Magazine article American Banker

Cap Hike Yes, 'Simplification' No

Magazine article American Banker

Cap Hike Yes, 'Simplification' No

Article excerpt

Industry officials said Tuesday that a new study from two prominent economists could help them in their battle for increased deposit insurance coverage.

But they emphasized that they did not agree with all of the report's recommendations, including one to tighten rules so that they prevent consumers from manipulating the system for additional coverage.

The report, by Alan S. Blinder, a managing partner with Promontory Financial Group and former vice chairman of the Federal Reserve Board, and Robert F. Wescott, who was a special assistant to President Clinton for international economics and finance, made several reform recommendations, including a much higher coverage level and indexing coverage to median income.

The paper recommended raising the $100,000 coverage limit to between $125,000 and $150,000 and indexing it to GDP per capita, as long as the Federal Deposit Insurance Corp. is allowed to charge more refined risk-based premiums.

A cap hike faces a tough fight on Capitol Hill, where it has already encountered opposition from Senate Banking Committee Chairman Phil Gramm. Lobbyists said the independent report from Mr. Blinder and Mr. Wescott could sway some who have yet to make up their minds on the issue.

"The value of the Blinder-Wescott piece is that it provides even more evidence to support the notion that the $100,000 limit needs to be raised," said James Chessen, chief economist with the American Bankers Association. …

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