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FDIC’S LOSSES WERE DOWN IN ’89 BUT STILL SUBSTANTIAL

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The federal fund that insures deposits at the nation's 13,200 banks lost money for the second consecutive year as a result of a continued hefty number of bank failures, the government reports.

The Federal Deposit Insurance Corp. reported a loss of $851 million in 1989, when 207 banks failed or required government assistance to stay open.The 1989 loss was down from a $4.24 billion in 1988 when a post-Depression record of 221 banks failed.

The loss results because the FDIC was forced to pay more to take over the failed banks than it received in insurance premiums paid by healthy banks.

The FDIC had liquidation expenses of $4.13 billion in 1989, compared with $7.36 billion it spent on failed banks in 1988.

FDIC Chairman L. William Seidman predicted that the bank insurance fund could return to profitability this year if it is not forced to take over any large banking institution.

"Although the bank fund declined in 1989, the drop was considerably less severe than the previous year," Seidman said.

Seidman predicted that bank failures could decline to 150 to 175 this year, still a large number compared with the 10 bank failures in 1980.