June 12, 2006

Honorable Martin J. Gruenberg
Acting Chairman
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429

Dear Chairman Gruenberg:

The enactment of the Federal Deposit Insurance Reform Act (FDIRA) provided important new tools to enable the Federal Deposit Insurance Corporation (FDIC) to manage deposit insurance funds in a more flexible manner. One of the most salient reforms removed the rigid mandates that required abrupt increases in premium in order to augment FDIC resources, the so-called "cliff". This reform was strongly supported by regulators, Congress, and industry alike.

As the FDIC considers funding levels for the coming year, we believe that the FDIC should draw upon the flexibility provided under the new law to assess premiums in an even and balanced way across an appropriate period of time rather than endeavor to build up the Deposit Insurance Fund (DIF) with considerable short-term premium increases. Eliminating the co-called "cliff" was a very good idea, because assessing insurance premium in a more stable way is likely to avoid the negative impact on the economy and the activities of banks that could result from sizeable spikes in deposit insurance premiums.

We support a healthy, strong, adequately funded DIF and stand ready as an industry to contribute to that strength. As envisioned by FDIRA, we believe that financial strength can best be achieved by a premium program that is as close to constant as financial demands will allow. Fortunately, the strong conditions of the banking industry will allow for a consistent program of DIF funding, and we encourage the FDIC board to take that approach when the board considers funding levels for the coming year.

Sincerely,