The Federal Deposit Insurance Corp. has a problem: So far this year, it has spent only $3.4 billion closing failed banks.

That equals only 7.6% to 10.3% of the losses the FDIC has predicted it will sustain in 1992 and 1993.

Normally, the slower-than-projected pace of closings would be cause for celebration. But in a year that the FDIC proposed hiking deposit premiums 22%, cynical bankers are wondering whether the agency is exaggerating the industry's troubles to justify higher charges.

And in a year in which the President is struggling to keep in his job, cynics are wondering if the agency isn't trying to help him politically by keeping bad banks from failing and threatening the nation's fragile economic recovery.

"Those who keep crying wolf eventually have to produce that wolf, or people will stop listening," said industry consultant Bert Ely.

Gloom-and-Doom Approach

FDIC Chairman William Taylor, the man in the middle of the controversy, is ignoring the critics and sticking with the official projection: An unspecified number of banks holding $168 billion to $236 billion in assets will fail this year and next. The cost to the FDIC will be anywhere from $26 billion to $35 billion.

That forecast is darker than the results of the past five, disastrous years combined. The FDIC - which weathered record bank failures in 1987, 1988, and 1989 - has spent $26 billion on 885 failures with $153 billion in assets since 1986.

Saved by the Rate Spread

Then why have just 61 banks with $20 billion in assets been closed so far this year? Because the widest interest rate spread in three years has kept alive 50 to 70 banks that would have failed, Mr. Taylor said.

"Whether or not it happens this month or next month or end of the year or after the first of the year, we think there is a significant number of financial institutions that still need to be settled, that are not viable," he said.

Bankers, unhappy about their premium hikes, aren't buying it.

"I think they are taking a worst-case-scenario approach. I think the problems are not as bad," said Joe Belew, president of the Consumer Bankers Association.

"There has been a turn-around," Mr. Belew added. "Banks have dealt with what's on their books."

If failures don't catch up with FDIC forecasts by yearend, the agency is going to have a hard time justifying the hike in insurgence premiums set for Jan. 1, said John Rippey, senior vice president at the Association of Bank Holding Companies.

Mr. Taylor is concerned that low interest rates are lulling people into thinking the FDIC's problems are over.

"I'd like the banks that ought to fail to fail and get as much of the system cleaned out as possible," he said. "Low rates compound that problem. Banks that appear now viable are really probably not, and you get caught up in this 'Can you close them?' game."

The bankers argue that the FDIC has a history of inflating industry problems. In June 1991, former FDIC Chairman L. William Seidman predicted that 340 banks with $140 billion in assets would fail in 1991 and 1992. That was his baseline estimate. His pessimistic scenario had 400 banks with $200 billion in assets failing during the two years.

Last year, 124 banks with assets of $63 billion failed.

On the other end of the spectrum are experts who agree with Mr. Taylor that industry problems are being masked by low rates. But they say he has no hidden agenda.

Cautious Incumbents

"It's politically awkward ... for the FDIC to move in at this time on banks," said Ed Kane, a professor at Boston College. "Incumbents in general do not want to alarm the public about the condition of the banking industry. They do not want to run for reelection against the backdrop of taxpayer money having to go into the Bank Insurance Fund.

"The same thing was true in '88 with FSLIC," he said.

Mr. Kane said that the FDIC is using the wrong criteria for closing banks.

"The fact that they are booking profits [from low interest rates] should not be the criterion. What's important is the economic insolvency of firms," he said.

The professor estimated that it would cost the FDIC $50 billion to close all the banks that need closing.

Selling to a Saturated Market

A prominent banking lawyer who did not want his name used said he think the FDIC is sitting on troubled banks because it can't scare up buyers.

"I think the market is saturated and it is hard to sell these things," he said. "It's a very daunting and slow process."

Mr. Taylor isn't alone in his view. The General Accounting Office, not normally an FDIC ally, came to the agency's defense June 9 in testimony before the Senate Banking Committee.

The Timing of Failures

"A number of factors, such as changes in economic conditions and fluctuations in interest rates, can affect the timing of actual bank failures, and thus the pace of resolution activity," GAO Comptroller General Charles A. Bowsher said.

Mr. Bowsher's testimony noted that FDIC identified 25 "large" banks in 1991 that it expected to fail this year. The agency set aside reserves to cover the cost of these failures.

But the future of 17 of those original 25 "is made uncertain by first-quarter financial reports that indicate profits generated from sales of securities and favorable interest spreads," Mr. Bowsher and.

"Regulators are developing resolution plans" for the remaining eight large banks, he said.

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