WASHINGTON -- The Federal Deposit Insurance Corp. told a powerful House committee chairman Monday that the government has no choice but to insure a new tax-exempt deposit product.

The FDIC is one of two banking agencies criticized by House Energy and Commerce Committee Chairman John D. Dingell last month for sanctioning the "Retirement CD," a product designed to help banks compete with annuities.

The Office of the Comptroller of the Currency also faced a June 13 deadline for responding to Rep. Dingell's concerns, which were laid out as 12 questions in May 25 letters to both agencies. A spokeswoman for the Comptroller said the agency's answer would be delivered this week.

Patent Pending

American Deposit Corp. developed the new product and has a patent pending. The Pine, Colo.-based company hopes to license the certificate of deposit to banks nationwide.

Typically, a new deposit product does not have to be cleared with Washington regulators. But the potential impact of this product is so great that it generated widespread interest even before it was offered by a bank. The regulators weighted in after getting numerous calls from reporters and bankers.

The OCC studied the Retirement CD for six months.and on May 12 ruled that the product could be offered. The same day, the FDIC agreed that the product carried federal deposit insurance.

Blackfeet National Bank, a tiny institution in Browning, Mont., is the only bank to license the product from American Deposit so far.

'Qualifies as a Deposith

FDIC acting Chairman Andrew C. Hove Jr. told Rep. Dingell Monday that, because "the Retirement CD qualifies as a deposit . . . we are required by law to insure it."

Rep. Dingell had asked the OCC and FDIC to withdraw their approvals and ban the product. "Withdrawal of the advisory opinion would not be appropriate," Mr. Hove wrote.

Comptroller of the Currency Eugene A. Ludwig also is expected to defend his agency's decision to allow introduction of the product.

In this letter to regulators, Rep. Dingell said the Retirement CD is illegal because it crosses the barrier between banking and commerce set up by the Glass-Steagall Act.

However, regulators think the product is a deposit -- not an insurance product.

With the Retirement CD, a depositor selects a maturity date and may withdraw up to two-thirds of the principal and interest then. The bank pays out the balance in monthly installments that are guaranteed to continue as long as the customer lives.

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