Top US Bank Regulator Says FDIC Needs Cash

EFFORTS to replenish the government's dwindling fund that insures bank deposits will raise consumer borrowing costs and leave depositors with smaller returns, the country's top banking regulator said Dec. 17. L. William Seidman, chairman of the Federal Deposit Insurance Corporation (FDIC), suggested raising the premium commercial banks currently pay into the insurance fund. He also advocated asking banks to make a one-time payment of $1 for every $100 of deposits to raise about $24 billion.

Without a significant infusion of cash, Mr. Seidman told a House Banking subcommittee, bank failures next year will drain the FDIC's Bank Insurance Fund to about $4 billion from the current level of about $9 billion, and a severe recession could leave it insolvent.

``I think everybody who uses bank services will have to pay for this,'' Seidman said later on Cable News Network's ``Larry King Live'' program.

``Some will come from the people who borrow money who will have to pay higher fees and higher interest and some will come in lower rates to depositors,'' he said.

Seidman said regulators have not yet decided whether to replenish the fund - which insures bank deposits up to $100,000 - by making banks pay more or by borrowing money from the United States Treasury and repaying it when banks are in better shape, as some economists suggest.