FDIC Federal Register Citations

From: Steve Penn

Sent: Monday, November 10, 2008 8:15 PM

To: Comments

Subject: RIN 3064-AD35 

Ladies and Gentlemen: 

The need to supplement the deposit insurance fund to pay for our most recent industry debacle is due to the systematic undercharging (and overrating) of the healthy banks in the system over a long period of time.  My bet is that a number of the recent large bank failures and regulatory assisted mergers occurred in banks that had been examined regularly and rated a 2 or better in the not-too-distant past. 

Raising premiums on the weakest may seem intuitively correct but it has the effect of further destabilizing those banks, many of which are marginally profitable or worse and already paying high premiums.  The proposed effective date is also much too fast given the state of the economy.  We do not need to exacerbate the earnings pressure much of the industry is already experiencing.   Lastly, if we truly think a change is necessary in the definition of brokered deposits, a slow phase-in is essentially to avoid more instability caused by hasty balance sheet restructuring.

I am certainly not for rewarding bad management but we are not in this mess from the risk that the weaker players have posed to the fund alone.  There is no quick fix.  Ultimately, the fund becomes sound only if the entire industry is risk rated correctly while allowing sufficient time for it to ramp up to the added cost.  The effective lobbying of the healthy and especially the large banks has ensured the fund would end up where it has.  Of course, a number of those banks are suddenly no longer with us.    

We appreciate the opportunity to comment on these proposed changes.

Stephen D. Penn
President & CEO
Alliance Banking Company
Winchester, Kentucky