The report notes that unprecendented costs in recent years have rendered the Federal Savings and Loan Insurance Corporation (FSLIC) insolvent. The pros and cons of a proposal to merge the FSLIC with the Federal Deposit Insurance Corporation (FDIC) are discussed, with the report advising against merger at the present time. Three specific steps are proposed to help revitalize the deposit insurance system. First, as soon as possible FSLIC should use different procedures to resolve insolvencies. Second, the Federal regulatory structure that controls FDIC and FSLIC should be reformed so that insurance fund losses can be minimized and the agencies can better manage risks. Third, adequate funding must be provided to bring FSLIC's reserves to an adequate level and to resolve problem cases.