WASHINGTON – The head of the FDIC says the new increase in federal deposit insurance limits will not solve all banking industry ills but will bolster public confidence in banks' safety. And she said a resolution was near in the legal tussle betwen Citigroup and Wells Fargo over which one will buy Wachovia.

Sheila Bair, the chairman of the Federal Deposit Insurance Corp., spoke Monday after last week's enactment of the $700 billion bailout that temporarily increases the insurance limits to $250,000 from $100,000 per individual account.

If the FDIC had to borrow from the Treasury to cover the increased limit, the money would be repaid by insurance premiums charged to U.S. banks and thrifts, Bair said in a speech to an economists' group.

The insurance-limit increase “does not solve all of the problems in the industry,” Bair told the gathering of the National Association of Business Economists. “But it will give a greater degree of assurance to depositors at a time when public confidence in the safety of their money is critically important.”

The bailout legislation gives the FDIC unlimited temporary authority to borrow from the Treasury if needed to cover the new $250,000 insurance limit – something the FDIC hasn't done since the early 1990s toward the end of the savings and loan crisis.

“The public should also know that if we do borrow, those funds will be repaid through industry assessments, and at no cost to the taxpayer,” Bair said. Despite the turmoil in the credit markets over the past year, she said, “I'm proud that we have not asked for help from the U.S. Treasury.

With the federal bailout and rescues of several major financial institutions, Treasury Secretary Henry Paulson “already has enough people knocking on his door,” Bair said.

Thirteen federally insured banks and savings and loans – including two major thrifts – have failed this year, and more are expected. The 13 failures this year compare with three in all of 2007. The largest bank failure in history, thrift Washington Mutual Inc.'s collapse in late September, didn't cost the federal insurance fund because WaMu was seized and sold to JPMorgan Chase & Co. But the failure in July of thrift IndyMac Bank cost $8.9 billion.

On Tuesday, Bair plans to ask the FDIC board for an increase in the premiums it charges U.S. banks and thrifts to replenish the insurance fund, which is now at $45.2 billion. That is below the minimum target level set by Congress and the lowest it has been since 2003.

Of the 8,500 or so federally insured banks and thrifts, the FDIC had 117 on its internal list of troubled institutions as of June 30, a five-year high.

The government's commitment to spend up to $700 billion to buy up soured debts from ailing banks is likely to save some institutions that would otherwise have died. But analysts doubt it will be enough to avert a major shakeout.

With more super-sized banks in business, fewer failures could still make a big dent in the deposit insurance fund. The fund's potential liability has been increased by the temporary rise in the insurance ceiling to $250,000 per account.

Asked about the battle between Citigroup Inc. and Wells Fargo & Co. for Wachovia Corp., Bair said, “I think we will have one (resolution) today” that is in accord with the public interest. She did not elaborate.

Citigroup on Monday said it has filed a complaint in New York Supreme Court against Wachovia, Wells Fargo and the directors of both companies seeking more than $60 billion in damages for interfering with the bank's planned takeover of Wachovia's banking operations. Citigroup and Wachovia are battling a separate case in federal court.

Federal Reserve officials are trying to broker some form of agreement between Wells Fargo and Citigroup, according to a person with knowledge of the talks. The person spoke on condition of anonymity because of the sensitive nature of the matter.