Big banks damaging 'mainstream' - Business First of Buffalo:

Salvatore Marranca is outraged.

The Southern Tier banker says his little Cattaraugus County Bank and thousands of other small U.S. banks are being punished for what a few big institutions did.

“Mainstream banks, which is what the 5,000 banks like us call ourselves, continue to be pummeled for the sins of Wall Street,” Marranca said.

“It’s very frustrating when we have to pay for the bad things other people are doing. We didn’t cause today’s problems and are willing to be part of a solution, but don’t penalize us in the process,” he said.

As the U.S. government tries to reverse the current economic free-fall, hoped-for solutions are being enacted that Marranca says will cost all institutions, not just the giants such as Citigroup, Bank of America and the others that are accused of taking unnecessary risks, bypassing or breaking the rules and contributing to the deepening and darkening recession.

At a Washington, D.C., meeting today, banks expect to learn more about the price they will have to pay. It will come in the form of a special assessment on top of higher insurance premiums that the Federal Deposit Insurance Corp. will impose.

This year, Cattaraugus County Bank already has budgeted $100,000 more for insurance premiums than the $40,000 to $50,000 it paid in 2008, Marranca said. But on top of that, the FDIC is expected to impose a one-time special assessment that could cost the bank as much as $26,000 in the second quarter.

The special charge and higher premiums are meant to bolster federal reserves and cover losses from accelerating bank failures. In a worst case scenario, the Deposit Insurance Fund could be nearly exhausted by yearend, some industry experts say.

Though the higher mandated costs are not expected to affect Cattaraugus County Bank’s lending ability, Marranca said “they will mean less money to make capital improvements and for growth, less money to spend on either higher deposit returns or lower loan rates - less money to flow into capital.

“It’s a tremendously significant increase for us,” said Marranca, who served as an FDIC bank examiner for 14 years before becoming president of Cattaraugus County Bank in 1982.