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Now-needy FDIC collected little in premiums
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| Contributor | RP |
| Last Edited | RP Mar 11, 2009 06:21pm |
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| Category | General |
| Media | Newspaper - Boston Globe |
| News Date | Thursday, March 12, 2009 12:00:00 AM UTC0:0 |
| Description | The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.
The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.
Hurley agreed with Bair's analysis of the FDIC's dilemma. "Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles. |
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