Community activists last week called on federal banking regulators to earmark any excess reserves in the deposit insurance funds for those financial institutions with strong community reinvestment ratings.

Both the Bank Insurance Fund and the Savings Association Insurance Fund exceed the mandated reserve ratio of 1.25%. The bank fund had $29.8 billion at midyear, or $1.40 for every $100 in insured deposits, and the thrift fund had $9.1 billion, or $1.29 for every $100. If $950 million in secondary reserves are counted, the thrift fund's reserve ratio is 1.42%. Some lawmakers in the past year have proposed legislation to rebate the excess but it has not advanced.

If the government were to return excess reserves, the reimbursements should be selective, the Greenlining Institute argued in a Sept. 2 letter to the four federal banking regulators.

"Should the pressure mount to return 'excess' reserves, we urge a surgeon's scalpel, not a bureaucrat's sledgehammer," leaders and members of the group wrote.

An American Bankers Association official called Greenlining's suggestion "completely unacceptable." -- Katharine Fraser

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