The House Committee on Financial Services is the gateway to Congress for the reform programme, and there too, sources are privately warning that the administrative transition could take deposit insurance reform back to square one. Tanoue is the outgoing Clinton administration appointee, so I would take the FDIC s current position on things with a pinch of salt, says one committee staff member. We ll await the chance to consult with the new Bush administration nominee. The big problem with this, of course, is that nothing but the political climate has changed. Large firms such as Merrill Lynch and Salomon Smith Barney will still be able to sweep previously uninsured customer money into insured deposits, increasing the likelihood that all banks will be needed to pay premiums to keep the size of the fund in step with deposit growth.
Reformers also claim the current system has deeper flaws.
Tanoue argues that because the fund is drawn on heavily when banks fail, and is topped up immediately after, extra strain is imposed on an industry already likely to be under stress. The best time to fix the roof is when the sun is shining. The FDIC s position to date has been that all of the system s weaknesses should be tackled at once not so much fixing the roof, as rebuilding the house and earlier this month a lengthy consultation process culminated in the release of agency-approved reforms. I think we will know his position very early. Powell s other acquaintances are being more circumspect.