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Inside Washington (02/01/2010)
* WASHINGTON (2/2/10)--Policymakers should consider raising the amount of money the Federal Deposit Insurance Corp. (FDIC) has to deal with bank failures, the Obama administration said in its 2011 budget, which was released Monday (The Wall Street Journal Feb. 1). The current reserve ratio range of 1.15% to 1.5% is inadequate, the proposal said. If the reserve ratio is increased, banks may have to pay higher premiums. At the end of September, the deposit insurance fund ratio dropped to 0.16%. The FDIC has worked to increase its fund by charging special fees and mandating a three-year premium pre-payment to raise $45 billion. However, bank failures continue. Last month, there were 15 failures, ahead of the 2009 pace that had 140 failures at year-end ... * WASHINGTON (2/2/10)--Four liquidity programs implemented by the Federal Reserve Board to prevent economic collapse shut down Monday. The programs are: The Primary Dealer Credit Facility, the Term Securities Loan Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility and the Commercial Paper Funding Facility. The Term Asset-Backed Securities Loan Facility and the Fed’s purchases of debt and mortgage-backed securities from Fannie Mae and Freddie Mac will end in March. Last week, President Barack Obama likened the government programs helping banks to a “root canal,” but financial observers said the programs were vital in preventing economic collapse (American Banker Feb. 1). The Fed was able to meet the market’s needs with the programs, said Song Won Sohn, lecturer in business and economics at California State University Channel Islands ... * WASHINGTON (2/21/10)--Lawrence Summers, White House economic adviser, said the Obama administration’s proposals to overhaul financial regulation are not an attack on banks (American Banker Feb. 1). Rather, they are an attempt to create a better financial system. Obama has proposed taxing big banks and limiting their growth. Summers said the constraints will reduce risk-taking and will not interfere with institutions’ abilities to serve customers. Also, it doesn’t make sense for banks to feel as though they have enough capital to pay bonuses to employees but not enough to reimburse taxpayers, he added. Summers spoke at the World Economic Forum in Davos, Switzerland ... * WASHINGTON (2/21/10)--Banks need to prepare for a changing rate environment, said participants at a Federal Deposit Insurance Corp. (FDIC) symposium Friday. Some banks that have held onto long-term assets may not be prepared for rates to normalize (American Banker Feb. 1). Panelists recommended that bankers form a committee to focus on the mix of assets and liabilities, using hedging instruments such as interest rate derivatives and focus on core depositors to mitigate risk ...


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