Searle, Ex-SunBanks Chief, Wary on Deposit Insurance

Philip F. Searle began his banking career in 1949 as a teller in a $6 million-asset bank in Geneva, Ohio. He ended it 1986 as chairman of SunBanks Inc., Orlando. Two years ago, Mr. Searle agreed to volunteer as chairman of the National Advisory Board, created by the thrift bailout law to provide a private-sector voice to the Resolution Trust Corp.

Mr. Searle, who lives in Naples, Fla., was in town last week and stopped by to talk with Barbara A. Rehm and other reporters in the Washington bureau of the American Banker about banks and the RTC.

American Banker: You believe that deposit insurance coverage should be reduced? Phil Searle: I don't think man can devise the proper kinds of firewalls to protect against the misuse of insured deposits by some institutions.

AB: Do you want narrow banks that would be allowed only to invest their insured deposits in safe assets like Treasury bonds? PS: A narrow bank is going to end up being allocation of credit, and I am not in favor that.

AB: Then what do you do? PS: There ought to be some kind of a haircut borne by the depositor, maybe the top 20%. And there ought to be just one $100,000 coverage per person. I also definitely believe in risk-based premiums and controlling the use of brokered deposits.

AB: On to RTC. The bailout agency has been making headlines with its new idea of selling big portfolios of assets to large investors. Is that a good idea? PS: I don't think it is the way to go. It is one of several ways.

AB: What's up with the RTC's program to finance asset sales for buyers? PS: Seller financing is being underutilized. They are not entertaining applications for seller financing for less than $500,000.

But that threshold is coming down and now they are ready to do business. There are a lot of assets out there that don't qualify for institutional financing.

AB: Are RTC sales hurting real estate markets? PS: We have yet to find the first adverse effect anywhere rising out of RTC sales activity. We do check quarterly on that. And that's been the answer all along.

AB: Is RTC doing a good job? PS: A lot of these criticisms arise out of activities or lack of action early on. Clearly there is room for a lot more administrative improvement, but they are doing better than they did - quite a bit better.

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