Federal Deposit
Insurance Corporation

From: Maria Teixeira
Sent: Thursday, November 06, 2008 4:16 PM
To: Comments
Cc: Luis Canela; George Benedict; Sandi Acosta
Subject: Notice of Proposal Rulemaking - Deposit Insurance Assessments

Attn. Mr. Robert E. Feldman
        Executive Secretary, Federal Deposit Insurance Corp.

Ref:  Notice of Proposal Rulemaking – Deposit Insurance Assessments-RIN 3064-AD35 – FHL Banks

Dear Mr. Feldman,

On behalf of BPD Bank, I am submitting the following comments regarding the Federal Deposit Insurance Corporation’s proposed rule concerning deposit insurance assessments. I appreciate the opportunity to address this important issue. 

The FHLBanks provide advances in a consistent, reliable and safe manner for their members. The availability of FHLBank advances as a means of wholesale funding is especially important to the community banks that represent the vast majority of the FHLBank System’s 8,100 members. The FHLBanks are playing a vital role in alleviating the current shortage of liquidity in the mortgage markets.

Penalizing the use of FHLBank funding is contrary to the current efforts by the Administration, Congress, and the Federal Reserve to restore liquidity and bolster confidence in the financial system. Because the markets are extremely volatile and uncertain, a rule like this could result in unintended negative consequences.

Under this proposal, financial institutions that use FHLB advances will be faced with several undesirable outcomes:

1. Operating costs will go up as a result of higher premiums.
2. FHLBank members will increase their focus on attracting less stable retail deposits by bidding up these accounts. If banks throughout the country turn to this method, it will drive up the cost of funds as they attempt to both attract new deposits and retain the existing ones.
3. Institutions may choose to decrease lending in their communities. During this current economic crisis, it would be harmful to implement a policy that would further restrict lending.

At a minimum, it would make sense to delay the rule’s implementation as it relates to Home Loan Advances until markets settle down. A period of 12 months, until December 31, 2009, which is the expiration date of the Emergency Economic Stabilization Act, seems appropriate.

FHLBank membership has long been viewed as protection for deposit insured funds because FHLBank members have access to reliable and consistently available source of liquidity. If the FDIC decides to proceed to a final rule concerning deposit insurance assessments, I strongly urge you not to adopt a policy that would penalize institutions based on their use of FHLBank advances.

Sincerely,

Maria J. Teixeira
Vice President - Treasurer
BPD Bank
90 Broad Street
New York, N.Y. 10004