Magazine article American Banker

Brokered Funds Not to Blame for '84 Bank Woes: House Report 'Refutes Rationale' Behind FDIC, FHLBB Restrictions

Magazine article American Banker

Brokered Funds Not to Blame for '84 Bank Woes: House Report 'Refutes Rationale' Behind FDIC, FHLBB Restrictions

Article excerpt

DENVER -- A House subcommittee report due for release this week concludes that brokered deposits have played no role in recent bank crises, one congressman said Friday.

"The study shows that brokered funds have nothing to do with the troubles at Empire or the Financial Corporation," said Rep. Doug Barnard Jr., D-Ga., a member of the House Banking Committee and chairman of the government operations subcommittee on commerce, consumer, and monetary affairs. He was referring to Empire Savings & Loan Association, Mesquite, Tex., which failed this year, and to the recently troubled Financial Corporation of America of Los Angeles.

"I wasn't at all surprised at that conclusion," Mr. Barnard said in an interview here during the annual conference of the Bank Administration Institute.

On Wednesday, the report, prepared by Mr. Barnard's subcommittee, will be voted and then passed on to the full Government Operations Committee for approval before being made public, a staffer for Mr. Barnard said Friday in Washington. The study, the staffer noted, is a comprehensive and statistical examination of the role of brokered funds in all banks, but especially in failed banks.

Brokered funds are bought and sold among financial institutions, often through third-party money brokers in the form of certificates of deposit -- from those banks having excess funds to those seeking funds. Insignificant Role for Brokered Funds

The House study, the staffer said, "refutes the rationale behind the two banking agencies' ruling" -- i. …

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