Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The latter was established after the savings and loans crisis of the 1980s. The existence of two separate funds for the same purpose led to banks attempting to shift from one fund to another, depending on the benefits each could provide. In the 1990s, SAIF premiums were, at one point, five times higher than BIF premiums. Alan Greenspan, Chairman of the Federal Reserve, was a critic of the system, saying, "We are, in effect, attempting to use government to enforce two different prices for the same item – namely, government-mandated deposit insurance. Such price differences only create efforts by market participants to arbitrage the difference." Greenspan proposed "to end this game and merge SAIF and BIF" .
FDIC office in Arlington, VA
Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF), and the Savings Association Insurance Fund (SAIF).
In February 2006, President George W. Bush signed into law the Federal Deposit Insurance Reform Act of 2005 (FDIRA),which contained changes to implement deposit insurance reform, as well as a number of study and survey requirements. Among the highlights of this law was merging the BIF and the SAIF into a new fund, the Deposit Insurance Fund (DIF). This change was made effective March 31, 2006. The FDIC maintains the DIF by assessing depository institutions an insurance premium. The amount each institution is assessed is based both on the balance of insured deposits, as well as on the degree of risk the institution poses to the insurance fund.
Typically, bank failures represent a cost to the DIF because the FDIC, as receiver of the failed institution, must liquidate assets that have declined substantially in value while, at the same time, making good on the institution's deposit obligations.