their marketplace. In June 1985, William Isaac, then chairman of the Federal Deposit Insurance Corp., told a U.S. Senate subcommittee that "troubled banks are twice as likely as all banks as a group to hold significant amounts" of these funds. Indeed, this controversial funding source was viewed as a culprit in the collapse of many thrifts across the country in the late 1980s. A decade later, regulators are still concerned about the instruments, though less so than in the past. "Brokered deposits in and of themselves are not such a bad thing, but they are harder to manage," says Kathryn Dick, director of treasury and market risk at the Office of the Comptroller of the Currency. "They are hot money." The biggest reason for the eased worries is that banks are in better shape than they were 10 years ago. "The regulatory environment hasn't changed, but the economic environment has," Ms. Dick says. "The fact of the matter is, there is a lot of capital in the bank industry right now." The OCC follows a clear-cut approach to sizing up individual banks' use of brokered deposits. Explains Ms. Dick: "A well-capitalized bank can use brokered deposits in any way, shape, or form. An adequately capitalized bank has to get permission from the regulators for use and it comes down to what they are paying for them and where they raise them. An undercapitalized bank cannot use brokered deposits."

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