Academic journal article ABA Banking Journal

Ten New Commandments

Academic journal article ABA Banking Journal

Ten New Commandments

Article excerpt

Ten new commandments

Late last year FDIC Chairman L. William Seidman unveiled "ten commandments" for deposit insurance reform, taken from an FDIC report called Deposit Insurance for the Nineties. The "commandments"--actually observations and proposals--represent FDIC's contribution to the debate over deposit insurance that is certain to arise from the Federal Savings and Loan Insurance Corp. crisis. The ten points:

(1) Federal deposit insurance is here to stay.

(2) Federal insurers must operate as much as possible like private insurers.

(3) A federal insurer's mission is to preserve its fund, preventing undue risk taking by insured institutions. To accomplish this, the insurer should not also charter depository institutions.

(4) The insurer's budget must be separate from the regular federal budget. Seidman noted that the current budget system actually penalizes deposit insurers for using funds to stop problems early--and more cheaply.

(5) Insurance premiums should reflect experience. Seidman believes deposit insurers should be able to adjust premiums to reflect costs.

(6) Federal insurers should have the right to decide who is insured. It takes FDIC two years or more to terminate coverage under current rules. …

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