Thrift executives are eyeing some of the $1.6 billion in annual interest income being earned on the deposit insurance funds.

What the Federal Deposit Insurance Corp. does not need could be returned to banks or thrifts or used to pay off the Financing Corp. bonds, according to Joe C. Morris, chairman of the SAIF Advisory Committee.

Together the Bank Insurance Fund and the Savings Association Insurance Fund have nearly $35 billion in reserves and generate roughly $1.6 billion a year in interest income.

The FDIC, which oversees both funds, is bankrolled by that interest income. The agency's current operating budget is $500 million a year and shrinking.

That means the two insurance funds are pulling in $1.1 billion more than the FDIC needs.

"The bigger the funds get, and the more attention there is on the deficit, the more people are going to be looking at that excess," said Mr. Morris, who is also a senior vice president at First Bank Kansas, Overland Park.

Five members of the SAIF Advisory Committee will meet on Dec. 9 with officials from the FDIC, the Congressional Budget Office, and the Office of Management and Budget to find out how that extra funding could be used.

"What can be done legally with that excess income?" Mr. Morris asked in a recent interview. "Is there a chance for rebates or refunds?"

Mr. Morris also wants to know whether the money could be used to cover interest due on the Financing Corp. bonds. That tab, $780 million a year, will be split by banks and thrifts starting Jan. 1.

"It would be relief across the board for everybody," Mr. Morris said.

But Douglas H. Jones, deputy general counsel at the FDIC, said Monday that the agency may not refund interest income.

"Under existing legislation we don't have any authority to do anything with the money" other than insure deposits, he said.

"That's the short answer, but then, of course, Congress can change things if it wants," noted Merrikay Hall, counsel to the SAIF Advisory Committee and a partner with Hughes Hubbard & Reed law firm.

The five members meeting next week will report back to the full SAIF Advisory Committee at its meeting in late January or early February. The committee was created in 1989 when the thrift fund was started. Its 18 members include a dozen thrift executives who counsel the FDIC and report to Congress twice a year.

The committee was an early and vigorous proponent of the Sept. 30 law capitalizing the thrift fund. Its members also are strong advocates of merging the bank and thrift funds.

Even if the FDIC could refund money to banks and thrifts or cover the Fico bond payments, Mr. Jones, said the thrift fund still is in a precarious position.

"The fund, although capitalized," he said, "because of the smaller number of institutions it has and less diversification still could have potential problems."

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