US FDIC seeks to exempt community banks

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US FDIC seeks to exempt community banks

The Federal Deposit Insurance Corp. is under pressure from lawmakers to exempt community banks from the special fee it is preparing to charge US lenders to account for its rescue of uninsured depositors at two failed lenders.

FDIC Chair Martin Gruenberg was repeatedly asked questions on the coming assessment in congressional hearings Tuesday and Wednesday. The deposit insurance fund will suffer an estimated $20 billion hit linked to the demise of Silicon Valley Bank and a $2.5 billion blow from Signature Bank, according to the agency.

Special assessments must be charged by law to banks, according to Gruenberg. He pointed out at the House Financial Services and Senate Banking Committee hearings that we have the discretion to tailor that assessment to account for institutions that have benefited from the actions taken to secure deposits at the collapsed banks.

Gruenberg told Representative Roger Williams that they were keenly sensitive to the impact of community banks, and that small banks in his state would be on the hook for bailing out bank deposits in California and New York.

The Texas Republican said that it was important to take a look at it because we all know that what they ll do is pass the cost on to someone like me.

Another House Republican, Frank Lucas of Oklahoma, said regional bank leaders are complaining that they are going to have to pay for the mistakes of the most sophisticated institutions, the largest institutions, and urged Gruenberg to make sure smaller banks do not disproportionately shoulder the burden.

The Senate Banking Chair Sherrod Brown and Elizabeth Warren want bigger banks to have to pay the bill, with the concern over who will have to pay the bill is a bipartisan issue.

Gruenberg stated that the FDIC intends to issue a plan in May on how it plans to pay for the rescues.

The US Economy is not getting a credit crunch, and none of it is the last thing that a srained US economy needs to do.