In May, there was no question the Federal Deposit Insurance Corp. needed the revenue that a 22% spike in premiums would generate next year.

But the issue was no longer black and white by Tuesday, when the agency decided it could make do with less of an increase. It didn't even raise the premium rate for the three-fourths of insured banks and thrifts that are deemed the best managed and best capitalized.

Others will pay 26 to 31 cents per $100 of domestic deposits, or 3 to 8 cents more than the current 23-cent rate for all banks.

No one knows whether these more focused increases will be enough to rebuild the FDIC's reserves. But the agency's quick change of heart could undermine its credibility. "It is a surprising decision in light of both the FDIC staff's conclusions and their previous statements," said Karen D. Shaw, president of the Institute for Strategy Development.

"I think they've left themselves a bit naked to the storm."

Indeed, at the meeting Tuesday, FDIC's staff suggested raising the average premium to just under 27 cents. Then acting FDIC Chairman Andrew C. Hove Jr. recommended reducing the average to 25.4 cents, and that rate was adopted.

Opposition from Treasury

Mr. Hove had little choice.

Thrust into the chairmanship last month when William Taylor died, Mr. Hove vowed to push his 22% premium increase. But the former Nebraska banker didn't factor in the tenaciousness of the Treasury.

"Clearly, [Treasury officials] didn't want an increase," Office of Thrift Supervision Director Timothy Ryan admitted. He and acting Comptroller of the Currency Stephen Steinbrink, who represent Treasury on the FDIC board, opposed a big premium jump.

"Do you stand your ground and get no increase, or do you try to work to some kind of compromise with Ryan and Steinbrink?" Mr. Hove said Wednesday in an interview.

"The only way to build a consensus was to compromise, and I admit I did."

Kenneth Guenther, executive vice president of the Independent Bankers Association of America, applauded Mr. Hove, saying he "played a heroic role."

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