Newspaper article THE JOURNAL RECORD

FDIC May Need Cash Infusion, Admits Brady

Newspaper article THE JOURNAL RECORD

FDIC May Need Cash Infusion, Admits Brady

Article excerpt

WASHINGTON (AP) - Treasury Secretary Nicholas F. Brady acknowledged Friday that the fund insuring commercial bank deposits may need a cash infusion, but pledged the money will come from the industry, not taxpayers.

Brady, in a speech to the Securities Industry Association, said his department was ``evaluating a range of contingency plans that would shore up the Bank Insurance Fund.''

However, he said, ``any such plan would draw only on banking industry resources to assure the soundness of the fund without imposing a burden on the taxpayer.''

``Responsibility for the fund will be placed squarely on the shoulders of the industry,'' he said. ``In fact, responsible banking organizations are already coming forward to accept this burden.''

Separately, Federal Deposit Insurance Corp. Chairman L. William Seidman, in a speech to the Association of Bank Holding Companies, outlined some of the options under consideration.

They include:

- Raising the deposit insurance premiums banks pay to the fund.

- Imposing a one-time assessment on all banks.

- Requiring banks to purchase preferred stock from the FDIC.

Seidman said the bank fund, although it is expected to lose money for the third consecutive year in 1990, ``is solvent now and we believe we can meet our obligations as we see them.''

However, he noted Federal Reserve Chairman Alan Greenspan's declaration that the economy has slipped into a ``meaningful downturn'' and warned, ``it likely will be a different story (for the bank fund) if we do, in fact, have a prolonged economic slowdown.''

The fund, which had $18.3 billion at the start of 1988, likely will fall to $10 billion by the end of this year.

Seidman slightly increased his estimate of the expected 1990 loss to the fund. …

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