Bank Insurance Fund

A top federal regulator said today the fund protecting commercial bank deposits is under "very substantial stress" and probably will suffer a third consecutive loss this year. L. William Seidman, chairman of the Federal Deposit Insurance Corp., said, "We may well have another loss in the current year." He told the Senate Banking Committee the loss could drop reserves in the fund to between 50 cents and 60 cents per $100 in bank deposits.

Despite support from an honor roll of prominent California banking experts, a savings and loan owned and operated by an Irvine company has been shut down by regulators, who said it was critically undercapitalized. Waterfield Bank of Germantown, Md., purchased in 2008 by Affinity Financial Corp. of Irvine, was closed Friday after suffering heavy losses on mortgages it had made before the acquisition. Unable to find a buyer, the Federal Deposit Insurance Corp. said it would liquidate the failed institution at a loss of $51 million to the bank insurance fund.

The Federal Deposit Insurance Corp. said Tuesday that its bank insurance fund, which insures 13,200 banks, fell for the second consecutive year to about half the level the law requires. The fund that backs up the nation's federally insured bank deposits declined by $851 million in 1989 to $13.2 billion, when 207 banks failed or required government assistance to remain open, the FDIC said in a preliminary, unaudited financial report. The 1989 loss was down from a $4.

As banks continue to struggle and collapse during the recession -- the industry lost $3.7 billion in the second quarter, and 81 institutions have failed so far this year -- the head of the Federal Deposit Insurance Corp. today sought to assure Americans that their deposits were not in danger. "The FDIC was created specifically for times such as these," Chairwoman Sheila Bair told reporters. "Our resources are strong. Your insured deposits are safe." But the fund that covers up to $250,000 in individual bank accounts is shrinking as banks collapse and the FDIC's list of "problem institutions" continues to swell -- up to 416 in second-quarter data the agency released today, from 305 in the first quarter.

The director of the Congressional Budget Office bluntly warned Tuesday that the bank insurance fund will run out of money late this year and will need to borrow cash from the Treasury if it is to continue rescuing depositors in financially crippled banks. But CBO director Robert D. Reischauer said the banking industry, which supports the fund with annual premiums, should be able to repay such borrowing over the next five years, making a direct taxpayer bailout unnecessary.

The nation's Bank Insurance Fund has fallen below its required level for the first time since 1995, regulators said Wednesday, increasing the chance of new fees on banks to replenish the fund, reformation of the deposit-insurance system, or both. Experts see no widespread problems for banks, however. Although the recession has hurt some institutions, total bank earnings were $21.7 billion in the first quarter this year--the first time quarterly profits exceeded $20 billion.

The federal insurance pool that protects bank depositors from losses on savings remains under "very substantial stress" and could lose another $2 billion this year, L. William Seidman, chairman of the Federal Deposit Insurance Corp., told Congress on Tuesday. In comments before the Senate Banking Committee, Seidman said such a loss could send the FDIC's reserves plunging to 50 cents for each $100 of insured deposits, down from 70 cents now.

FDIC Fund Recovered Last Year: The Federal Deposit Insurance Corp. said its pool of funds to protect depositors swelled to a $13.1-billion surplus as the number of bank failures hit a 12-year low. The FDIC, which administers the Bank Insurance Fund, said the surplus marked a massive turnaround from twin deficits in 1991 and 1992. The regulatory agency cited improved industry conditions and the agency's cost-control efforts as the main reasons for the fund's strong performance.

Bank Insurance Fund Has Deficit of $7 Billion: The federal bank insurance fund had a deficit of $7 billion at the end of last year, reflecting money set aside to cover future bank failures, the Federal Deposit Insurance Corp. announced. Despite the deficit, accounts of up to $100,000 are protected because the agency has $30 billion in additional borrowing authority from the Treasury. The FDIC said it does not expect to use any of this money until later in the year.

Faced with a rising caseload of failing banks, the Federal Deposit Insurance Corp. has decided it can't be overly picky about who buys the carcasses. The insurance fund's board voted Wednesday to back down from a plan to require private equity firms to maintain an unusually high capital-to-assets ratio for failed banks they buy. The FDIC board voted to lower to 10%, from a proposed 15%, a basic measure of the minimum capital that private equity investors must maintain for three years after buying a bank.

The nation's Bank Insurance Fund has fallen below its required level for the first time since 1995, regulators said Wednesday, increasing the chance of new fees on banks to replenish the fund, reformation of the deposit-insurance system, or both. Experts see no widespread problems for banks, however. Although the recession has hurt some institutions, total bank earnings were $21.7 billion in the first quarter this year--the first time quarterly profits exceeded $20 billion.

The Federal Deposit Insurance Corp. on Tuesday approved a plan to rescue the savings and loan deposit insurance fund by having thrifts make a one-time payment of $4.5 billion. The five-member FDIC board unanimously passed rules to rescue the Savings Assn. Insurance Fund, a week after Congress included the rescue language in a broader bank reform bill. The law eliminated the possibility of additional taxpayer financing for the thrift crisis, which cost taxpayers about $481 billion.

Before congressional representatives recess this month to hit the campaign trail, they should vote to bolster the deposit insurance fund for savings and loan associations. If they don't, all taxpayers could be left holding a very expensive bag, for while the S&L industry has never been healthier, the Savings Association Insurance Fund (SAIF) is underfunded and casts an uncomfortable shadow from the 1980s over the thrift industry.

The Federal Deposit Insurance Corp., citing a healthy banking industry and growing economy, Tuesday cut the premiums banks must pay to insure customers' deposits to the lowest rate ever. Starting Jan. 1, the nation's healthiest banks--or more than 9 out of 10 of the 11,000 banking institutions--will see their premiums drop to zero from the current 4 cents for each $100 of insured deposits.

Federal Reserve Board Chairman Alan Greenspan on Thursday strongly endorsed proposed legislation that would convert the nation's savings and loan associations into commercial banks, signaling the impending end of a 62-year-old industry devoted exclusively to housing finance. The S & L crisis of the 1980s wiped out hundreds of thrifts, and the drastically shrunken industry no longer needs a specially designated role to encourage home ownership, legislators and policy-makers have decided.

The nation's healthy banks could save up to $4.4 billion annually in premiums for deposit insurance under a drastically reduced rate structure approved Tuesday. The Federal Deposit Insurance Corp. board, by a 4-0 vote, agreed to slash premiums banks pay into the insurance fund, a reduction that could go into effect by September. The FDIC manages the fund, which insures deposits in member banks for up to $100,000 per account in the event a bank fails.

FDIC Fund at Record $23.2 Billion: Near-record profits and declining failures in the banking industry enabled the fund that insures commercial bank deposits to reach a new high at the end of the first quarter. The balance sets the stage for deposit insurance premiums to decline. The first-quarter balance is up 6% from the end of last year and 52% from the same time in 1994. The Washington-based Federal Deposit Insurance Corp.