1997, banks insured by the BIF will pay $322 million annually and SAIF-insured institutions will pay $458 million annually toward FICO interest. Payments are due through 1999.

The new law calls for the merger of the two insurance funds only after the BIF and SAIF charters are combined. …

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