WASHINGTON In his first extensive comments on proposed reforms, Federal Deposit Insurance Corp. Chairman Don Powell said he supports giving institutions credit for past premium payments, and increasing per-account coverage but only by indexing it to inflation from 2001.
Mr. Powell said reform should be comprehensive, not piecemeal an apparent change of mind from his confirmation hearing in June, when he appeared to endorse prioritizing elements of the agencys sweeping plan.
The former Texas community banker also acknowledged that the timetable for deposit insurance reform has changed because of last weeks terrorist attacks; he no longer expects legislation to pass this year.
Id say because of recent events that Congress will not be focusing on deposit reform this year and it may be this time next year before that becomes something they want to take up, Mr. Powell said. On the other hand, we are prepared, and we are ready, to take it up tomorrow or in the first quarter of next year whenever Congress chooses to do that.
Mr. Powell had been scheduled to testify last week at a House hearing on the issue, but it was postponed to give Congress time to deal with the national crisis. Still, Mr. Powell clearly has deposit insurance reform on his mind, and in an interview Thursday he said he broadly supports the recommendations the agency issued in April.
He went further than his predecessor, Donna Tanoue, and offered a specific date to start indexing the current $100,000 coverage level from right now.
Yeah, I think that it is natural to start there, Mr. Powell said. But this is part of the ongoing dialogue.
Mr. Powell stressed that he is open to other options, and said this would be one of the key points of debate.
He also endorsed a new idea that has been proposed by some lawmakers for so-called assessment credits that would be given to institutions that have been paying into the system for a long time. While the concept has yet to be detailed publicly, supporters say that instead of rebates, the FDIC would offer institutions credits toward future premium payments on the basis of historical contributions.
Thus, even if premiums are increased, as many expect, long-standing institutions would likely pay little, or nothing at all, once their credit was applied. Currently, 92% of institutions pay nothing for deposit insurance.
That idea could soothe various banking trade groups that claim reform could impose a vast new cost on their members if all institutions are hit with an immediate premium. Though many questions remain on exactly how and in what form credits would be issued, Mr. Powell said he liked the idea.
We would support assessment credits, he said. I think it is a recognition of those that have paid into the fund over the years.
Mr. Powell also clarified what he meant when he said the agencys recommendations could be prioritized.
I think on any issue, you approach something like merging of the funds, and attempt to go forth on something where there is general acceptance about it, he said. And then there are some issues that are probably more important than others. But I think it is important that it be dealt with as a package but as in most cases, nothing gets done the way it originally starts out.
Mr. Powell added a personal perspective on a question that has been vexing many long-time bankers that of the so-called free riders. Those include institutions that have either been formed during the past five years or have added billions of dollars in insured deposits without paying any premiums. Mr. Powell, who established First National Bank of Amarillo in 1996, acknowledged his institution had been a free rider. But he said that he would have been willing to pay.
We were getting something for nothing, Mr. Powell, who was president and chairman of the bank. I dont think that benefits anybody. I think all of those banks, including the fast-growing institutions, would be willing to listen to our thoughts about assessing and asking them to pay premiums.
Speaking more broadly, Mr. Powell said he thought banks could play an important role in repairing the damage done to the economy by last weeks attacks, and that he thought they were already performing well under pressure.
I think banks can do what they have been doing, Mr. Powell said. Banks have always been part of something that is good in their communities. They have a long history of helping people out, and they do it well. Watch.
He added that regulators will weigh any difficulties banks face as a result of the terrorist strikes, and have already communicated with examiners on how to handle those situations.