FDIC Federal Register Citations

From: Bruce Schriefer
Sent: Wednesday, November 05, 2008 8:18 AM
To: Comments
Cc: Bruce Schriefer
Subject: Temporary Liquidity Program 

Thanks you for you efforts to strengthen customer confidence in our banking system however, there are several implications for community banks that could be devastating. The portion dealing with guaranteed fed funds could destroy the fed funds liquidity system as we know it today. 

• The 75 basis point fee for insuring fed funds activity is too high for both the risk and the market to bear. Banks that are designated “too big to fail” will probably opt out of the program leaving small to medium size banks forced to pay more for funding. A loss on a fed funds transaction is probably the remotest of potential losses for the FDIC. Any experienced based cost would probably be closer to .000075 basis rather than 75 basis points. We would propose a much lower fee for insuring fed funds transactions and possibly a risk-based formula tied to the same criteria as used for the deposit insurance assessment.
• Capping access at 125% of September 30,2008 levels is onerous, especially considering many banks had no borrowing on that date but may very well have short term  needs tied to agriculture or other seasonal issues. Access should be provided to all banks, preferably at a risk-based cost.
• Most banks will wait until the deadline date to make a decision to opt-in or opt-out. There will be no practical way of knowing who “is guaranteed” on the day of implementation. All  fed funds transactions should be guaranteed until at least 10 days after the FDIC has published the Opt-out list on it’s web-site.

Thanks you for your consideration of our concerns.