WASHINGTON - Merrill Lynch & Co. and Citigroup Inc.'s Salomon Smith Barney dramatically scaled back the amount of money they swept from uninsured accounts into insured deposits during the second quarter.

The announcements came as another key lawmaker raised concerns that these companies and hundreds of others are "free riders," a term for institutions that have added billions of dollars to insured accounts in the past five years without paying any new premiums and, as a result, diluted the ratio of insurance fund reserves to insured deposits.

But the days of Merrill and Citigroup adding more than $20 billion every three months to insured accounts - as they did in the first quarter - may be over and could dampen a controversy that began last year.

Citi, which has been shifting monies from Salomon accounts to insured deposits at six of its banks, said Wednesday that it added about $5.9 billion in the second quarter. The New York institution had added nearly three times that the previous quarter.

Separately, Merrill announced Tuesday that it had largely finished shifting monies to insured accounts and that deposits at its two banks, in New Jersey and Utah, had remained relatively unchanged in the second quarter.

Both companies attributed the slowdown to the weaker economy and business factors, not political pressure.

A Citi spokeswoman said the declining growth in deposits was "reflective of the greater market environment, coupled with a beginning trend toward fixed-income investments."

A spokesman for Merrill said: "As we have said repeatedly in the past, the transition of existing accounts from money market funds to insured bank deposits would reach this point where it is largely completed, and that means the insured deposits in our banks are largely stabilized. The current slower markets also play a secondary, less influential, role in this stabilization."

The news was relatively good for financial services industry representatives, who have long worried that the influx of deposits shifted by the two institutions could eventually reduce the ratio of reserves to insured deposits below the statutory minimum of 1.25% and trigger industrywide premiums.

But industry representatives said that, though the shifting of funds has slowed, the issue must still be dealt with as part of deposit insurance reform.

"I don't think the issue is going away because it is fundamentally an issue of fairness," said James Chessen, chief economist for the American Bankers Association. "The principle absolutely remains and will be an issue regardless of the impacts that these transfers have already had on the fund. They have certainly diluted the fund, diluted the buffer but have not triggered additional premiums for the industry."

Other representatives agreed with his assertions.

"This is an absolutely key issue because of the specter of the industry paying premiums because of one or two institutions' growth," said Diane Casey, president of America's Community Bankers.

Indeed, Sen. Charles Schumer has joined the list of policymakers who have raised broader concerns about the issue. At a meeting Tuesday with bankers from his home state, the New York Democrat echoed complaints over the more than 900 banks and thrifts that have been chartered since 1996, the last time most financial institutions paid deposit insurance premiums.

Currently 92% of the industry pay no premiums because they fall in the lowest-risk category. But the fact that the newest institutions have never paid any deposit insurance premium rankles many industry officials. Bankers worry that as new banks come into the system their additional deposits could dilute the fund and trigger premiums.

Sen. Schumer told people at the closed-door meeting, sources said, that he understood the argument that many new entrants into the banking system might be getting a free ride on deposit insurance and that this could eventually trigger new assessments.

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