Leave fund alone

In reading the editorial, “Let’s consider tapping bank fund,” in the Jan. 3 issue, several corrections are appropriate. First, while the dollars that comprise the Public Deposit Insurance Fund were the result of insurance premiums paid by commercial banks from 1937 to 1985 and earnings on that money, it is not a bank fund. It is a taxpayer fund. These dollars were set aside for the exclusive purpose of protecting governmental units from the possibility of a devastating loss as a result of a depository institution failing with deposits above the amount guaranteed through the Federal Deposit Insurance Corp.

Second, the editorial indicates that PDIF is a dormant fund. It is not dormant. It continues to serve the same purpose today that it served in 1937, when visionary leaders of the General Assembly in the wake of the Great Depression wanted to assure that taxpayer money was safe.

Third, the editorial indicates that the fund has not been tapped for nearly 20 years “in spite of the avalanche of bank failures.” The “avalanche” has been a single bank in Indiana.

Fourth, Indiana is not the “only remaining” state with such a fund; it is the only state that ever had such a fund. The fund has worked very well for nearly 74 years. Many of the same reasons that existed in 1937 continue to exist in 2011.

Fifth, the need for the fund is not questionable. The fact that the fund can now require collateral from higher-risk depositories does not guarantee that an institution which has not pledged collateral will not fail.

Banks have put money into the fund with the expectation that public monies would be protected. Had they anticipated a theft of those dollars by the Legislature, they would never have put money into the fund. This proposal is a de facto tax on banks, plain and simple.

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S. Joe DeHaven
President and CEO
Indiana Bankers Association