Back when Congress passed the Federal Deposit Insurance Corporation Improvement Act in 1991, bankers and their friends called the new law all sorts of names.

Among the epithets that graced the pages of American Banker at the time were "punitive," "extremely costly," "counterproductive," and "310 pages of ways to terrorize bankers."

Now, a little more than four years later, "FDICIA is still viewed as a bogeyman" by bankers, says Karen Shaw Petrou, president of the Washington bank consulting firm ISD/Shaw.

But Ms. Petrou, the very expert who predicted four years ago that the legislation would prove "extremely costly," is one of a number of consultants, analysts, and the like who now think the law has actually helped the banking industry.

"It's turned out in general to be a constructive piece of legislation," she said. Especially helpful, in her view, is a section of the law that requires regulators to emphasize that banks come up with stronger internal controls to limit risk.

"As Daiwa and Barings demonstrated last year, internal controls are at least as important to prudential banking as capital," she said.

Meanwhile, at the American Bankers Association, chief economist James Chessen argues that by requiring regulators to take prompt corrective action against undercapitalized banks and thrifts, and require the FDIC to charge risky institutions more for deposit insurance, the legislation paved the way for much lower premiums for most banks.

"There are many provisions in FDICIA which fundamentally changed how the FDIC will operate in the future, and most of those were very good provisions," Mr. Chessen said.

James J. McDermott Jr., president of the brokerage firm Keefe, Bruyette & Woods, was highly critical of the act when it passed and still knocks it for hitting banks with new rules while leaving their nonbank competitors alone.

But he also now believes that the law helped clear the way for the banking industry's remarkable recovery of the last four years.

"It was kind of like castor oil," he said. "In the sense that it helped restore credibility to banks, the medicine was necessary at the time - but there were harsh applications."

All this is music to the ears of Richard S. Carnell, now assistant Treasury secretary for financial institutions, who as senior counsel of the Senate Banking Committee in 1991 was a principal author of the legislation.

Mr. Carnell used to spend a lot of his time defending what he calls act's "core provisions" - risk-based premiums, prompt corrective action, and least-cost resolution of failed institutions by the FDIC. He wrote law- journal articles, made speeches, and fumed about the "culture of ad hoc discretion" that maintained Congress shouldn't tie regulators' hands with specific capital tripwires.

These days, he can save his breath. "There's an increasing recognition that all three reforms are beneficial, both to public interest generally and to depository institutions specifically, because they reduce the FDIC's risk exposure," he said.

Even Mr. Carnell does not defend all of the 1991 law - its Truth-in- Savings section has been especially unpopular - but he and others say many of the law's most intrusive requirements have been improved since 1991 by Congress and regulators.

And Mr. Carnell argues that by making Congress and the public more confident about the soundness of banks and the deposit insurance system, the act has cleared the way for lawmakers and regulators to ease up on banking rules that don't affect safety and soundness.

Comptroller of the Currency Eugene A. Ludwig said as much in a 1993 speech, arguing that the law had helped "make possible renewed pursuit of new products and services for the banking industry."

Still, there are doubters. Many of them.

Alan Tubbs, president of Maquoketa State Bank in Maquoketa, Iowa, and ABA president in 1991, agrees that FDICIA's risk-based premiums have been a good thing. But that's about it.

"The health of the banking industry improved because of the health of the economy - not FDICIA," he said.

William Isaac, a former FDIC chairman who now heads Secura Group, a Washington-based bank consulting firm, is even harsher.

"I don't see any redeeming virtues in FDICIA at all," he said. "I think there will come a day when we will really regret that we have it on our books."

The law's biggest problem, Mr. Isaac said, is prompt corrective action. "I honestly worry about what we're going to do when we have a crisis and regulators need to exercise some judgment and flexibility and they can't because of this law," he said.

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