WASHINGTON — Federal Deposit Insurance Corp. Chairman Sheila Bair signaled Tuesday the agency may lower the cost of certain debt guarantees under its program to stabilize the liquidity markets.
The FDIC is set to finalize a rule Friday that grants temporary coverage of all senior unsecured debt and checking deposits that do not bear interest. The industry has criticized certain aspects of the interim rule issued last month, including a 75-basis-point fee on the debt.
In testimony at a House Financial Services Committee hearing on the federal bailout, Ms. Bair said the agency would consider setting different rates for different types of debt covered by the program. She also said the FDIC is reconsidering the coverage of certain short-term borrowings, which the industry complained is too costly.
"We are evaluating carefully all the comments received and may make some changes to the program when we adopt a final rule," she said in testimony. "For example, we are considering suggestions with regard to whether the debt guarantee program should cover very short term funding or whether we should have a tiered fee structure based upon the maturity of the debt guaranteed."
In several comment letters, bankers and other industry representatives said the cost of the debt coverage could make the program prohibitive for some institutions.
The debt guarantee would last until June 30, 2012, and would only cover debt issued between Oct. 14 and June 30, 2009. The deposit coverage would last until the end of next year.
All institutions are receiving the deposit and debt protection free-of-charge until Dec. 5, after which point institutions must opt out if they wish to avoid paying the fees.