ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release December 8, 2000 #00-137
E-mail: [email protected]

HELFER SAYS DOUBLING DEPOSIT INSURANCE COVERAGE PUTS TAXPAYERS AT RISK

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WASHINGTON, D.C. — Former FDIC Chairman Ricki Helfer has declared her strong opposition to doubling federal deposit insurance coverage for banks and savings institutions.

“It is my firm belief that doubling deposit insurance coverage to the $200,000 level presents the risk that those who favor privatization of the whole system will join the debate and will potentially succeed in destroying the current system that has worked so well,” she told America’s Community Bankers’ Winter Management Conference earlier this week in New York City.

Helfer said a fully funded deposit insurance system backed by the full faith and credit of the U.S. government is critical to addressing banking crises. “It is my belief that in a significant financial crisis, private insurance funds or reinsurers would also fail and taxpayers would be back on call to the pay the bills” to reimburse depositors for their losses, she added.

Helfer, who is advising ACB on deposit insurance reforms being considered by the FDIC, said the costs of increased deposit insurance coverage depend on the assumptions that are made, including assumptions about the deposit reserve ratio. She warned that, in her view, the risk of doubling deposit coverage is substantially greater than the benefit it would bring to banks.

Helfer supported indexing deposit insurance coverage for inflation, using the 1974 coverage level of $40,000 as a base. That would result in deposit coverage in today’s dollars of between $100,000 and $140,000, she said.

Rather than double deposit coverage, Helfer outlined what she called potentially better ways to address the concern community bankers have over losing market share. One way is for Congress to pass legislation that would give banks the option of offering interest on business checking accounts. That would help banks create new banking relationships, especially with small businesses, and attract new deposits, she said.

A second way to help community banks is for Congress to increase deposit insurance coverage on retirement accounts when it considers Social Security reform and revisions to individual retirement accounts. “That would result in a win-win for everyone,” Helfer added.

Helfer also urged Congress to merge the Bank Insurance Fund and the Savings Association Insurance Fund. A BIF-SAIF merger is the “most important step that can be taken to insure a sound deposit insurance system,” she said.

ACB plans to file its comments with the FDIC next week.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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