CBO: Bank Insurance Fund Drying Up;Budget Office Warns Recession Puts FDIC in Jeopardy This Year
The Congressional Budget Office warned Congress yesterday that the Federal Deposit Insurance Corp. will run out of money by the end of the year because the economy has slipped into a recession that is rapidly driving up the cost of bank failures.</br></br>Only hours before President Bush pledged his support for banking reform last night, the CBO predicted the FDIC will have to spend a record $13 billion cleaning up failed banks this year and will need to pay out $30 billion by the end of 1993 - about $9 billion more than was projected only last September.</br></br>CBO Director Robert Reischauer told the Senate Banking Committee that the economy's condition is turning out to be more serious than predicted. As a result, more banks will fail and the cost of those failures will increase.</br></br>To keep the FDIC from running out of money, Reischauer said, "There would appear to be little alternative to calling on the resources of the Treasury - that is, the taxpayers."</br></br>In his State of the Union address last night, the president spoke to the larger issue of banking reform but said nothing about the distress in the fund that protects the millions of Americans whose savings are the bedrock of that system.