Savings Association Insurance Fund (SAIF)

Savings Association Insurance Fund (SAIF) was a government insurance fund for savings and loans and thrift institutions in the United States to protect depositors from losses due to institutional failure.

SAIF was created in the aftermath of the savings and loan crisis of the late 1980s, during which poor real estate investments led to the failure of more than 1,000 of America's savings and loan institutions, costing taxpayers more than $160 billion.

The fund was first established by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to provide similar protective coverage for consumers as the Federal Deposit Insurance Corporation, or FDIC does for bank accounts. FDIC was created in 1933 during the Great Depression as a way to protect consumers' savings and restore trust in America's banks.

SAIF was administered as a stand-alone fund by FDIC until 2006 when it combined with another of that agency's banking insurance programs, the Bank Insurance Fund, or BIF.

Savings Association Insurance Fund initially replaced the Federal Savings and Loan Insurance Corporation, or FSLIC, which had become insolvent during the 1980s S&L crisis. Despite being recapitalized several times in the latter half of the '80s with tens of billions of taxpayer dollars, FSLIC was eventually abolished, to be replaced by SAIF as administered by FDIC.

As the FDIC noted in 2005 before the merger with BIF, SAIF was primarily funded from two revenue streams: interest earned on investments in U.S. Treasury obligations and deposit insurance assessments. Other funding could also come from U.S. Treasury loans, the Federal Financing Bank and the Federal Home Loan Banks.

"The FDIC has borrowing authority from the U.S. Treasury up to $30 billion for insurance purposes on behalf of the SAIF and the BIF," according to the agency. "A statutory formula, known as the Maximum Obligation Limitation (MOL), limits the amount of obligations the SAIF can incur to the sum of its cash, 90 percent of the fair market value of other assets, and the amount authorized to be borrowed from the U.S. Treasury. The MOL for the SAIF was $21.0 billion as of December 31, 2005, and 2004, respectively.

In March of 2006, the U.S. Congress called for SAIF to be merged with another one of the FDIC's administered funds, the Bank Insurance Fund, as part of the passage of the Federal Deposit Insurance Reform Act of 2005.

The idea of a merger with BIF had been under consideration for some time. In a 1999 FDIC report, economist Robert Oshinsky explained why.

Ever since it was created, SAIF had been thought of as vulnerable, "partly because of its small size and partly because of its geographic concentration. SAIF-member institutions constitute a much smaller portion of U.S. banking organizations than Bank Insurance Fund member institutions do," Oshinsky wrote.

"As of year-end 1998, the SAIF had 1,430 members, roughly 16 percent the number of BIF members," he added, "and the SAIF insured an estimated $709 billion in deposits, roughly 33 percent of the estimated deposits insured by the BIF.1 In addition, SAIF-member institutions are geographically concentrated, unlike BIF-member institutions."