FHLBank Exec Pans FDIC Assessment Plan

The FDIC's proposal to increase deposit insurance assessments and penalize banks with unsecured liabilities runs counter to the federal government's effort to increase liquidity and should be withdrawn, according to the Federal Home Loan Bank of Atlanta. Since the Federal Deposit Insurance Corp. issued the proposed rule, Congress has increased the deposit insurance limit to $250,000 at no extra cost to institutions, while FDIC has guaranteed unsecured debt issued by banks and thrifts. "To say that the proposed rule has been overtaken by events understates the issue," FHLB executive vice president Jill Spencer says in a comment letter. If FDIC moves ahead with the assessment increase, Ms Spencer contends that institutions should not be penalized for relying on unsecured debt and FHLBank advances. Without advances, "we firmly believe that the number of institution failures would have been much higher and costlier" to the bank insurance fund, the Atlanta FHLBank says.