FDIC May Alter Guarantee Plan After Banks Complain (Update1)
By Rebecca Christie
Nov. 17 (
Bloomberg) -- The Federal Deposit Insurance Corp. may revise a $1.4 trillion debt-insurance program to address complaints that it would spur an exodus from the $250 billion market for overnight loans between banks.
The FDIC is considering charging different fees depending on the maturity of the debt, instead of its previous plan for a flat fee. Companies including JPMorgan Chase & Co. and Bank of America Corp. said the original proposal threatened to make the overnight federal funds market too costly compared with alternatives such as direct loans from the Federal Reserve.
``We are definitely thinking through how to respond to some of the concerns that have been raised,'' Art Murton, director of the FDIC's insurance and research division, said in an interview. ``Complexity is somewhat inevitable. We're doing our best to take away unnecessary confusion.''
The FDIC today announced it would take up the issue at a board meeting set for 2 p.m. on Nov. 21. The agenda calls for the final rule to be discussed and voted on.
The deliberations show how officials are trying to avoid some of the unintended consequences that have plagued other government programs. Banks in September protested a Treasury plan to insure money-market funds, saying it could spur a rush out of bank deposits. Some companies complain the Fed's purchases of top-ranked commercial paper penalize second-tier firms. ........(more)
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