Taylor Predicts FDIC Premium Will Rise Soon - |Maybe June'
WASHINGTON - William Taylor, chairman of the Federal Deposit Insurance Corp., provided still another hint this week that the bank insurance premium will go up in 1992.
"It is probably going to go up - probably soon. Maybe June," Mr. Taylor said in an interview with Reuters.
Banks fear that raising the premium too high to help pay for rising bank failures will backfire by pushing more institutions to the brink of disaster. The current level is 23 cents per $100 of insured deposits.
Mr. Taylor did not say how high a premium he would support, but the expressed caution. "I intuitively feel that above 30 basis points, it gets tougher and tougher."
The FDIC needs the money to pay back the $70 billion loan Congress approved to shore up the Bank Insurance Fund, bled dry by more than 1,000 failures since 1985.
With failures expected to climb in 1992 and bigger banks getting into difficulties, Congress fears the loan will turn into a taxpayer bailout of the industry.
Lowering the Cost of Failures
While Mr. Taylor said he can provide no assurance the $70 billion will be the FDIC's last need for funds, he said he is working on innovative programs to bring down the agency's costs of handling failure, possibly by as much as 50%.
One plan is to set up a "hospital," in which sick banks would be nursed back to health. Another is to help more weak banks survive by expanding programs to inject funds or help strong banks take them over.