Economy Rockford: Paying For Others Mistakes

So far more than 15 U.S. Banks have failed this year, and many more are expected to follow suit in the future. The FDIC has proposed hiking premiums for banks to help make up for this funding shortfall. Read on while a local expert weighs in on the plan.

Boosting the cost for FDIC Insurance coverage could place a heavy burden on the profits of many local banks, says Alpin Bank President Bill Roop. The one time tax being proposed by the FDIC would be applied on 20 cents for every 100 dollars of insured deposits in the institution. For example, a 250 million dollar bank could get hit with a 500 thousand dollar bill, wiping out 20 to 40 percent of its profits. Roop says, that puts enormous pressure on banks. He questions why healthy institutions like Alpine, should have to pay for others mistakes.

“The idea behind this is again, cleaning up the assets to provide a conduit. For mortgage lending and other lending to continue, which should help you. The values of real estate should appreciate again and the values of real estate should start moving a little better than what it is right now.”

The FDIC hopes to collect nearly 27 billion dollars from this assessment, but says it will need at least 65 billion to take over failed banks through 2013.

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