Summary: Pursuant to a congressional request, GAO reviewed whether the: (1) transfer of money from federal deposit insurance funds into mutual funds will significantly affect the assessment income of the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF); and (2) Federal Deposit Insurance Corporation's (FDIC) projections for BIF and SAIF consider this movement of money. GAO noted that: (1) although the transfer of savings from deposits has reduced the assessment bases of BIF and SAIF, the transfer of savings from bank and thrift deposits into mutual funds has not adversely affected the financial condition of BIF or SAIF; (2) the slow rates of growth in the assessment bases contribute to the shortening of timetables for recapitalizing BIF and SAIF; (3) the slow rates of growth in the assessment bases would reduce the level of deposits that BIF and SAIF are projected to insure, but it would not reduce the funds' projected reserves by the same proportion; (4) FDIC has not explicitly taken into account the impact of mutual funds on deposits; and (5) the willingness of consumers to move funds between deposits and mutual funds introduces a source of volatility into deposit growth projections and insurance fund reserve ratio calculations.
