Pressure Grows for Speedy Action By FDIC on Cutting Bank Premium

WASHINGTON - Pressure is mounting on the Federal Deposit Insurance Corp. to schedule a public vote on its proposed 83% cut in bank premiums.

A letter drafted by nine senators, including Majority Whip Trent Lott, warns FDIC Chairman Ricki Helfer against playing politics with bankers' money.

The American Bankers Association, in its most forceful and public move to date, weighed in with its own letter to Ms. Helfer.

"We are urging you to move forward ... by making a public announcement setting a date certain when the premiums will be reduced," states a draft of the senators' letter, which a congressional source said could be mailed as early as today. "We believe a premium reduction should not be placed on hold" while Congress searches for a way to bail out the beleaguered thrift fund.

"Holding the premium reduction in abeyance during such a time period may frustrate a solution on this matter," the letter admonishes.

The senators, including four member of the Senate Banking Committee, also asked Ms. Helfer to supply recommendations for recapitalizing the Savings Association Insurance Fund.

Back in January the FDIC announced plans to slash the rates it charges banks to an average of 4.5 cents, but the agency must still adopt the reduction through a vote of its board.

For months, the FDIC said it would take that vote in May. But with the month coming to close, bankers are getting antsy.

"If you were handing a big check ... to a government agency on the promise of a refund that was not legally binding, you'd be pretty nervous," said Edward L. Yingling, ABA's executive director of government relations.

In its May 24 letter ABA, the ABA criticized the FDIC's plan to charge banks the current rate of 23 cents per $100 of domestic deposits through the third quarter, even though the Bank Insurance Fund will reach its reserve target in the second quarter.

Congress mandated that bank premiums be lowered once the fund held $1.25 for every $100 of insured deposits. FDIC Chief Financial Officer William Longbrake said last week that the fund may have met that ratio in late April. If that's the case, the agency will have to refund nearly $2 billion in premiums paid from May 1 through Sept. 30.

But FDIC has always maintained that it will not be able to verify the fund's reserves until mid-September, when analysis of second-quarter call reports yields a precise counting of insured deposits.

In a response to ABA Thursday, FDIC General Counsel William F. Kroener III

He said a board meeting will not be set until the agency's staff finishes reviewing the 3,200 comments letters the proposal attracted.

"A board meeting will be scheduled when the rule-making process is complete," he noted.

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