Remarks By
Ricki Tigert Helfer
Chairman
Federal Deposit Insurance Corporation
Before The
Annual Convention
Independent Bankers Association Of America
Honolulu, Hawaii
February 14, 1995
America's banks today enjoy their strongest capital levels in thirty years. In recent years,
America's banks have repeatedly experienced earnings records. In the last four years,
America's banks have largely rebuilt the Bank Insurance Fund.
We at the Federal Deposit Insurance Corporation can say with pride that no bank
depositor has lost a penny of insured money and that no U.S. taxpayer has paid a
single cent for this depositor protection.
We can say that because you -- the banking industry -- paid for that protection. I
congratulate you on your accomplishments.
It is a special pleasure for me to address the Independent Bankers Association of
America. Most of the 7,000 institutions the Federal Deposit Insurance Corporation
directly supervises are community banks -- banks like the Cascade Community Bank of
Auburn, in Washington state; or the Farmers & Merchants Bank, Tomah, Wisconsin; or
the First City Bank in my hometown, Murfreesboro, Tennessee.
Indeed, historians have written that the FDIC was created sixty-one years ago to assure
the survival of the small, community-oriented bank at a time when many of the most
powerful people in the country advocated giant, national organizations as the answer to
the banking crisis of the early 1930s.
There is no question that the link between the FDIC and the community bank is a strong
and enduring one -- and one that goes back to the FDIC's beginning.
Marriner Eccles, the chairman of the Federal Reserve Board in the 1930s, was no fan of
small banks nor of the FDIC. He was, however, widely acknowledged for his intellectual
honesty.
In his memoirs, he wrote that the banks the FDIC supervises held a special place in the
heart of President Franklin Delano Roosevelt.
Eccles wrote disapprovingly that, in President Roosevelt's view, "the state nonmember
banks represented the small, democratically controlled institutions, responsive to local
needs, with officers who had the welfare of the homefolks at heart."
Ricki Tigert Helfer
Chairman
Federal Deposit Insurance Corporation
Before The
Annual Convention
Independent Bankers Association Of America
Honolulu, Hawaii
February 14, 1995
America's banks today enjoy their strongest capital levels in thirty years. In recent years,
America's banks have repeatedly experienced earnings records. In the last four years,
America's banks have largely rebuilt the Bank Insurance Fund.
We at the Federal Deposit Insurance Corporation can say with pride that no bank
depositor has lost a penny of insured money and that no U.S. taxpayer has paid a
single cent for this depositor protection.
We can say that because you -- the banking industry -- paid for that protection. I
congratulate you on your accomplishments.
It is a special pleasure for me to address the Independent Bankers Association of
America. Most of the 7,000 institutions the Federal Deposit Insurance Corporation
directly supervises are community banks -- banks like the Cascade Community Bank of
Auburn, in Washington state; or the Farmers & Merchants Bank, Tomah, Wisconsin; or
the First City Bank in my hometown, Murfreesboro, Tennessee.
Indeed, historians have written that the FDIC was created sixty-one years ago to assure
the survival of the small, community-oriented bank at a time when many of the most
powerful people in the country advocated giant, national organizations as the answer to
the banking crisis of the early 1930s.
There is no question that the link between the FDIC and the community bank is a strong
and enduring one -- and one that goes back to the FDIC's beginning.
Marriner Eccles, the chairman of the Federal Reserve Board in the 1930s, was no fan of
small banks nor of the FDIC. He was, however, widely acknowledged for his intellectual
honesty.
In his memoirs, he wrote that the banks the FDIC supervises held a special place in the
heart of President Franklin Delano Roosevelt.
Eccles wrote disapprovingly that, in President Roosevelt's view, "the state nonmember
banks represented the small, democratically controlled institutions, responsive to local
needs, with officers who had the welfare of the homefolks at heart."
In my personal experience, that was certainly true.
I went to college -- and graduate school -- on scholarship. Consequently, I was always
on a tight budget. When i was in college, my family banked at a community bank in
Smyrna, Tennessee, where we then lived -- down the road a piece -- as we used to say
-- from Murfreesboro. I will never forget that the banker called my mother when my
checking account dropped below $25 to make sure I had enough money to cover
unexpected expenses.
We were not big customers of the bank -- far from it -- but this banker had the welfare of
all his customers, including me, at heart.
That was what community banking was about then.
This is what community banking is about today.
I am not here today, however, to discuss my memories -- however fondly I hold them.
Rather, I want to talk about some of the things going on back in Washington -- which
has been described as America's largest theme park, where the line between reality and
fantasy is sometimes blurred -- often on purpose.
As you know, the FDIC board two weeks ago proposed significantly lowering deposit
insurance premiums for banks. Sometime around mid-year, the bank insurance fund will
be recapitalized at the level mandated by Congress. By that point, the banks will have
built up a reserve of nearly $25 billion.
Sometime around mid-year, we will reach the target the law requires of $1.25 in
reserves for every $100 in insured deposits.
The FDIC will not know that goal has been reached when the event occurs because we
rely on the call reports you file with us to determine insured deposit levels.
When the goal is reached, however, the time will come to lift the cost and burden on
banking from historically high insurance premiums. This cost affects not only banks but
also the customers they serve.
Under the FDIC's proposal, premiums would drop significantly for nine-out-of-ten banks
in the country. For the banking industry as a whole, assessments would fall from about
$6 billion a year to $1.1 billion.
We would still base premiums on the risk that individual institutions pose to the bank
insurance fund. We believe the law requires us to do that.
We would try to set assessments in order to maintain the 1.25 target. We believe the
law requires us to do that, too.
I went to college -- and graduate school -- on scholarship. Consequently, I was always
on a tight budget. When i was in college, my family banked at a community bank in
Smyrna, Tennessee, where we then lived -- down the road a piece -- as we used to say
-- from Murfreesboro. I will never forget that the banker called my mother when my
checking account dropped below $25 to make sure I had enough money to cover
unexpected expenses.
We were not big customers of the bank -- far from it -- but this banker had the welfare of
all his customers, including me, at heart.
That was what community banking was about then.
This is what community banking is about today.
I am not here today, however, to discuss my memories -- however fondly I hold them.
Rather, I want to talk about some of the things going on back in Washington -- which
has been described as America's largest theme park, where the line between reality and
fantasy is sometimes blurred -- often on purpose.
As you know, the FDIC board two weeks ago proposed significantly lowering deposit
insurance premiums for banks. Sometime around mid-year, the bank insurance fund will
be recapitalized at the level mandated by Congress. By that point, the banks will have
built up a reserve of nearly $25 billion.
Sometime around mid-year, we will reach the target the law requires of $1.25 in
reserves for every $100 in insured deposits.
The FDIC will not know that goal has been reached when the event occurs because we
rely on the call reports you file with us to determine insured deposit levels.
When the goal is reached, however, the time will come to lift the cost and burden on
banking from historically high insurance premiums. This cost affects not only banks but
also the customers they serve.
Under the FDIC's proposal, premiums would drop significantly for nine-out-of-ten banks
in the country. For the banking industry as a whole, assessments would fall from about
$6 billion a year to $1.1 billion.
We would still base premiums on the risk that individual institutions pose to the bank
insurance fund. We believe the law requires us to do that.
We would try to set assessments in order to maintain the 1.25 target. We believe the
law requires us to do that, too.