Magazine article American Banker

Overcharge Case Doesn't Seem to Sway Court

Magazine article American Banker

Overcharge Case Doesn't Seem to Sway Court

Article excerpt

A federal appeals court on Monday seemed skeptical of a claim that the Federal Deposit Insurance Corp. overcharged banks by billions of dollars.

More than two dozen of the nation's largest banks alleged that the agency erred in 1996 when it charged a special assessment designed to recapitalize the then-struggling Savings Association Insurance Fund. The banks said the FDIC overstated the amount of money it needed.

"At the heart of this case is a fraction," said Carol R. Van Cleef, the attorney who represented the banks before the U.S. Court of Appeals for the District of Columbia Circuit. "We are challenging the amount of the special assessment."

Under the Deposit Insurance Act of 1996, Congress authorized the FDIC to charge a one-time assessment to institutions with deposits insured by the thrift fund in order to ensure that the fund had $1.25 in reserves for every $100 in insured deposits.

In calculating the amount the assessment would need to raise, the agency considered both SAIF-member deposits and so-called Oakar deposits, which are former savings-and-loan deposits held by Bank Insurance Fund members. The banks argued that the FDIC should have exclusively considered SAIF-member deposits when it set the assessment, which would have resulted in lower charges.

Ms. Van Cleef said that had the FDIC considered only SAIF-member deposits, it would have had to raise $1.8 billion to recapitalize the thrift fund, rather than the $4. …

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