Comprehensive Deposit Insurance Reform and Taxpayer Protection Act of 1991: Observations on Accounting Reforms and Funding for the Bank Insurance Fund

GAO discussed recently passed legislation regarding bank deposit insurance protection, focusing on: (1) the level of funding the act provides for the Bank Insurance Fund; and (2) accounting reforms. GAO noted that: (1) the legislation provides the Fund with approximately $70 billion in borrowing authority to resolve problem banks; (2) $30 billion of that amount is for losses the Fund incurs in resolving troubled institutions; (3) the remaining balance is for the Fund's working needs; (4) regulators need these funds to act quickly to resolve problems institutions as well as prevent the ultimate cost to the Fund from escalating; and (5) the timing and thrust of the legislation provides the framework to deal with flawed accounting rules that allow banks to conceal loan losses.