CARLISLE, IOWA - Iowa banks and thrifts will have to cover a big chunk of the nearly $12 million in uninsured deposits of local schools and governments held by Hartford-Carlisle Savings Bank, which regulators shut down Friday.

A 1930s Iowa program called the "sinking fund" guarantees that state and local government treasurers will get back every dime of the $11.7 million they deposited at the $114 million-asset bank, which was closed Friday.

The sinking fund's balance stands at $3.3 million, or $8.4 million short of the lost government funds. As a result, the state will levy a one-time assessment on the roughly 400 Iowa banks and thrifts that accept public funds. Each institution will contribute an average of $21,000, though actual amounts will differ according to the institution's share of the total government deposits statewide.

"It may not be entirely fair, but I think it's very important for Iowa banks to reassure people that if their tax money is lost in a failed institution, it will be the industry and not the taxpayers who shore up the problem," said Sharon Presnall, senior vice president for government relations at the Iowa Bankers Association.

Iowa's sinking-fund program may be unique. Most other states simply buy bonds to collateralize uninsured portions of municipal deposits. Iowa actually tried that system for a while before reverting to the sinking fund last year.

"This is a good, efficient system here," State Treasurer Michael L. Fitzgerald said. "You're ensuring bank stability. And until something happens, there is no cost." The last time Iowa banks and thrifts had to contribute to the sinking fund was during the farm crisis in 1983, after the failure of Bloomfield Bank.

According to the Federal Deposit Insurance Corp., bad loans - some of them apparently fraudulent - caused the failure of the 105-year-old bank here, a town of 3,500 just outside Des Moines.

On Tuesday, House Banking Committee Chairman Jim Leach announced that a Feb. 8 hearing will be held on the recent rash of banks brought down by fraud or subprime lending and asset securitization. The hearing was scheduled in response to the failures of BestBank of Boulder, Colo., and First National Bank of Keystone, W. Va., but a committee spokesman said it would probably include Hartford-Carlisle too.

Rep. Leach, a Republican from Iowa, also plans to use the hearing to promote his bill to strengthen FDIC examination authority.

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