[Congressional Record Volume 146, Number 37 (Wednesday, March 29, 2000)]
[Senate]
[Pages S1875-S1876]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        DEPOSIT INSURANCE FAIRNESS AND ECONOMIC OPPORTUNITY ACT

  Mr. SANTORUM. Mr. President, Senator John Edwards and I introduced S. 
2293, the Deposit Insurance Fairness and Economic Opportunity Act. Also 
joining in this effort are Senators Jesse Helms, Frank Murkowski, and 
Kay Bailey Hutchison.
  This bill is a continuation of an effort begun last year during 
consideration of S. 900, the now Gramm-Leach-Bliley Act. I offered an 
amendment on the Senate floor regarding the annual obligation that 
banks and thrifts pay into their respective deposit insurance funds to 
retire the debt on bonds issued by the Financing Corporation (FICO) in 
the late 1980s. This annual assessment for banks and thrifts totals 
nearly $800 million. This money is used to support the federal deposit 
insurance system consisting of the Bank Insurance Fund [BIF] and the 
Savings Association Insurance Fund (SAIF).
  By law, banks and thrifts are required to contribute the equivalent 
of 1.25 percent of their deposits into the insurance funds for it to be 
considered capitalized. Presently, and for the last several years, 
these funds have met--and exceeded--that statutory requirement. For 
example, the SAIF steadily increased from 1.25 percent in 1996 to 1.45 
percent in 1999. Similarly, the BIF rose from 1.34 percent in 1996 to 
1.37 percent in 1999.
  Over time, this situation has evolved where banks and thrifts are 
required to meet the annual obligation despite an overcapitalization of 
the insurance funds. In short, this is money that is leaving our 
communities that could be used for expanded lending in the areas of 
home buying, small business start-ups, and educational expenses. 
According to a former Federal Deposit Insurance Corporation [FDIC] 
Commissioner, every dollar available for capital can yield $10 in 
additional community lending. Therefore, it is projected that this bill 
could generate up to $8 billion in new loans each year.
  To achieve the goals of requiring the banking community to meet their 
financial obligation to the funds; maintain the safety and soundness of 
the deposit insurance funds; and allow needed dollars to remain in our 
communities,

[[Page S1876]]

Senator Edwards and I have proposed the following in S. 2293: (1) Raise 
the designated reserve ratio of the deposit insurance funds from the 
current 1.25 percent of assets to 1.4 percent of assets. This will 
provide an enhanced buffer in the deposit insurance funds to ensure 
their continued safety and soundness; (2) Allow funds in excess of the 
1.4 reserve ratio to be used to pay the annual FICO obligation; (3) 
Allow money to be returned to banks and thrifts on a pro-rata basis 
when the debt is retired on the FICO bonds in 2017. As mentioned 
before, the BIF and SAIF are overcapitalized, and continue to grow 
since the funds are invested in government bonds and generate 
investment income. The legislation specifies that only when both BIF 
and SAIF exceed the 1.4 reserve ratio can the excess be used to pay the 
annual assessment.
  I believe the approach set out in S. 2293 is one of common sense. 
Congress required the two deposit insurance funds to be capitalized at 
a set level. The mandate was accepted and met by the bank and thrift 
industries, and growth in the fund has led them to exceed the original 
requirements. This legislation simply affirms that banks and thrifts 
must continue to meet their statutorily-required financial obligation, 
and if the deposit insurance funds are healthy and sound, then such 
excess dollars can be kept in their communities.

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