There may be a downside to free deposit insurance premiums, according to Treasury Under Secretary John D. Hawke Jr.
In a speech on Thursday, Mr. Hawke warned that banks could be perceived as receiving a government benefit for free, rather than paying a fair market value.
Now that the Federal Deposit Insurance Corp. has cut its premiums to zero for most banks, Mr. Hawke said the industry will have little leverage for fighting "anticompetitive" laws such as House Banking's proposed Glass- Stegall repeal bill, which would force banks to conduct securities underwriting in costly subsidiaries rather than in the bank itself.
"House Banking Chairman Jim Leach argues these rules are necessary to protect the insurance fund. But if you're paying a fair price, those arguments don't carry any weight," he said at a conference sponsored by the Consumer Federation of America.