Consumer Advocate Ralph Nader Calls on Congressional Banking Committees to Hold Hearings...

Consumer Advocate Ralph Nader Calls on Congressional Banking Committees to
Hold Hearings on FDIC's Handling of Troubled Banks

WASHINGTON, July 23 /PRNewswire-USNewswire/ -- The following letter was sent
by Ralph Nader to the U.S. Senate Committee on Banking, Housing and Urban
Affairs, and the U.S. House Committee on Financial Services:

Senator Chris Dodd
U.S. Senate Committee on Banking, Housing and Urban Affairs
448 Russell Building
Washington, DC 20510

Congressman Barney Frank
House Committee on Financial Services
2252 Rayburn H.O.B.
Washington, DC 20515

Dear Senator Dodd and Congressman Frank:

I write today to suggest that you jointly hold hearings on the Federal Deposit
Insurance Corporation's ability to deal with potential bank failures in the
next several years.

In a March 10, 2008 memorandum on insurance assessment rates, Arthur J.
Murton, Director of the Division of Insurance and Research for the Federal
Deposit Insurance Corporation (FDIC) stated:

While 99 percent of insured institutions meet the "well capitalized" criteria,
the possibility remains that the fund could suffer insurance losses that are
significantly higher than anticipated. The U.S. economy and the banking sector
currently face a significant amount of uncertainty from ongoing housing sector
problems, financial market turbulence and potentially weak prospects for
consumer spending. These problems could lead to significantly higher loan
losses and weaker earnings for insured institutions.

Indeed, the recent failure of IndyMac highlights the need for tough
Congressional oversight. Banking experts have indicated that the cost of the
collapse of IndyMac alone will be between $4 billion and $8 billion. The FDIC
has approximately $53 billion on hand to deal with bank failures. This amount
may not be adequate given the cost of IndyMac and given the approximately $4
trillion in deposits the FDIC insures.

Several questions should be presented to FDIC officials such as:

1. Was IndyMac on the list of "Problem Institutions" before it failed?

2. Were the other banks that failed this year on the FDIC list of "Problem
Institutions"?

3. What is the anticipated cost of dealing with the failures of the other four
banks that failed this year?

4. As of March 31, 2008 the FDIC reported 90 "Problem Institutions" with
assets of $26 billion. What is the current number of "Problem Institutions"
and what are the assets of these "Problem Institutions"?

5. How many banks are likely to fail in 2008 and 2009 respectively?

6. What is the estimated range of costs of dealing with the projected
failures?

7. What will the effect of higher losses than those projected be on the FDIC's
estimate of the proper reserve ratio?

8. What are the FDIC's projections for reserves needed and potential bank
failures beyond 2009?

9. Is the FDIC resisting raising the current rates of assessments on FDIC
insured banks so that the cost of any significant bailouts will have to be
shifted to the taxpayers?

10. Does the Government Accountability Office (GAO) believe that the existing
rate schedule for the Deposit Insurance Fund (DIF) is set at the proper level?

The Federal Deposit Insurance Reform Act of 2005 requires the FDIC to set a
Designated Reserve Ratio (DRR) for the Deposit Insurance Fund (DIF). This law
also eliminated the fixed DRR of 1.25 percent of insured deposits and allows
FDIC to set the DRR within a range between 1.15 percent and 1.50 percent. It
is time to for Congress to revisit the FDIC's current approach to setting
reserve ratios.

The FDIC is not likely to address its own inability to clearly assess the
current risks posed to depositors and taxpayers by the high-rolling banking
industry.

I hope you hold hearings sooner rather than later on this important matter. I
have attached a column I wrote on March 2, 2002 titled: "FDIC Insurance Scam"
for your review.

Sincerely,

Ralph Nader P.O. Box 19312 Washington, DC 20036

cc: Sheila C. Bair, Chairman Federal Deposit Insurance Corporation (FDIC)

March 2, 2002, FDIC Insurance Scam By Ralph Nader:
http://www.nader.org/index.php?/archives/327-FDIC-Insurance-Scam.html

SOURCE Ralph Nader, Consumer Advocate

Ralph Nader, +1-202-387-8034