FDIC Projected to Lose $6.1 Billion Over Next 3 Years

New projections by the Bush Administration show the fund insuring bank deposits shrinking to less than half its current size within three years, a senior House Banking Committee member said Wednesday.

The Federal Deposit Insurance Corp.’s fund for commercial banks will lose $6.1 billion through fiscal 1993 even if the fees banks pay for deposit insurance are increased, said Rep. Frank Annunzio (D-Ill.), citing projections by the Office of Management and Budget.

The new estimates are sharply more pessimistic than the budget office’s previous projections. In June, the budget office had estimated that the FDIC would show a profit of $600 million during the three-year period, Annunzio said.

“The taxpayer is in serious jeopardy of being asked to bail out the banks,” he said in disclosing what he characterized as “little-noticed calculations” by the budget office.

The new projections are in the budget agreement reached by White House negotiators and congressional leaders on Sept. 30, he said.

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 shrinking to $5.3 billion by Sept. 30, 1993, or only 22 cents for every $100 in deposits. 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.

“These OMB projections are doubly alarming when you realize that they are based on economic assumptions that do not include a recession,” said Annunzio, chairman of the House Banking Financial Institutions Subcommittee.