[Congressional Record Volume 142, Number 50 (Thursday, April 18, 1996)]
[Senate]
[Page S3632]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 1687. A bill to provide for annual payments from the surplus funds 
of the Federal Reserve System to cover the interest on obligations 
issued by the Financing Corporation; to the Committee on Banking, 
Housing, and Urban Affairs.


                The Federal Reserve Surplus Act of 1996

 Mr. KERRY. Mr. President, I am introducing the Federal Reserve 
Surplus Act of 1996 to provide a solution to an impending crisis in our 
financial services industry, and to avoid once again having to use 
taxpayers' money to bail out another round of S&L failures. I am happy 
to join my colleague in the House, Congressman Barney Frank as well as 
other members of the Massachusetts delegation, Congressmen Joe Kennedy, 
Marty Meehan, and Richard Neal, who introduced the companion bill in 
the House of Representatives.
  This bill will ease the obligation remaining from the savings and 
loan crisis of the 1980's with a creative approach that does not burden 
the banking institutions or taxpayers, but uses an existing $3.7 
billion fund at the Federal Reserve. The GAO tells us that because the 
Federal Reserve's interest income so far exceeds its expenses, we 
believe it is highly unlikely the System will ever incur sufficient 
annual losses such that it would be required to use any funds in the 
surplus account.
  Savings and loans are required to pay almost $800 million per year in 
interest on financing corporation bonds which were sold to cover 
depositor claims on S&L's that failed in the 1980's. This legislation 
would use $3 billion from the Federal Reserve's surplus fund as a 
contribution toward the payment of the FICO interest obligation. This 
would leave about $1 billion in the fund.
  It is generally believed, within the financial community, as 
Congressman Frank has said, that ``continuing to require the savings 
and loans to pay the entire FICO interest obligation would worsen the 
disparity between what banks must pay to such a degree as to risk 
default by the SAIF, which would ultimately result in a further drain 
on the Treasury.''
  Mr. President, this just makes sense. The Federal Reserve is 
controlling a fund with no specific purpose--paid in by banks--and the 
Congress should turn to this fund first before asking bankers in this 
country to bear the burden of recapitalizing the savings association 
insurance fund.
  Mr. President, I ask unanimous consent to have the bill printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1687

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Federal Reserve Surplus Act 
     of 1996''.

     SEC. 2. TRANSFER OF FEDERAL RESERVE SURPLUS FUNDS TO MEET 
                   FICO CARRYING COSTS.

       (a) In General.--Section 7(a) of the Federal Reserve Act 
     (12 U.S.C. 289) is amended by adding at the end the following 
     new paragraph:
       ``(4) FICO payments.--
       ``(A) In general.--During the period beginning on the date 
     of enactment of the Federal Reserve Surplus Act of 1996 and 
     ending on the date on which the Financing Corporation ceases 
     to have any obligations outstanding under section 21(e) of 
     the Federal Home Loan Bank Act, the Board shall annually 
     transfer (in addition to the transfers of funds required 
     under paragraph (3)) to the Financing Corporation, from 
     amounts in the surplus funds of the Federal reserve banks, an 
     amount equal to $3,000,000,000 divided by the number of 
     calendar years any portion of which falls within such period 
     for use in accordance with section 21(f)(1) of the Federal 
     Home Loan Bank Act.
       ``(B) Allocation.--The Board shall annually determine, on 
     the basis of such factors as the Board considers appropriate, 
     the manner in which the amount of the obligation of the Board 
     under subparagraph (A) shall be allocated among the surplus 
     funds of the Federal reserve banks.''.
       (b) Conforming Amendment.--Paragraph (1) of section 21(f) 
     of the Federal Home Loan Bank Act (12 U.S.C. 1441(f)) is 
     amended to read as follows:
       ``(1) Federal reserve surplus.--
       ``(A) In general.--Amounts transferred to the Financing 
     Corporation by the Board of Governors of the Federal Reserve 
     System from the surplus funds of the Federal reserve banks in 
     accordance with section 7(a)(4) of the Federal Reserve Act.
       ``(B) Treatment in case of bank insurance fund member 
     assessments.--To the extent Bank Insurance Fund members (as 
     defined in section 7(l)(4) of the Federal Deposit Insurance 
     Act) are subject to any assessments under this subsection, 
     the total amount of such assessments which, but for this 
     subparagraph, would be imposed on all such members for any 
     year shall be reduced by the transferred amount referred to 
     in subparagraph (A) with respect to such year.''.
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