Federal Deposit Insurance Corp. Chairman Sheila Bair on Monday reiterated support for charging large banks a fee to help fund future takeovers of systemically important institutions.
Responding to a question about whether the U.S. and European nations should levy a bank tax, Bair said a prefunded system was the best way to ensure that regulators had liquid funds to run a complex resolution, taxpayers would not be burdened and banks would not be subject to the pro-cyclical effect of assessments following a large failure.
"There is a temporary need for working capital as you break up and sell off the institution," Bair said in a interview with CNBC. "We think that is better done through a fund that is assessed in advance. We think frankly that would be better for the industry too."
The House-passed financial overhaul package would establish a resolution account of $200 billion, compared with a $50 billion fund in the pending Senate version. "It's not a bailout fund," Bair said. "It's really a taxpayer protection plan."
She said a prefunded system "would be more predictable … as opposed to assessing" banks "after the fact."
