Monday, March 9, 2009

Small Bank Bailout of Wall Street Halved

Related: Small Banks to Bailout Wall Street

"FDIC agrees to cut emergency bank fee" By Associated Press | March 6, 2009

WASHINGTON - The head of the Federal Deposit Insurance Corp. agreed to halve a new fee on banks in exchange for Congress more than tripling the agency's authority to tap federal aid, if needed to replenish the deposit insurance fund.

Word of the move by FDIC chairman Sheila Bair came four days after she warned that the fund insuring deposits could be wiped out this year without the new fees on banks and thrifts. Banks have been chafing over the new fees, saying they will place an extra burden on an already struggling industry.

Bair is agreeing to cut the new emergency premium, to be collected from all federally-insured institutions on Sept. 30, to 10 cents for every $100 of their insured deposits from the 20 cents the FDIC approved last Friday. That compares with an average premium of 6.3 cents paid by banks and thrifts last year.

At the same time, the FDIC has been seeking a permanent increase in its line of credit with the Treasury Department to $100 billion from $30 billion. The agency has never drawn on that long-term credit line, but Bair told lawmakers that such an increase "would leave no doubt that the FDIC will have the resources necessary to address future contingencies and seamlessly fulfill the government's commitment to protect insured depositors against loss."

Housing rescue legislation headed for approval by the House yesterday includes the boosted borrowing authority for the FDIC. --more--"