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News Link • Economic Stimulus

FDIC Proposes Six-Month Extension for Debt Guarantees (Update2)

• Bloomberg.com

Sept. 9 (Bloomberg) -- The Federal Deposit Insurance Corp. proposed a six-month, emergency-only extension to its debt guarantee program as regulators move to wean companies from federal aid approved at the height of last year’s credit crisis.

The five-member FDIC board today unanimously approved seeking comment for 15 days on extending the program. The FDIC now guarantees eligible debt issued before the scheduled Oct. 31 expiration by banks that get agency approval and pay a fee.

“It has been a successful program but we would like to end it,” FDIC Chairman Sheila Bair said at a Washington meeting. Credit markets are recovering and she doesn’t expect banks to need further access to the program, meaning the agency should now seek input whether to go “cold turkey” or offer an emergency mechanism for a final six months, she said.

Bankers have pressed the FDIC to spell out how it will end the program, which Federal Reserve Chairman Ben S. Bernanke has said was instrumental in keeping markets stable during the worst of the 2008 financial crisis. The program is part of the Temporary Liquidity Guarantee Program; a portion for business checking accounts was extended in August for six months.

 

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