Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 11, 1990 TAG: 9005110268
SECTION: BUSINESS PAGE: C-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
In his first extensive public remarks on deposit insurance reform, Greenspan told a Federal Reserve Bank of Chicago conference that the issue "should be high on our agenda" as Congress and the Bush administration consider permitting banks to expand into securities and insurance.
Among the specific reforms he suggested were varying deposit insurance premiums according to the riskiness of a bank's investments, more frequently examining banks' books, more swiftly seizing weak banks and requiring bank owners to risk more of their own money.
Greenspan did not address such proposals as cutting back on the $100,000 per-account insurance, limiting insurance to one account, imposing a "deductible" on the insurance or finding a way to allow large banks to fail without endangering the system.
"He is proceeding gingerly . . . but in the chairman are the seeds of a most radical reform of our existing financial system," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America, which represents smaller banks wary of deposit insurance changes.
The Treasury Department is due to release its bank reform plan by February. Greenspan is expected to be a major influence in its development and in congressional debate on the issue next year. Greenspan appeared to reject the notion of simply doing away with deposit insurance and other safeguards, which some free-market conservatives advocate.
Bank owners now risk about six cents of every dollar they lend. However, Greenspan noted that in the 1800s, before the creation of deposit insurance and the discount window, bankers risked 25 cents to 50 cents for every dollar they loaned. That encouraged them to use more caution.
by CNB