So many U.S. banks are failing that three government bank watchdogs want the law changed to force a review only when a bank failure costs the federal insurance fund $300 million or more. The inspectors general, or IGs, of the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., citing a heavy workload of "material loss reviews" of failed banks, want Congress to change the law that triggers a review, according to a letter obtained by Reuters on Monday.
Currently a review must be done if a federally supervised bank's failure costs the federal Deposit Insurance Fund more than $25 million, the letter said.
If the workload is not reduced, the watchdogs' oversight of other, urgent government programs to stabilize the financial system and revive the economy could suffer, said the letter, which was sent to Representative Barney Frank, chairman of the House Financial Services Committee. The request is expected to be discussed on Tuesday at a hearing before the oversight subcommittee of the U.S. House of Representatives Financial Services Committee.
In the first four months of 2009, 32 U.S. banks failed, compared with 25 in all of 2008, and just three in 2007. There were no bank failures in 2006 and 2005.
On Friday, in the biggest bank failure of the year so far, regulators shut down Silverton Bank, in Atlanta, Georgia, at a cost to the FDIC's bank deposit insurance fund of $1.3 billion.
In a material loss review, an inspector general explores why a failed bank's problems resulted in a hit to the federal bank insurance fund, and recommends how to prevent such a loss in the future....
"We are writing to request that the Congress consider increasing the threshold" to reflect the increased size and number of bank failures, the watchdogs wrote in the letter.
Currently a review must be done if a federally supervised bank's failure costs the federal Deposit Insurance Fund more than $25 million, the letter said.
If the workload is not reduced, the watchdogs' oversight of other, urgent government programs to stabilize the financial system and revive the economy could suffer, said the letter, which was sent to Representative Barney Frank, chairman of the House Financial Services Committee. The request is expected to be discussed on Tuesday at a hearing before the oversight subcommittee of the U.S. House of Representatives Financial Services Committee.
In the first four months of 2009, 32 U.S. banks failed, compared with 25 in all of 2008, and just three in 2007. There were no bank failures in 2006 and 2005.
On Friday, in the biggest bank failure of the year so far, regulators shut down Silverton Bank, in Atlanta, Georgia, at a cost to the FDIC's bank deposit insurance fund of $1.3 billion.
In a material loss review, an inspector general explores why a failed bank's problems resulted in a hit to the federal bank insurance fund, and recommends how to prevent such a loss in the future....
"We are writing to request that the Congress consider increasing the threshold" to reflect the increased size and number of bank failures, the watchdogs wrote in the letter.
If the present threshold remains unchanged, the inspectors general said they will be less able to "oversee many of the new and significant programs and initiatives that the federal banking agencies are undertaking."The inspectors general recommended raising the threshold for a material loss review to between $300 million and $500 million.Scheduled to testify at the Tuesday hearing are Treasury Inspector General Eric Thorson, the Fed's IG Elizabeth Coleman and the FDIC's IG Jon Rymer
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