problems in the depressed Southwest have become so acute, banking
experts say, that they could create the largest one-year drain in
history on the government agency that insures deposits at the
Some officials of the Federal Deposit Insurance Corp., with the
$1 billion bailout of First RepublicBank Corp. underway, are
estimating that the agency could end up paying as much as $4 billion
this year to solve banking problems in Texas alone.
While such losses would not deal the $18 billion fund that
insures deposits at the nation's banks a crippling blow, says FDIC
Chairman L. William Seidman, the losses would represent the biggest
one-year financial drain the agency has endured in years and could
leave the FDIC with total assets of less than $16 billion, the
Moreover, analysts are predicting that the agency would likely
come under pressure to begin rebuilding those lost resources early
next year by imposing higher insurance premiums on the banking
``This is a year of big hits for the FDIC,'' said James J.
McDermott Jr., a bank analyst at the firm of Keefe, Bruyette &
``After the government cleanup in Texas, the banking industry
may face one of two options - higher insurance premiums or imposing
premiums on foreign deposits,'' said Lawrence W. Cohn, senior
banking analyst for the Merrill Lynch Capital Markets Group.
The immediate trouble facing the FDIC involves the failure, or
near-failure, of two of the largest commercial banking institutions
in Texas: the First RepublicBank Corp. and the First City
Bancorporation of Texas Inc.
Both banks have been hurt by bad energy and real estate loans.
Dallas-based First RepublicBank, the state's largest banking
company, with $33.2 billion in assets, announced on Tuesday that its
financial condition had reached such a state that it had asked the
FDIC for aid. On Thursday, the FDIC agreed to a $1 billion capital
infusion which officials said could grow.
Meanwhile, First City, based in Houston, with assets of $12
billion, is having trouble persuading its bondholders to accept a
1987 rescue plan that would pay them 35 to 45 cents on the dollar
for the debt securities.
According to Seidman, the agency took about a $1 billion loss on
the First City bailout plan last year. He said that if any aspects
of that plan were eventually renegotiated, the extra cost to the
agency would be nominal or nil. But despite the lack of added
costs, the First City case has again drawn attention to banking
problems in Texas, raising fears of a further loss of confidence.
Concerning the First RepublicBank rescue, Seidman conceded that
even the most favorable deal for the agency would be costly. First
RepublicBank has almost $4 billion in non-performing loans, and
other banking experts have estimated that to attract a potential
buyer for the bank, the FDIC would have to inject $2 billion to $3
billion of its own funds. …