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Inside Washington (10/06/2008)
* WASHINGTON (10/7/08)--On Tuesday, the Federal Deposit Insurance Corp. (FDIC) is expected to raise premium rates for 2009 and propose changes to its risk-based pricing system (American Banker Oct. 6). The FDIC did not release information on the new rates, but observers expect that the two-basis-point range would double and some healthy banks could pay up to 15 cents per $100. Healthy banks currently pay five to seven cents per $100. The agency must raise premium rates to replenish its reserves after several big bank failures. It has five years to raise its ratio of reserves to 1.15%--up from the current 1.01% ... * WASHINGTON (10/7/08)--Now that the $700 billion bailout bill has passed, the Treasury Department can begin purchasing $250 billion of illiquid assets immediately from banks through a no-bid process, or through an auction program (American Banker Oct. 6). Treasury Secretary Henry Paulson said the department would likely buy simpler securities first and that the Treasury can handle about $50 billion of purchases per month. Observers also expect the department to hold its first auction within one month and hire five to 10 asset managers. About two dozen lawyers, bankers and accountants could also be hired by the department, although a payscale has not yet been determined. In addition to purchasing assets, the Treasury must create an insurance program to guarantee mortgage-backed securities that are uninsured. The department also must encourage mortgage servicers to use a refinancing program that went into effect Oct. 1. Both Paulson and President Bush said that more details would come to light this week ... * WASHINGTON (10/7/08)--The Small Business Administration (SBA) reported that its loan volume dropped 13% to $18 billion, and that the number of loans decreased 29% to 78,317. The number of loans in August and September plummeted more than 50%compared with last year, according to Eric Zarnikow, SBA administrator for the office of capital access (American Banker Oct. 6). Applications are down at SBA’s lending partners, and applicants are not as creditworthy as they have been in the past, added Zarnikow. The economy, high energy and commodity prices, and tighter lending standards are also to blame for the loan drop. A Federal Reserve Board survey in July indicated that 70% of senior loan officers said their commercial and industrial credit standards had tightened ...

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