Magazine article American Banker

FDIC's Deposit Reform Plan Slowed by Politics

Magazine article American Banker

FDIC's Deposit Reform Plan Slowed by Politics

Article excerpt

Donna Tanoue unveiled a gutsy plan March 7 to review the foundations of the deposit insurance system, but then the Federal Deposit Insurance Corp. chairman began backpedaling.

In some respects, Ms. Tanoue is a victim of bad timing.

With her term due to expire in the fall, President Clinton has renominated Ms. Tanoue. But she is still awaiting Senate approval.

Standing between her and confirmation is Senate Banking Committee Chairman Phil Gramm. The powerful and opinionated Republican has not scheduled a hearing and may prefer to wait and see if his fellow Texan, Gov. George W. Bush, is elected President and wants to select his own FDIC chairman.

Regardless, Sen. Gramm made it clear that he is not interested in deposit insurance reform, particularly in doubling the coverage to $200,000 per account.

"I think if anything, $100,000 is too high," he said the day Ms. Tanoue announced the agency's plans. "I'm not going to support raising them (coverage levels) under any circumstances."

His criticism appears to be carrying some weight: since laying out the ambitious proposal in a speech to the Independent Community Bankers of America, Ms. Tanoue and FDIC senior officials have had little to say about reforming deposit insurance.

In fact, by the next day, Ms. Tanoue was much less enthusiastic, taking pains to point out that she had not endorsed any specific change.

However, as she basked in the standing ovation 1,200 ICBA members gave her, Ms. Tanoue made clear she has strong opinions about the current system, including its current maximum of $100,000 of insurance per account.

"In terms of purchasing power, $100,000 isn't what it was in 1980 when the current level of coverage was set," she said. "Had the coverage limit been indexed to inflation, it would now be about $197,000."

Then she added, "We are inclined to think that raising the coverage limit to $200,000 may not substantially elevate the risk of exposure of the funds. …

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