The Federal Deposit Insurance Corp.’s powers could be expanded if Congress decides to shift insurance companies from state regulation to federal regulation, FDIC Chairman Sheila Bair said Wednesday.
Bair said the FDIC could start providing guarantees for insurance companies, much like it already guarantees the deposits of most U.S. banks, if the insurance industry comes under federal regulation. Insurance companies are currently regulated by individual states.
“Our authorities would be expanded,” Bair said at an International Association of Deposit Insurers annual conference.
Bair also said the FDIC is “actively engaged” in discussions with the Bush administration about a new federal program to provide economic incentives for lenders to modify distressed home loans into sustainable long-term loans, in an attempt to stem the wave of foreclosures.
She said last week that the $700 billion financial rescue plan passed earlier this month gives the U.S. Treasury Department the power to use loan guarantees and credit enhancements to facilitate loan modifications and prevent avoidable foreclosures.
Bair also told the conference that despite all the tools regulators have been using, she cannot yet say the credit crisis has reached a bottom.
“I would like to say we’ve turned a corner … but at this point I still don’t feel comfortable making that prediction,” she said.
So far 16 banks have failed this year, including Washington Mutual, the largest bank failure in U.S. history. In 2007, three U.S. banks failed.
Bair said there will still be increases in U.S. bank failures, but “it will be in a range we can handle.”
(Reporting by Karey Wutkowski; Editing by Brian Moss)