Will Congress Skip Town Without Bailing Out The Bailouts?

All through this year, Congress and the Bush Administration have agreed on one thing: Washington has to restore confidence in the nation's shaky financial institutions. But what began as a grand effort to reform Depression-era laws regulating banking has become a struggle to keep federal deposit-insurance funds solvent. And as lawmakers sink into end-of-session infighting, even that modest -- but essential -- goal could conceivably get lost in the scuffle. The Federal Deposit Insurance Corp. needs an infusion of money for both the ailing Bank Insurance Fund and the thrift cleanup. The savings and loan bailout can probably wait until Congress returns next year, but the BIF's condition is critical. New FDIC Chairman William Taylor warns that the fund's dwindling reserves could run out by yearend. The BIF might then find itself unable to pay off depositors if hit with an unanticipated bank failure. Odds are that Congress will come up with extra money, perhaps in the form of a temporary stop-gap. But lawmakers are so reluctant to vote for anything that looks like a bank bailout that they might skip town and pray that the BIF will make it into spring.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.