Banks have operated under tighter federal regulation than entities in the savings and loan disaster. But the continuing problem of failing banks is raising the possibility of another S&L-style bailout.

A report to Congress a few days ago said that the FDIC, the fund that insures bank deposits, is running out of money and could be insolvent by next year. That was a shock to Congress because earlier reports indicated there was a little more money in the system and the crunch might not come quite so quickly.In the past three years, some 600 banks have failed, leaving - according to updated figures - only $2 billion to $5 billion in the FDIC insurance account. Federal auditors have reviewed 368 of the nation's biggest banks and conclude that 71 may have to be taken over by the FDIC this year, costing the fund between $7 billion and $11 billion to protect depositors - obviously more money than is in the fund.

So how are FDIC-guaranteed deposits going to be covered?

There are two approaches; stiffer insurance fees levied on banks and borrowing money from the U.S. Treasury. Reform legislation proposed by the Bush administration would increase the FDIC's borrowing authority to $70 billion. In effect, this would replace the fund's traditional industry-financed reserve with a very large line of credit signed by the American taxpayer.

Theoretically, the borrowed money would be paid back to the treasury as FDIC reserves were strengthened by higher industry fees. But even optimists don't see a quick recovery for the FDIC. If higher industry fees don't get the job done, officials say a Treasury "equity contribution" might be necessary.

A Treasury "equity contribution" is a fancy phrase for taxpayer-financed bailout. After all, the Treasury gets its funds from the taxpayers in the first place. Any contribution would be made with taxpayer money.

Before asking taxpayers to replenish the FDIC, Congress should demand more money from the banks. An official of the General Accounting Office suggested a special 40 cent assessment on every $100 in assets.

However, there are limits to that kind of levy. The GAO suggestion would raise about $15 billion from banks themselves, but that is almost equal to the entire $16.6 billion in profits earned by banks in 1990. Turning the whole banking industry into a non-profit operation is hardly going to lead to prosperity. In addition, the extra fees could cause another 19 marginal banks to fail.

Despite congressional unhappiness with the FDIC problem, there is no argument that fees will have to be raised. The only question is how much and how quickly they would be collected. For example, if the $15 billion in extra fees were spread over two or three years, it could cushion the blow to banks while easing any impact on taxpayer funds.

Congress is not normally known for its speed, but as the S&L crisis clearly showed, quick action generally saves money. Congress needs to decide what to do to bolster the FDIC - and act before the August recess, preferably by June if possible.

Aside from the FDIC fund, Congress will have to support tougher rules designed to identify problemsearlier and to prevent abuses that can lead to bank failure. But in the end, everything depends on the economy. Even the best-run banks are going to have a hard time if the U.S. economy cannot perform at an adequate level.