WASHINGTON — The Federal Deposit Insurance Corp. is planning to slash in half a special emergency assessment it announced last week if legislation passes that allows it to borrow more from the Treasury Department, according to sources.

The special fee charged on second-quarter domestic deposits would drop to 10 basis points from the 20-basis point premium the FDIC board approved as an interim rule on Friday, the sources said.

The House is expected to pass a bill later today that includes a provision to raise the FDIC's borrowing authority to $100 billion from $30 billion. Senate Banking Committee Chairman Chris Dodd is expected to introduce a stand-alone bill as early as this afternoon that would temporarily raise the FDIC's borrowing authority to $500 billion.

If the bill becomes law, FDIC Chairman Sheila Bair has told Sen. Dodd she would agree to reduce the special premium, sources said.

Since the agency announced the assessment, which FDIC officials say is necessary to save the Deposit Insurance Fund from falling to zero, bankers and industry representatives have mounted heavy criticism.

Critics say it would come at a time when institutions are already clinging to much-needed capital. Community banks also assert they will be hardest-hit by the fee, saying large banks have contributed most to the market turmoil but have a liability base besides deposits that help them absorb the assessment.

It was unclear Thursday how the agency, if it lowered the premium, would raise the roughly $15 billion it says is needed from the special assessment to bolster fund reserves that last quarter were only 0.4% of insured deposits.

Bair has previously appeared reluctant to tap any of the Treasury line of credit, but sources said she was concerned $30 billion was not a sufficient cushion to retain public confidence in the DIF. A larger cushion would mean the FDIC could take more time to rebuild the fund, sources said.

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