[Congressional Record Volume 148, Number 14 (Thursday, February 14, 2002)]
[Senate]
[Page S854]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JOHNSON (for himself, Mr. Hagel, Mr. Reed, and Mr. Enzi):
  S. 1945. A bill to provide for the merger of the bank and savings 
association deposit insurance funds, to modernize and improve the 
safety and fairness of the Federal deposit insurance system, and for 
other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. JOHNSON. Mr. President, I rise to introduce S. 1945, the Safe and 
Fair Deposit Insurance Act of 2002, together with my good friends and 
colleagues, Senator Hagel, Senator Reed and Senator Enzi. This 
important legislation would help to ensure that deposit insurance, 
which is the bedrock of our banking system, maintains its strength even 
when faced with economic weakness.
  S. 1945 is the culmination of many years of my involvement in the 
issue of deposit insurance reform. I would like to recognize the 
banking community in South Dakota for their critical role in the 
process, from explaining how elements of the current system endanger 
local banks throughout that great State, to helping to craft solutions 
that make sense to the average American depositor.
  The current deposit insurance system is dangerously pro-cyclical, and 
in a softening economy, banks are at real risk of having to absorb 
severe insurance premiums when they can least afford them. In the last 
month alone, four banks have failed, putting pressure on the insurance 
funds.
  In addition, deposit insurance coverage was last adjusted in 1980, 
and its real value has eroded over the decades. S. 1945 proposes an 
increase in coverage, and ensures that in the future, coverage keeps 
pace with inflation through periodic indexing. We also increase the 
level of coverage for our municipalities' deposits, to reduce the risk 
that a bank failure will wipe out a town's financial base, as happened 
just last week in Ohio, and also to free up much needed capital to lend 
to cash-starved communities.
  Our bill pays special attention to the needs of our retirees. We 
propose that retirement savings be covered up to $250,000, to allow our 
retirees to keep their money safe without being forced to search for a 
bank outside of their trusted communities.
  So many of our retirees have spent their lives saving to make sure 
they can remain independent in their later years, especially given some 
uncertainty about the long-term health of Social Security. Many have 
put those savings to work in a variety of investments through tax-
deferred accounts and have watched those balances mount.
  Over the last few months, however, we have been reminded that while 
equity markets can provide unparalleled opportunities for economic 
growth, those opportunities come with volatility. And while many 
younger investors have enough time to ride out ups and downs, those of 
us who are closer to retirement age have to make sure we have enough 
savings in secure investments to provide for a comfortable retirement.
  Our bill also merges the two deposit insurance funds, and gives the 
FDIC additional flexibility to manage the fund balance through regular 
insurance premiums. Since 1996, 93 percent of all insured depositories 
have paid nothing for their insurance coverage, which simply doesn't 
make sense. Under the bill, the FDIC would be permitted to resume 
premium assessments; however, they would also be required to keep the 
fund ratio within a range, with a goal of minimizing sharp swings in 
those assessments. FDIC is also charged with the task of building the 
fund up in good times, so in bad times, banks will avoid the economic 
pressure of steep charges that could precipitate a downward spiral.
  Finally, we provide a one-time assessment credit so that institutions 
that have paid their fair share into the insurance funds don't end up 
subsidizing new entrants and fast growers. The credit will also defer 
premium payments for up to several years in some cases.
  Before I close, I would like to comment on the remarkable bipartisan 
process that has allowed this bill to take shape. Partisan politics has 
no place in discussions of deposit insurance reform, which is so 
critical to America's economic foundation. Senators Hagel, Reed, Enzi 
and I have worked together on S. 1945, and I am proud of the results of 
this teamwork. This is just one more example proving that the best laws 
are those that are built on solid principles by bipartisan teams.
  Finally, I thank FDIC Chairman Don Powell for his leadership on this 
issue. He has recognized the importance of reform, and it has been a 
pleasure working with him and his talented team at the FDIC.
                                 ______