Newspaper article THE JOURNAL RECORD

FDIC Well Could Go Dry; Banks to Replenish Funds

Newspaper article THE JOURNAL RECORD

FDIC Well Could Go Dry; Banks to Replenish Funds

Article excerpt

Banks will definitely end up paying to replenish the federal Deposit Insurance Fund one way or the other, Oklahoma Bankers Association President Roger Beverage said.

But it shouldn't be through a 20-basis-point deposit assessment increase that penalizes community banks innocent of Wall Street's bad decisions, he said.

"There's resignation, frustration, anger - whatever you want to call it - among bankers who have to pay this assessment," he said. "Oklahoma banks have been doing things the right way for a long time. They've never gone out and made these lousy loans that you find on major investment banks. ... They took care of their customers and helped their communities grow.

"And now, they're being asked to bail out the clowns on Wall Street that took them to the edge of the abyss," he said.

As the government struggles to find a way to bring the nation's economy back to equilibrium, the Federal Deposit Insurance Corp. on Feb. 27 voted to impose a one-time assessment on all banks equal to 20 cents on every $100 of insured deposits in order to quickly restore the reserves of the Deposit Insurance Fund.

Over the last year, a slew of bank failures have sapped billions out of the fund, which was created to insure regular accounts up to $250,000. The fund is now its lowest level in nearly 25 years - $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007. The new fees are expected to raise nearly $27 billion this year to replenish the fund.

FDIC Chairman Sheila Bair has warned that the fund insuring Americans' bank deposits could be wiped out this year without that injection. She also acknowledged, in a letter to bank CEOs, that the new increased fees and hefty emergency premium the agency voted to levy last week will bring a "significant expense" to banks, especially amid a recession and financial crisis when their earnings are under pressure.

"We also recognize that assessments reduce the funds that banks can lend in their communities to help revitalize the economy," Bair wrote in a letter dated Monday to the chief executives of the nation's 8,305 federally insured banks and thrifts.

That's a point Beverage and other community bankers refuse to accept. Bankers groups across the country this week have issued statements of frustration, arguing from the position that smaller banks generally didn't participate in the risky business practices that led larger Wall Street institutions to invest in the "toxic assets" of subprime mortgages and related financial vehicles.

In Oklahoma, where about 95 percent of the banks are on solid footing, Beverage said, the new assessment fees mean about $113 million "coming out of the state in one shot." That's in addition to normal premiums, which brings the total to about $200 million for the year.

"Can our banks afford it? …

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