Merger mania is endangering the insurance funds, and politics is preventing a rational solution, Federal Deposit Insurance Corp. Chairman Donna A. Tanoue said Wednesday.

In a speech to the Exchequer Club, Ms. Tanoue said combining the Bank Insurance Fund and the Savings Association Insurance Fund would make them bigger, less concentrated geographically, and safer.

"As megamergers increase, the health of the funds increasingly depends on the health of the 25 largest institutions," she said. The failure of a group of these or even a single one could cause "widespread problems."

Neither of the financial modernization bills passed recently by the Senate and the House would combine the funds, however.

"Why even bother talking about this? It's not even on the table anymore," said Bert Ely, the president of the consulting firm Ely & Co.

Controversy over the thrift charter has been the main obstacle to merging the funds in recent years. Banks have demanded the elimination of the charter-which they consider unfairly permissive-in exchange for a merger. But the thrift industry has not taken the bait.

In an interview after the speech, Ms. Tanoue acknowledged that hopes for a quick fix are dim.

But she pointed out several bright spots on the horizon. One is the upcoming merger of the American Bankers Association and America's Community Bankers, the thrift trade group, which have repeatedly locked horns over the thrift charter issue.

"Our government relations department hasn't looked at this issue for a long time," said James D. McLaughlin, the ABA's director of regulatory affairs. "That'll have to be revisited."

Another bright spot is a soon-to-be-released FDIC "white paper" on potential dangers to the insurance funds, Ms. Tanoue said. It explores the hypothetical impact of various bank and thrift failure scenarios on the insurance funds, she said, and will bolster the agency's argument for merging the funds.

Combining the funds would also eliminate any chance of a premium differential between the two, a problem that in the past has led financial institutions to try to shift deposits from one fund to the other, she said.

Having a single fund would also make life simpler for the 846 banks and thrifts that hold both SAIF and BIF deposits and therefore get two assessment notices quarterly, Ms. Tanoue added.

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