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THE 104TH CONGRESS IS down to its final days, and the Senate and House Banking Committees need to face up to their number one priority — straightening out the deposit insurance funds.

Extending back to the last Congress, the two committees have procrastinated over what to do about recapitalizing the saving associations insurance fund (SAIF). The solution to the SAIF problem must also include a plan to ensure the retirement of the Financing Corporation (FICO) bonds voted in 1987 in a failed attempt to bail out the savings and loan industry without using tax funds.

The thrift industry’s efforts to bring the SAIF fund up to the statutory minimum level of capital has been hampered by the fact that $800 million of its premiums are siphoned off annually to pay interest on the outstanding FICO bonds. The thrifts are willing to provide $6 billion up front to cover the SAIF shortfall, but if they do this, the industry will need help in meeting the annual interest charges on the FICO bonds.

Most proposals that have received serious consideration would require the thrifts’ fellow depository institutions — commercial banks — to pay a portion of the FICO interest costs. Banks have complained bitterly, contending they didn’t create the thrift problems.

But, stability of the deposit insurance funds is important to all depository institutions — banks included. The public doesn’t dwell on the differences among the depository institutions or their separate insurance funds. Most view them as a single industry. So, if public confidence slips in one arena, it is likely to infect others among the depository institutions.

Lobbyists for the banking industry are misleading the public when they suggest that it was only thrifts that had problems in the 1980s. Failures in the banking industry during this period completely depleted the bank insurance fund (BIF) and left it with a $7 billion deficit in late 1991. So concerned was the Congress that it voted a $30 billion line of credit at the Treasury for the insurance fund. And that contingency liability for the taxpayers remains on the books today.

Nonetheless, the banks are dragging their feet, demanding a price if they participate in the plan. The price: a roll back of bank regulations — i.e., safeguards for consumers.

James M. Culberson, Jr., president of the American Bankers Association, delivers the message in blunt terms:

“If we’re not getting anything in exchange of any significance,” we’re not for it. In fact, I would be very much opposed.”

Similar tough talk came from the Independent Bankers Association of America (IBAA) whose executive vice president warns “The No. 1 priority of the IBAA throughout this legislative year has been regulatory relief.”

In short, Congress is being asked to take financial safeguards from consumers and communities in return for the cash that the banks would put up to help solve the deposit insurance fund problem. Otherwise, the bank lobby will unleash its lobbying troops to block the rescue for SAIF.

It will be interesting to see how many members of the two banking committees — and the entire Congress — are willing to cave in to this kind of legislative blackmail. It’s something that voters can underline on their scorecards for November 5.

Clearly, the public interest lies in the Congress dealing with the deposit insurance problem as a separate piece of priority legislation, and not allowing it to be cluttered and potentially endangered by unrelated calls for roll backs of regulatory safeguards for consumers and communities.