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FDIC May Tap Treasury Line to Bolster Insurance Fund, Bair Says

• Bloomberg
The Federal Deposit Insurance Corp. is considering tapping its Treasury Department line of credit as it examines ways to replenish a reserve fund depleted by 92 bank failures this year, Chairman Sheila Bair said.
The FDIC’s board will seek public comment on options that may include charging banks a fee, issuing debt or tapping the Treasury, Bair said today at a conference at Georgetown University in Washington. Lawmakers this week urged Bair to use the borrowing authority that was expanded in May.

The FDIC’s insurance fund, used to pay depositors of failed banks, fell to $10.4 billion as of June 30, the lowest since the savings-and-loan crisis in 1993, from $13 billion three months earlier, the agency reported last month. The FDIC had set aside an additional $32 billion for losses in the next 12 months.

Community banks are lobbying the FDIC and Congress to keep the agency from charging the industry an additional fee, saying lenders are struggling to raise capital and have already paid an emergency fee to boost the fund this year. Borrowing from the Treasury could weaken public confidence in the agency and spur criticism that taxpayer funds are being used to support banks.

U.S. Representative Barney Frank, the Massachusetts Democrat who leads the House Financial Services Committee, and Senator Carl Levin, a Michigan Democrat, said this week the FDIC should borrow from the Treasury instead of levying an additional fee on the industry, particularly small banks

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