Federal Insurance Program for Grain Warehouse Depositors--Issues and Information

Pursuant to a congressional request, GAO studied issues relating to the possible establishment of a federal deposit insurance program for grain warehouses comparable to that operated for banks by the Federal Deposit Insurance Corporation (FDIC), including the costs and problems attendant to such a program, existing state and private insurance programs for grain deposits, and existing federal regulatory programs for warehouses.

GAO found that, among those who would be most affected by a similar program for the grain industry, there is limited support for such a program. GAO found that those individuals were concerned with: (1) the potentially high cost of such a program; (2) the expansion of regulatory requirements that such a program would entail; (3) uncertainty about the extent of coverage; (4) the potential that such a program would encourage unscrupulous practices in the industry; (5) the potential impact of such a program on existing state and private insurance programs; (6) whether or not such a program would be mandatory; (7) coverage limitations; (8) methods that would be used to finance and administer such a program; and (9) whether such a program would be justified. GAO estimated that, depending on program features, a deposit insurance program might cost from $41 million to $71 million annually, which would equate to from 0.5 to 0.7 cent per bushel of grain marketed. In addition, GAO found that: (1) the only provisions for financial compensation for depositors were several state indemnity funds, private insurance policies and, in 29 states, state bonding requirements for grain warehouses and merchandisers; (2) state bonding requirements and indemnity funds differed significantly between states; and (3) very little private insurance was available to grain depositors.