The Bush administration predicts that bank failures will reduce the government insurance fund protecting deposits by $6.1 billion over three years, a House subcommittee chairman says.
The commercial bank fund of the Federal Deposit Insurance Corp. will decline from $11.4 billion at the end of June to $5.3 billion by Sept. 30, 1993, which would mark its sixth consecutive annual loss, Rep. Frank Annunzio, D-Ill., said Wednesday.The shrinkage to less than half the fund's current size will come even if regulators continue to raise insurance premiums charged to banks, said Annunzio, chairman of the House Banking subcommittee on financial institutions.
He cited projections by the administration's Office of Management and Budget contained in the budget agreement reached by White House negotiators and congressional leaders on Sept. 30.
The new estimates are far more pessimistic than the budget office's previous projections. In June, it had estimated the FDIC would show a profit of $600 million over the three-year period.
Roger Watson, FDIC director of research, said the figures as described by Annunzio "certainly are pessimistic."
"They are possible, but not likely," he said.
They show the fund reserves falling to only 22 cents for every $100 in deposits by the end of the 1993 fiscal year. That is less than one-fifth the $1.25 minimum considered safe and less than half the 60-cent level in the fund at the end of June.
Annual losses in the fund, by fiscal year, are projected at $3.7 billion in 1991, $2.3 billion in 1992 and $100 million in 1993.