WASHINGTON -- The thrift insurance fund will soon get an unexpected $191 million boost, thanks to a recent Federal Deposit Insurance Corp. investigation.
It seems that the FDIC's Inspector General found that the Savings Association Insurance Fund had been prematurely billed $180 million by the Financing Corp., or Fico, whose bonds pay for part of the S&L cleanup.
"When the FDIC found out about this, we wanted to use that money to pay part of a Fico payment," said FDIC spokesman David Barr. Twice a year, the Financing Corp. sends a $400 million bill to the thrift fund, which uses part of the deposit insurance fees it collects to pay that tab and puts the rest in its reserves.
So on July 6, the FDIC board voted in a closed meeting to deduct $191 million - $180 million plus interest - from its most recent bill. It plans to pay the Financing Corp. the remaining $209 million later this month.
Mr. Barr was quick to say that the FDIC isn't stiffing the Financing Corp. bondholders - they will still get their money.
"FICO has in its possession the $191 million because FICO was using it as a buffer," he said. Pessimists at Financing Corp. worried early on that the thrift industry might shrink so much that the industry's premiums might not cover Financing Corp. payments later, so it built in that reserve, he said.
The one-time lower payment does not mean the FDIC will reduce thrifts' assessments. Rather, the bonus will go towards building the thrift insurance fund up to the Congressionally mandated level of 1.25% of deposits. The boost adds 10% to the fund's reserves, which now stand at $2 billion, Mr. Barr said.
That should be welcome news to the thrift industry and its regulators, who are concerned about an anticipated imbalance between the FDIC's Bank Insurance Fund and the thrift fund.
They fear that thrifts will find it hard to compete with banks a few years from now, after the bank fund reserves reach 1.25% and its assessments drop off steeply.
The thrift fund generates $1.8 billion in assessments annually, and pays $800 million of that to the Financing Corp. So its reserves now grow by roughly $1 billion a year.
The fund cannot lower its assessments until its reserves reach roughly $7.5 billion, "So $200 million will help," Mr. Barr said.