Federal Deposit Insurance Corp. Chairman Sheila Bair signaled Tuesday that her agency may lower the cost of certain debt guarantees under its program to stabilize the liquidity markets.
The FDIC is set to finalize a rule Friday that will grant temporary coverage of all senior unsecured debt and checking deposits that do not bear interest. The industry has criticized certain aspects of an interim rule issued last month, including a 75-basis-point fee for the coverage.
In testimony at a House Financial Services Committee hearing on the federal bailout, Ms. Bair said the agency would consider setting different rates for different types of debt covered by the program. She also said the FDIC is reconsidering the coverage of certain short-term borrowings. The industry had complained that the coverage is too costly.
"We are evaluating carefully all the comments received and may make some changes to the program when we adopt a final rule," she said in testimony. "For example, we are considering suggestions with regard to whether the debt guarantee program should cover very short-term funding, or whether we should have a tiered fee structure based upon the maturity of the debt guaranteed."
In several comment letters, bankers and other industry representatives said the cost of the debt coverage could make the program prohibitive for some institutions.