The federal fund that insures deposits in commercial banks could suffer a loss in 1988 for the first time in its 54-year history, Federal Deposit Insurance Corp. Chairman L. William Seidman said Monday. Seidman said a loss to the insurance fund, if any, would depend on how much the FDIC spends to resolve the problems of First RepublicBank of Dallas, which earlier this month received a $1 billion infusion of government aid. The deterioration of Texas banks, hard hit by losses on real estate and energy loans, has raised concern about the health of the insurance fund, which backs deposits of up to $100,000 in 13,700 commercial banks. Speaking at a luncheon meeting with reporters, Seidman said it is too soon to say with certainty what the cost of restoring First RepublicBank to health will be. But, he said the $5 billion to $6 billion estimates of some are ``far higher than anything that is likely to be required.'' He said the $1.7 billion cost of the 1984 bailout of Continental Illinois Bank & Trust Co., which was about the same size as First RepublicBank, ``is the best guide we have.'' The FDIC's initial outlay on First RepublicBank could be higher than the ultimate cost, just as it was in the case of Continental when the agency spent $4.5 billion, Seidman said. However, he said the FDIC now usually tries to structure bank rescues so that the initial cash cost is close to the ultimate cost. If the First RepublicBank cost is in the $1.7 billion range and if banks fail this year at about the same rate as last year, then ``it is possible we will have a loss in 1988,'' he said. Last year, a post-Depression record of 184 banks failed. Forty-four have failed so far this year and Seidman said he expected the 1988 total to be roughly the same as 1987. As failures have increased, the steady growth of the FDIC fund _ from $4.6 billion in 1970, $11.6 billion in 1980 to $17.9 billion in 1985 _ has slowed. The fund finished 1986 with $18.2 billion and 1987 with $18.3 billion. Seidman said the 1988 loss, if it occurs, would be ``something under 5 percent ... certainly under ... $1 billion.'' He said he did not see any prospect for what he termed a substantial loss, one approaching 20 percent, or about $3.5 billion. He contrasted the relatively healthy condition of the FDIC fund with that of the Federal Savings and Loan Insurance Corp., which insures deposits in 3,170 savings institutions. FSLIC was insolvent until last fall when money began flowing from congressionally-authorized bond sales. It has had to keep bankrupt S&Ls open because it lacked the money to pay off depositors.
