[Congressional Record Volume 148, Number 66 (Tuesday, May 21, 2002)]
[House]
[Pages H2787-H2803]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2002

  Mr. OXLEY. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 3717) to reform the Federal deposit insurance system, and for 
other purposes, as amended.
  The Clerk read as follows:

                               H.R. 3717

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Federal 
     Deposit Insurance Reform Act of 2002''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Merging the BIF and SAIF.
Sec. 3. Increase in deposit insurance coverage.
Sec. 4. Setting assessments and repeal of special rules relating to 
              minimum assessments and free deposit insurance.
Sec. 5. Replacement of fixed designated reserve ratio with reserve 
              range.
Sec. 6. Requirements applicable to the risk-based assessment system.
Sec. 7. Refunds, dividends, and credits from Deposit Insurance Fund.
Sec. 8. Deposit Insurance Fund restoration plans.
Sec. 9. Regulations required.
Sec. 10. Studies of FDIC structure and expenses and certain activities 
              and further possible changes to deposit insurance system.
Sec. 11. Technical and conforming amendments to the Federal Deposit 
              Insurance Act relating to the merger of the BIF and SAIF.
Sec. 12. Other technical and conforming amendments relating to the 
              merger of the BIF and SAIF.

     SEC. 2. MERGING THE BIF AND SAIF.

       (a) In General.--
       (1) Merger.--The Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be merged into the Deposit 
     Insurance Fund.
       (2) Disposition of assets and liabilities.--All assets and 
     liabilities of the Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be transferred to the 
     Deposit Insurance Fund.
       (3) No separate existence.--The separate existence of the 
     Bank Insurance Fund and the Savings Association Insurance 
     Fund shall cease on the effective date of the merger thereof 
     under this section.
       (b) Repeal of Outdated Merger Provision.--Section 2704 of 
     the Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) 
     is repealed.
       (c) Effective Date.--This section shall take effect on the 
     first day of the first calendar quarter that begins after the 
     end of the 90-day period beginning on the date of the 
     enactment of this Act.

     SEC. 3. INCREASE IN DEPOSIT INSURANCE COVERAGE.

       (a) In General.--Section 11(a)(1) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1821(a)(1)) is amended--
       (1) by striking subparagraph (B) and inserting the 
     following new subparagraph:
       ``(B) Net amount of insured deposit.--The net amount due to 
     any depositor at an insured depository institution shall not 
     exceed the standard maximum deposit insurance amount as 
     determined in accordance with subparagraphs (C), (D), (E) and 
     (F) and paragraph (3).''; and
       (2) by adding at the end the following new subparagraphs:
       ``(E) Standard maximum deposit insurance amount defined.--
     For purposes of this Act, the term `standard maximum deposit 
     insurance amount' means--
       ``(i) until the effective date of final regulations 
     prescribed pursuant to section 9(a)(2) of the Federal Deposit 
     Insurance Reform Act of 2002, $100,000; and
       ``(ii) on and after such effective date, $130,000, adjusted 
     as provided under subparagraph (F).
       ``(F) Inflation adjustment.--
       ``(i) In general.--By April 1 of 2005, and the 1st day of 
     each subsequent 5-year period, the Board of Directors and the 
     National Credit Union Administration Board shall jointly 
     prescribe the amount by which the standard maximum deposit 
     insurance amount and the standard maximum share insurance 
     amount (as defined in section 207(k) of the Federal Credit 
     Union Act) applicable to any depositor at an insured 
     depository institution shall be increased by calculating the 
     product of--

       ``(I) $130,000; and
       ``(II) the ratio of the value of the Personal Consumption 
     Expenditures Chain-Type Index (or any successor index 
     thereto), published by the Department of Commerce, as of 
     December 31 of the year preceding the year in which the 
     adjustment is calculated under this clause, to the value 
     of such index as of the date this subparagraph takes 
     effect.
       ``(ii) Rounding.--If the amount determined under clause 
     (ii) for any period is not a multiple of $10,000, the amount 
     so determined shall be rounded to the nearest $10,000.
       ``(iii) Publication and report to the congress.--Not later 
     than April 5 of any calendar year in which an adjustment is 
     required to be calculated under clause (i) to the standard 
     maximum deposit insurance amount and the standard maximum 
     share insurance amount under such clause, the Board of 
     Directors and the National Credit Union Administration Board 
     shall--

       ``(I) publish in the Federal Register the standard maximum 
     deposit insurance

[[Page H2788]]

     amount, the standard maximum share insurance amount, and the 
     amount of coverage under paragraph (3)(A) and section 
     207(k)(3) of the Federal Credit Union Act, as so calculated; 
     and
       ``(II) jointly submit a report to the Congress containing 
     the amounts described in subclause (I).

       ``(iv) 6-month implementation period.--Unless an Act of 
     Congress enacted before July 1 of the calendar year in which 
     an adjustment is required to be calculated under clause (i) 
     provides otherwise, the increase in the standard maximum 
     deposit insurance amount and the standard maximum share 
     insurance amount shall take effect on January 1 of the year 
     immediately succeeding such calendar year.''.
       (b) Coverage for Certain Employee Benefit Plan Deposits.--
     Section 11(a)(1)(D) of the Federal Deposit Insurance Act (12 
     U.S.C. 1821(a)(1)(D)) is amended to read as follows:
       ``(D) Coverage for certain employee benefit plan 
     deposits.--
       ``(i) Pass-through insurance.--The Corporation shall 
     provide pass-through deposit insurance for the deposits of 
     any employee benefit plan.
       ``(ii) Prohibition on acceptance of benefit plan 
     deposits.--An insured depository institution that is not well 
     capitalized or adequately capitalized may not accept employee 
     benefit plan deposits.
       ``(iii) Definitions.--For purposes of this subparagraph, 
     the following definitions shall apply:

       ``(I) Capital standards.--The terms `well capitalized' and 
     `adequately capitalized' have the same meanings as in section 
     38.
       ``(II) Employee benefit plan.--The term `employee benefit 
     plan' has the same meaning as in paragraph (8)(B)(ii), and 
     includes any eligible deferred compensation plan described in 
     section 457 of the Internal Revenue Code of 1986.
       ``(III) Pass-through deposit insurance.--The term `pass-
     through deposit insurance' means, with respect to an employee 
     benefit plan, deposit insurance coverage provided on a pro 
     rata basis to the participants in the plan, in accordance 
     with the interest of each participant.''.

       (c) Doubling of Deposit Insurance for Certain Retirement 
     Accounts.--Section 11(a)(3)(A) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1821(a)(3)(A)) is amended by 
     striking ``$100,000'' and inserting ``2 times the standard 
     maximum deposit insurance amount (as determined under 
     paragraph (1))''.
       (d) Increased Insurance Coverage for Municipal Deposits.--
     Section 11(a)(2) of the Federal Deposit Insurance Act (12 
     U.S.C. 1821(a)(2)) is amended--
       (1) in subparagraph (A)--
       (A) by moving the margins of clauses (i) through (v) 4 ems 
     to the right;
       (B) by striking, in the matter following clause (v), ``such 
     depositor shall'' and all that follows through the period; 
     and
       (C) by striking the semicolon at the end of clause (v) and 
     inserting a period;
       (2) by striking ``(2)(A) Notwithstanding'' and all that 
     follows through ``a depositor who is--'' and inserting the 
     following:
       ``(2) Municipal depositors.--
       ``(A) In general.--Notwithstanding any limitation in this 
     Act or in any other provision of law relating to the amount 
     of deposit insurance available to any 1 depositor--
       ``(i) a municipal depositor shall, for the purpose of 
     determining the amount of insured deposits under this 
     subsection, be deemed to be a depositor separate and distinct 
     from any other officer, employee, or agent of the United 
     States or any public unit referred to in subparagraph (E); 
     and
       ``(ii) except as provided in subparagraph (B), the deposits 
     of a municipal depositor shall be insured in an amount equal 
     to the standard maximum deposit insurance amount (as 
     determined under paragraph (1)).
       ``(B) In-state municipal depositors.--In the case of the 
     deposits of an in-State municipal depositor described in 
     clause (ii), (iii), (iv), or (v) of subparagraph (E) at an 
     insured depository institution, such deposits shall be 
     insured in an amount not to exceed the lesser of--
       ``(i) $2,000,000; or
       ``(ii) the sum of the standard maximum deposit insurance 
     amount and 80 percent of the amount of any deposits in excess 
     of the standard maximum deposit insurance amount.
       ``(C) Municipal deposit parity.--No State may deny to 
     insured depository institutions within its jurisdiction the 
     authority to accept deposits insured under this paragraph, or 
     prohibit the making of such deposits in such institutions by 
     any in-State municipal depositor.
       ``(D) In-state municipal depositor defined.--For purposes 
     of this paragraph, the term `in-State municipal depositor' 
     means a municipal depositor that is located in the same State 
     as the office or branch of the insured depository institution 
     at which the deposits of that depositor are held.
       ``(E) Municipal depositor.--In this paragraph, the term 
     `municipal depositor' means a depositor that is--'';
       (3) by striking ``(B) The'' and inserting the following:
       ``(F) Authority to limit deposits.--The''; and
       (4) by striking ``depositor referred to in subparagraph (A) 
     of this paragraph'' each place such term appears and 
     inserting ``municipal depositor''.
       (e) Technical and Conforming Amendment Relating to 
     Insurance of Trust Funds.--Paragraphs (1) and (3) of section 
     7(i) of the Federal Deposit Insurance Act (12 U.S.C. 1817(i)) 
     are each amended by striking ``$100,000'' and inserting ``the 
     standard maximum deposit insurance amount (as determined 
     under section 11(a)(1))''.
       (f) Other Technical and Conforming Amendments.--
       (1) Section 11(m)(6) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1821(m)(6)) is amended by striking ``$100,000'' 
     and inserting ``an amount equal to the standard maximum 
     deposit insurance amount''.
       (2) Subsection (a) of section 18 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1828(a)) is amended to read as 
     follows:
       ``(a) Insurance Logo.--
       ``(1) Insured depository institutions.--Each insured 
     depository institution shall display at each place of 
     business maintained by that institution a sign or signs 
     relating to the insurance of the deposits of the 
     institution, in accordance with regulations to be 
     prescribed by the Corporation.
       ``(2) Regulations.--The Corporation shall prescribe 
     regulations to carry out this subsection, including 
     regulations governing the substance of signs required by 
     paragraph (1) and the manner of display or use of such signs.
       ``(3) Penalties.--For each day that an insured depository 
     institution continues to violate this subsection or any 
     regulation issued under this subsection, it shall be subject 
     to a penalty of not more than $100, which the Corporation may 
     recover for its use.''.
       (3) Section 43(d) of the Federal Deposit Insurance Act (12 
     U.S.C. 1831t(d)) is amended by striking ``$100,000'' and 
     inserting ``an amount equal to the standard maximum deposit 
     insurance amount''.
       (4) Section 6 of the International Banking Act of 1978 (12 
     U.S.C. 3104) is amended--
       (A) by striking ``$100,000'' each place such term appears 
     and inserting ``an amount equal to the standard maximum 
     deposit insurance amount''; and
       (B) by adding at the end the following new subsection:
       ``(e) Standard Maximum Deposit Insurance Amount Defined.--
     For purposes of this section, the term `standard maximum 
     deposit insurance amount' means the amount of the maximum 
     amount of deposit insurance as determined under section 
     11(a)(1) of the Federal Deposit Insurance Act.''.
       (g) Conforming Change to Credit Union Share Insurance 
     Fund.--
       (1) In general.--Section 207(k) of the Federal Credit Union 
     Act (12 U.S.C. 1787(k)) is amended--
       (A) by striking ``(k)(1)'' and all that follows through the 
     end of paragraph (1) and inserting the following:
       ``(k) Insured Amounts Payable.--
       ``(1) Net insured amount.--
       ``(A) In general.--Subject to the provisions of paragraph 
     (2), the net amount of share insurance payable to any member 
     at an insured credit union shall not exceed the total amount 
     of the shares or deposits in the name of the member (after 
     deducting offsets), less any part thereof which is in excess 
     of the standard maximum share insurance amount, as determined 
     in accordance with this paragraph and paragraphs (5) and (6), 
     and consistently with actions taken by the Federal Deposit 
     Insurance Corporation under section 11(a) of the Federal 
     Deposit Insurance Act.
       ``(B) Aggregation.--Determination of the net amount of 
     share insurance under subparagraph (A), shall be in 
     accordance with such regulations as the Board may prescribe, 
     and, in determining the amount payable to any member, there 
     shall be added together all accounts in the credit union 
     maintained by that member for that member's own benefit, 
     either in the member's own name or in the names of others.
       ``(C) Authority to define the extent of coverage.--The 
     Board may define, with such classifications and exceptions as 
     it may prescribe, the extent of the share insurance coverage 
     provided for member accounts, including member accounts in 
     the name of a minor, in trust, or in joint tenancy.'';
       (B) in paragraph (2)--
       (i) in subparagraph (A)--

       (I) in clauses (i) through (v), by moving the margins 4 ems 
     to the right;
       (II) in the matter following clause (v), by striking ``his 
     account'' and all that follows through the period; and
       (III) by striking the semicolon at the end of clause (v) 
     and inserting a period;

       (ii) by striking ``(2)(A) Notwithstanding'' and all that 
     follows through ``a depositor or member who is--'' and 
     inserting the following:
       ``(2) Municipal depositors or members.--
       ``(A) In general.--Notwithstanding any limitation in this 
     Act or in any other provision of law relating to the amount 
     of insurance available to any 1 depositor or member, deposits 
     or shares of a municipal depositor or member shall be insured 
     in an amount equal to the standard maximum share insurance 
     amount (as determined under paragraph (5)), except as 
     provided in subparagraph (B).
       ``(B) In-state municipal depositors.--In the case of the 
     deposits of an in-State municipal depositor described in 
     clause (ii), (iii), (iv), or (v) of subparagraph (E) at an 
     insured credit union, such deposits shall be insured in an 
     amount equal to the lesser of--
       ``(i) $2,000,000; or
       ``(ii) the sum of the standard maximum deposit insurance 
     amount and 80 percent of the

[[Page H2789]]

     amount of any deposits in excess of the standard maximum 
     deposit insurance amount.
       ``(C) Rule of construction.--No provision of this paragraph 
     shall be construed as authorizing an insured credit union to 
     accept the deposits of a municipal depositor in an amount 
     greater than such credit union is authorized to accept under 
     any other provision of Federal or State law.
       ``(D) In-state municipal depositor defined.--For purposes 
     of this paragraph, the term `in-State municipal depositor' 
     means a municipal depositor that is located in the same State 
     as the office or branch of the insured credit union at which 
     the deposits of that depositor are held.
       ``(E) Municipal depositor.--In this paragraph, the term 
     `municipal depositor' means a depositor that is--'';
       (iii) by striking ``(B) The'' and inserting the following:
       ``(F) Authority to limit deposits.--The''; and
       (iv) by striking ``depositor or member referred to in 
     subparagraph (A)'' and inserting ``municipal depositor or 
     member''; and
       (C) by adding at the end the following new paragraphs:
       ``(4) Coverage for certain employee benefit plan 
     deposits.--
       ``(A) Pass-through insurance.--The Administration shall 
     provide pass-through share insurance for the deposits or 
     shares of any employee benefit plan.
       ``(B) Prohibition on acceptance of deposits.--An insured 
     credit union that is not well capitalized or adequately 
     capitalized may not accept employee benefit plan deposits.
       ``(C) Definitions.--For purposes of this paragraph, the 
     following definitions shall apply:
       ``(i) Capital standards.--The terms `well capitalized' and 
     `adequately capitalized' have the same meanings as in section 
     216(c).
       ``(ii) Employee benefit plan.--The term `employee benefit 
     plan'--

       ``(I) has the meaning given to such term in section 3(3) of 
     the Employee Retirement Income Security Act of 1974;
       ``(II) includes any plan described in section 401(d) of the 
     Internal Revenue Code of 1986; and
       ``(III) includes any eligible deferred compensation plan 
     described in section 457 of the Internal Revenue Code of 
     1986.

       ``(iii) Pass-through share insurance.--The term `pass-
     through share insurance' means, with respect to an employee 
     benefit plan, insurance coverage provided on a pro rata basis 
     to the participants in the plan, in accordance with the 
     interest of each participant.
       ``(D) Rule of construction.--No provision of this paragraph 
     shall be construed as authorizing an insured credit union to 
     accept the deposits of an employee benefit plan in an amount 
     greater than such credit union is authorized to accept under 
     any other provision of Federal or State law.
       ``(5) Standard maximum share insurance amount defined.--For 
     purposes of this Act, the term `standard maximum share 
     insurance amount' means--
       ``(A) until the effective date of final regulations 
     prescribed pursuant to section 9(a)(2) of the Federal Deposit 
     Insurance Reform Act of 2002, $100,000; and
       ``(B) on and after such effective date, $130,000, adjusted 
     as provided under section 11(a)(1)(F) of the Federal Deposit 
     Insurance Act.''.
       (2) Doubling of share insurance for certain retirement 
     accounts.--Section 207(k)(3) of the Federal Credit Union Act 
     (12 U.S.C. 1787(k)(3)) is amended by striking ``$100,000'' 
     and inserting ``2 times the standard maximum share insurance 
     amount (as determined under paragraph (1))''.
       (h) Effective Date.--This section and the amendments made 
     by this section shall take effect on the date the final 
     regulations required under section 9(a)(2) take effect.

     SEC. 4. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES 
                   RELATING TO MINIMUM ASSESSMENTS AND FREE 
                   DEPOSIT INSURANCE.

       (a) Setting Assessments.--Section 7(b)(2) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
       (1) by striking subparagraphs (A) and (B) and inserting the 
     following new subparagraphs:
       ``(A) In general.--The Board of Directors shall set 
     assessments for insured depository institutions in such 
     amounts as the Board of Directors may determine to be 
     necessary or appropriate, subject to subparagraph (D).
       ``(B) Factors to be considered.--In setting assessments 
     under subparagraph (A), the Board of Directors shall consider 
     the following factors:
       ``(i) The estimated operating expenses of the Deposit 
     Insurance Fund.
       ``(ii) The estimated case resolution expenses and income of 
     the Deposit Insurance Fund.
       ``(iii) The projected effects of the payment of assessments 
     on the capital and earnings of insured depository 
     institutions.
       ``(iv) the risk factors and other factors taken into 
     account pursuant to paragraph (1) under the risk-based 
     assessment system, including the requirement under such 
     paragraph to maintain a risk-based system.
       ``(v) Any other factors the Board of Directors may 
     determine to be appropriate.''; and
       (2) by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Base rate for assessments.--
       ``(i) In general.--In setting assessment rates pursuant to 
     subparagraph (A), the Board of Directors shall establish a 
     base rate of not more than 1 basis point (exclusive of any 
     credit or dividend) for those insured depository institutions 
     in the lowest-risk category under the risk-based assessment 
     system established pursuant to paragraph (1).
       ``(ii) Suspension.--Clause (i) shall not apply during any 
     period in which the reserve ratio of the Deposit Insurance 
     Fund is less than the amount which is equal to 1.15 percent 
     of the aggregate estimated insured deposits.''.
       (b) Assessment Recordkeeping Period Shortened.--Paragraph 
     (5) of section 7(b) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)) is amended to read as follows:
       ``(5) Depository institution required to maintain 
     assessment-related records.--Each insured depository 
     institution shall maintain all records that the Corporation 
     may require for verifying the correctness of any assessment 
     on the insured depository institution under this subsection 
     until the later of--
       ``(A) the end of the 3-year period beginning on the due 
     date of the assessment; or
       ``(B) in the case of a dispute between the insured 
     depository institution and the Corporation with respect to 
     such assessment, the date of a final determination of any 
     such dispute.''.
       (c) Increase in Fees for Late Assessment Payments.--
     Subsection (h) of section 18 of the Federal Deposit Insurance 
     Act (12 U.S.C. 1828(h)) is amended to read as follows:
       ``(h) Penalty for Failure to Timely Pay Assessments.--
       ``(1) In general.--Any insured depository institution which 
     fails or refuses to pay any assessment shall be subject to a 
     penalty in an amount not more than 1 percent of the amount of 
     the assessment due for each day that such violation 
     continues.
       ``(2) Exception in case of dispute.--Paragraph (1) shall 
     not apply if--
       ``(A) the failure to pay an assessment is due to a dispute 
     between the insured depository institution and the 
     Corporation over the amount of such assessment; and
       ``(B) the insured depository institution deposits security 
     satisfactory to the Corporation for payment upon final 
     determination of the issue.
       ``(3) Authority to modify or remit penalty.--The 
     Corporation, in the sole discretion of the Corporation, may 
     compromise, modify or remit any penalty which the Corporation 
     may assess or has already assessed under paragraph (1) upon a 
     finding that good cause prevented the timely payment of an 
     assessment.''.
       (d) Assessments for Lifeline Accounts.--
       (1) In general.--Section 232 of the Federal Deposit 
     Insurance Corporation Improvement Act of 1991 (12 U.S.C. 
     1834) is amended by striking subsection (c).
       (2) Clarification of rate applicable to deposits 
     attributable to lifeline accounts.--Section 7(b)(2)(H) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(H)) is 
     amended by striking ``at a rate determined in accordance with 
     such Act'' and inserting ``at \1/2\ the assessment rate 
     otherwise applicable for such insured depository 
     institution''.
       (3) Regulations.--Section 232(a)(1) of the Federal Deposit 
     Insurance Corporation Improvement Act of 1991 (12 U.S.C. 
     1834(a)(1)) is amended by striking ``Board of Governors of 
     the Federal Reserve System, and the''.
       (e) Technical and Conforming Amendments.--
       (1) Paragraph (3) of section 7(a) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(a)(3)) is amended by striking 
     the 3d sentence and inserting the following: ``Such reports 
     of condition shall be the basis for the certified statements 
     to be filed pursuant to subsection (c).''.
       (2) Subparagraphs (B)(ii) and (C) of section 7(b)(1) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) are each 
     amended by striking ``semiannual'' where such term appears in 
     each such subparagraph.
       (3) Section 7(b)(2) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1817(b)(2)) is amended--
       (A) by striking subparagraphs (E), (F), and (G);
       (B) in subparagraph (C), by striking ``semiannual''; and
       (C) by redesignating subparagraph (H) (as amended by 
     subsection (e)(2) of this section) as subparagraph (E).
       (4) Section 7(b) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)) is amended by striking paragraph (4) and 
     redesignating paragraphs (5) (as amended by subsection (b) of 
     this section), (6), and (7) as paragraphs (4), (5), and (6) 
     respectively.
       (5) Section 7(c) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(c)) is amended--
       (A) in paragraph (1)(A), by striking ``semiannual'';
       (B) in paragraph (2)(A), by striking ``semiannual''; and
       (C) in paragraph (3), by striking ``semiannual period'' and 
     inserting ``initial assessment period''.
       (6) Section 7(g)(6) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1817(g)(6)) (as amended by subsection (c) of this 
     section) is amended by striking ``(b)(5)'' and inserting 
     ``(b)(4)''.
       (7) Section 8(p) of the Federal Deposit Insurance Act (12 
     U.S.C. 1818(p)) is amended by striking ``semiannual''.
       (8) Section 8(q) of the Federal Deposit Insurance Act (12 
     U.S.C. 1818(q)) is amended by striking ``semiannual period'' 
     and inserting ``assessment period''.

[[Page H2790]]

       (9) Section 13(c)(4)(G)(ii)(II) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)(II)) is amended by 
     striking ``semiannual period'' and inserting ``assessment 
     period''.
       (10) Section 232(a) of the Federal Deposit Insurance 
     Corporation Improvement Act of 1991 (12 U.S.C. 1834(a)) is 
     amended--
       (A) in the matter preceding subparagraph (A) of paragraph 
     (2), by striking ``the Board and'';
       (B) in subparagraph (J) of paragraph (2), by striking ``the 
     Board'' and inserting ``the Corporation'';
       (C) by striking subparagraph (A) of paragraph (3) and 
     inserting the following new subparagraph:
       ``(A) Corporation.--The term `Corporation' means the 
     Federal Deposit Insurance Corporation.''; and
       (D) in subparagraph (C) of paragraph (3), by striking 
     ``Board'' and inserting ``Corporation''.
       (f) Effective Date.--Except as provided in subsection (c), 
     this section and the amendments made by this section shall 
     take effect on the date that the final regulations required 
     under section 9(a)(5) take effect.

     SEC. 5. REPLACEMENT OF FIXED DESIGNATED RESERVE RATIO WITH 
                   RESERVE RANGE.

       (a) In General.--Section 7(b)(3) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(b)(3)) is amended to read as 
     follows:
       ``(3) Designated reserve ratio.--
       ``(A) Establishment.--
       ``(i) In general.--The Board of Directors shall designate, 
     by regulation after notice and opportunity for comment, the 
     reserve ratio applicable with respect to the Deposit 
     Insurance Fund.
       ``(ii) Not less than annual redetermination.--A 
     determination under clause (i) shall be made by the Board of 
     Directors at least before the beginning of each calendar 
     year, for such calendar year, and at such other times as the 
     Board of Directors may determine to be appropriate.
       ``(B) Range.--The reserve ratio designated by the Board of 
     Directors for any year--
       ``(i) may not exceed 1.4 percent of estimated insured 
     deposits; and
       ``(ii) may not be less than 1.15 percent of estimated 
     insured deposits.
       ``(C) Factors.--In designating a reserve ratio for any 
     year, the Board of Directors shall--
       ``(i) take into account the risk of losses to the Deposit 
     Insurance Fund in such year and future years, including 
     historic experience and potential and estimated losses from 
     insured depository institutions;
       ``(ii) take into account economic conditions generally 
     affecting insured depository institutions so as to allow the 
     designated reserve ratio to increase during more favorable 
     economic conditions and to decrease during less favorable 
     economic conditions, notwithstanding the increased risks of 
     loss that may exist during such less favorable conditions, as 
     determined to be appropriate by the Board of Directors;
       ``(iii) seek to prevent sharp swings in the assessment 
     rates for insured depository institutions; and
       ``(iv) take into account such other factors as the Board of 
     Directors may determine to be appropriate, consistent with 
     the requirements of this subparagraph.
       ``(D) Publication of proposed change in ratio.--In 
     soliciting comment on any proposed change in the designated 
     reserve ratio in accordance with subparagraph (A), the Board 
     of Directors shall include in the published proposal a 
     thorough analysis of the data and projections on which the 
     proposal is based.''.
       (b) Technical and Conforming Amendment.--Section 3(y) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) is 
     amended--
       (1) by striking ``(y) The term'' and inserting ``(y) 
     Definitions Relating to Deposit Insurance Fund.--
       ``(1) Deposit insurance fund.--The term''; and
       (2) by inserting after paragraph (1) (as so designated by 
     paragraph (1) of this subsection) the following new 
     paragraph:
       ``(2) Designated reserve ratio.--The term `designated 
     reserve ratio' means the reserve ratio designated by the 
     Board of Directors in accordance with section 7(b)(3).''.
       (c) Effective Date.--This section and the amendments made 
     by this section shall take effect on the date that the final 
     regulations required under section 9(a)(1) take effect.

     SEC. 6. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT 
                   SYSTEM.

       Section 7(b)(1) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)(1)) is amended by adding at the end the 
     following new subparagraphs:
       ``(E) Information concerning risk of loss and economic 
     conditions.--
       ``(i) Sources of information.--For purposes of determining 
     risk of losses at insured depository institutions and 
     economic conditions generally affecting depository 
     institutions, the Corporation shall collect information, as 
     appropriate, from all sources the Board of Directors 
     considers appropriate, such as reports of condition, 
     inspection reports, and other information from all Federal 
     banking agencies, any information available from State bank 
     supervisors, State insurance and securities regulators, the 
     Securities and Exchange Commission (including information 
     described in section 35), the Secretary of the Treasury, the 
     Commodity Futures Trading Commission, the Farm Credit 
     Administration, the Federal Trade Commission, any Federal 
     reserve bank or Federal home loan bank, and other regulators 
     of financial institutions, and any information available from 
     credit rating entities, and other private economic or 
     business analysts.
       ``(ii) Consultation with federal banking agencies.--

       ``(I) In general.--Except as provided in subclause (II), in 
     assessing the risk of loss to the Deposit Insurance Fund with 
     respect to any insured depository institution, the 
     Corporation shall consult with the appropriate Federal 
     banking agency of such institution.
       ``(II) Treatment on aggregate basis.--In the case of 
     insured depository institutions that are well capitalized (as 
     defined in section 38) and, in the most recent examination, 
     were found to be well managed, the consultation under 
     subclause (I) concerning the assessment of the risk of loss 
     posed by such institutions may be made on an aggregate basis.

       ``(iii) Rule of construction.--No provision of this 
     paragraph shall be construed as providing any new authority 
     for the Corporation to require submission of information by 
     insured depository institutions to the Corporation.
       ``(F) Modifications to the risk-based assessment system 
     allowed only after notice and comment.--In revising or 
     modifying the risk-based assessment system at any time after 
     the date of the enactment of the Federal Deposit Insurance 
     Reform Act of 2002, the Board of Directors may implement such 
     revisions or modification in final form only after notice and 
     opportunity for comment.''.

     SEC. 7. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT 
                   INSURANCE FUND.

       (a) In General.--Subsection (e) of section 7 of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(e)) is amended to read 
     as follows:
       ``(e) Refunds, Dividends, and Credits.--
       ``(1) Refunds of overpayments.--In the case of any payment 
     of an assessment by an insured depository institution in 
     excess of the amount due to the Corporation, the Corporation 
     may--
       ``(A) refund the amount of the excess payment to the 
     insured depository institution; or
       ``(B) credit such excess amount toward the payment of 
     subsequent assessments until such credit is exhausted.
       ``(2) Dividends from excess amounts in deposit insurance 
     fund.--
       ``(A) Reserve ratio equal to or in excess of 1.4 percent of 
     estimated insured deposits.--Whenever the reserve ratio of 
     the Deposit Insurance Fund equals or exceeds 1.4 percent of 
     estimated insured deposits, the Corporation shall declare the 
     amount in the Fund in excess of the amount required to 
     maintain the reserve ratio at the designated reserve ratio in 
     effect at such time, as dividends to be paid to insured 
     depository institutions.
       ``(B) Reserve ratio equal to or in excess of 1.35 percent 
     of estimated insured deposits and less than 1.4 percent.--
     Whenever the reserve ratio of the Deposit Insurance Fund 
     equals or exceeds 1.35 percent of estimated insured deposits 
     and is less than 1.4 percent of such deposits, the 
     Corporation shall declare the amount in the Fund that is 
     equal to 50 percent of the amount in excess of the amount 
     required to maintain the reserve ratio at 1.35 percent of the 
     estimated insured deposits as dividends to be paid to insured 
     depository institutions.
       ``(C) Basis for distribution of dividends.--
       ``(i) In general.--Solely for the purposes of dividend 
     distribution under this paragraph and credit distribution 
     under paragraph (3)(B), the Corporation shall determine each 
     insured depository institution's relative contribution to the 
     Deposit Insurance Fund (or any predecessor deposit insurance 
     fund) for calculating such institution's share of any 
     dividend or credit declared under this paragraph or paragraph 
     (3)(B), taking into account the factors described in clause 
     (ii).
       ``(ii) Factors for distribution.--In implementing this 
     paragraph and paragraph (3)(B) in accordance with 
     regulations, the Corporation shall take into account the 
     following factors:

       ``(I) The ratio of the assessment base of an insured 
     depository institution (including any predecessor) on 
     December 31, 1996, to the assessment base of all eligible 
     insured depository institutions on that date.
       ``(II) The total amount of assessments paid on or after 
     January 1, 1997, by an insured depository institution 
     (including any predecessor) to the Deposit Insurance Fund 
     (and any predecessor deposit insurance fund).
       ``(III) That portion of assessments paid by an insured 
     depository institution (including any predecessor) that 
     reflects higher levels of risk assumed by such institution.
       ``(IV) Such other factors as the Corporation may determine 
     to be appropriate.

       ``(D) Notice and opportunity for comment.--The calculation, 
     declaration, and payment of dividends under this paragraph 
     shall be made at such times, in such manner, and on such 
     conditions as the Corporation shall prescribe by regulation, 
     after notice and opportunity for comment.
       ``(3) Credit pool.--
       ``(A) One-time credit based on total assessment base at 
     year-end 1996.--

[[Page H2791]]

       ``(i) In general.--Before the end of the 270-day period 
     beginning on the date of the enactment of the Federal Deposit 
     Insurance Reform Act of 2002, the Board of Directors shall, 
     by regulation, provide for a credit to each eligible insured 
     depository institution, based on the assessment base of the 
     institution (including any predecessor institution) on 
     December 31, 1996, as compared to the combined aggregate 
     assessment base of all eligible insured depository 
     institutions, taking into account such factors as the 
     Board of Directors may determine to be appropriate.
       ``(ii) Credit limit.--The aggregate amount of credits 
     available under clause (i) to all eligible insured depository 
     institutions shall equal the amount that the Corporation 
     could collect if the Corporation imposed an assessment of 12 
     basis points on the combined assessment base of the Bank 
     Insurance Fund and the Savings Association Insurance Fund as 
     of December 31, 2001.
       ``(iii) Eligible insured depository institution defined.--
     For purposes of this paragraph, the term `eligible insured 
     depository institution' means any insured depository 
     institution that--

       ``(I) was in existence on December 31, 1996, and paid a 
     deposit insurance assessment prior to that date; or
       ``(II) is a successor to any insured depository institution 
     described in subclause (II).

       ``(iv) Application of credits.--

       ``(I) In general.--The amount of a credit to any eligible 
     insured depository institution under this paragraph may be 
     applied by the Corporation to those portions of the 
     assessments imposed on such institution under subsection (b) 
     that become due for assessment periods beginning after the 
     effective date of regulations prescribed under clause (i).
       ``(II) Regulations.--The regulations prescribed under 
     clause (i) shall establish the qualifications and procedures 
     governing the application of assessment credits pursuant to 
     subclause (I).

       ``(v) Criteria for determination.--In determining whether 
     to provide assessment credits under this paragraph and the 
     amounts of any such credits, the Board of Directors shall 
     take into account the factors for designating the reserve 
     ratio under subsection (b)(3) and the factors for setting 
     assessments under subsection (b)(2)(B).
       ``(vi) Limitation on amount of credit for certain 
     depository institutions.--In the case of an insured 
     depository institution that exhibits financial, operational, 
     or compliance weaknesses ranging from moderately severe to 
     unsatisfactory, or is not adequately capitalized (as defined 
     in section 38) at the beginning of an assessment period, the 
     amount of any credit allowed under this paragraph against the 
     assessment on that depository institution for such period may 
     not exceed the amount calculated by applying to that 
     depository institution the average assessment rate on all 
     insured depository institutions for such assessment period.
       ``(vii) Predecessor defined.--For purposes of this 
     paragraph, the term `predecessor', when used with respect to 
     any insured depository institution, includes any other 
     insured depository institution acquired by or merged with 
     such insured depository institution.
       ``(B) On-going credit pool.--
       ``(i) In general.--In addition to the credit provided 
     pursuant to subparagraph (A) and subject to the limitation 
     contained in clause (vi) of such subparagraph, the 
     Corporation shall, by regulation, establish an on-going 
     system of credits to be applied against future assessments 
     under subsection (b)(1) on the same basis as the dividends 
     provided under paragraph (2)(C).
       ``(ii) Limitation on credits under certain circumstances.--
     No credits may be allowed by the Corporation under this 
     subparagraph during any period in which--

       ``(I) the reserve ratio of the Deposit Insurance Fund is 
     less than the designated reserve ratio of such Fund; or
       ``(II) the designated reserve ratio of the Fund is less 
     than 1.25 percent of the amount of estimated insured 
     deposits.

       ``(4) Administrative review.--
       ``(A) In general.--The regulations prescribed under 
     paragraph (2)(D) and subparagraphs (A) and (B) of paragraph 
     (3) shall include provisions allowing an insured depository 
     institution a reasonable opportunity to challenge 
     administratively the amount of the credit or dividend 
     determined under paragraph (2) or (3) for such institution.
       ``(B) Administrative review.--Any review under subparagraph 
     (A) of any determination of the Corporation under paragraph 
     (2) or (3) shall be final and not subject to judicial 
     review.''.
       (b) Definition of Reserve Ratio.--Section 3(y) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended 
     by section 5(b) of this Act) is amended by adding at the end 
     the following new paragraph:
       ``(3) Reserve ratio.--The term `reserve ratio', when used 
     with regard to the Deposit Insurance Fund other than in 
     connection with a reference to the designated reserve ratio, 
     means the ratio of the net worth of the Deposit Insurance 
     Fund to the value of the aggregate estimated insured 
     deposits.''.

     SEC. 8. DEPOSIT INSURANCE FUND RESTORATION PLANS.

       Section 7(b)(3) of the Federal Deposit Insurance Act (12 
     U.S.C. 1917(b)(3)) (as amended by section 5(a) of this Act) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(E) DIF restoration plans.--
       ``(i) In general.--Whenever--

       ``(I) the Corporation projects that the reserve ratio of 
     the Deposit Insurance Fund will fall below the designated 
     reserve ratio within 6 months of such determination; or
       ``(II) the reserve ratio of the Deposit Insurance Fund 
     actually falls below the designated reserve ratio without any 
     determination under subclause (I) having been made,

     the Corporation shall establish and implement a Deposit 
     Insurance Fund restoration plan within 30 days that meets the 
     requirements of clause (ii) or (iii), as the case may be, and 
     such other conditions as the Corporation determines to be 
     appropriate.
       ``(ii) Requirements of plan if reserve ratio does not fall 
     below 1.0 percent.--If the reserve ratio of the Deposit 
     Insurance Fund is not projected to or has not fallen below an 
     amount equal to 1.0 percent of the aggregate estimated 
     insured deposits, a Deposit Insurance Fund restoration plan 
     meets the requirements of this clause if the plan provides 
     that the reserve ratio of the Fund will meet or exceed the 
     designated reserve ratio that was in effect before the 
     occurrence of the event described in subclause (I) or (II) of 
     clause (i) before the end of the 3-year period beginning upon 
     implementation of the plan.
       ``(iii) Requirements of plan if reserve ratio falls below 
     1.0 percent.--If the reserve ratio of the Deposit Insurance 
     Fund has fallen below an amount equal to 1.0 percent of the 
     aggregate estimated insured deposits, a Deposit Insurance 
     Fund restoration plan meets the requirements of this clause 
     if the plan provides that the reserve ratio of the Fund--

       ``(I) will meet or exceed an amount equal to 1.0 percent of 
     the aggregate estimated insured deposits before the end of 
     the 2-year period beginning upon implementation of the plan; 
     and
       ``(II) will meet or exceed the designated reserve ratio 
     that was in effect before the occurrence of the event 
     described in subclause (I) or (II) of clause (i) before the 
     end of the 3-year period beginning on the date the reserve 
     ratio first meets or exceeds an amount equal to 1.0 percent 
     of the aggregate estimated insured deposits after the 
     implementation of the plan.

       ``(iv) Transparency.--Not more than 90 days after the 
     Corporation establishes and implements a restoration plan 
     under clause (i), the Corporation shall publish in the 
     Federal Register a detailed analysis of the factors 
     considered and the basis for the actions taken with regard to 
     the plan.''.

     SEC. 9. REGULATIONS REQUIRED.

       (a) In General.--Not later than 270 days after the date of 
     the enactment of this Act, the Board of Directors of the 
     Federal Deposit Insurance Corporation shall prescribe final 
     regulations, after notice and opportunity for comment--
       (1) designating the reserve ratio for the Deposit Insurance 
     Fund in accordance with section 7(b)(3) of the Federal 
     Deposit Insurance Act (as amended by section 5 of this Act);
       (2) implementing increases in deposit insurance coverage in 
     accordance with the amendments made by section 3 of this Act;
       (3) implementing the dividend requirement under section 
     7(e)(2) of the Federal Deposit Insurance Act (as amended by 
     section 7 of this Act).
       (4) implementing the 1-time assessment credit to certain 
     insured depository institutions in accordance with section 
     7(e)(3) of the Federal Deposit Insurance Act, as amended by 
     section 7 of this Act, including the qualifications and 
     procedures under which the Corporation would apply assessment 
     credits; and
       (5) providing for assessments under section 7(b) of the 
     Federal Deposit Insurance Act, as amended by this Act.
       (b) Rule of Construction.--No provision of this Act or any 
     amendment made by this Act shall be construed as affecting 
     the authority of the Corporation to set or collect deposit 
     insurance assessments before the effective date of the final 
     regulation prescribed under subsection (a).

     SEC. 10. STUDIES OF FDIC STRUCTURE AND EXPENSES AND CERTAIN 
                   ACTIVITIES AND FURTHER POSSIBLE CHANGES TO 
                   DEPOSIT INSURANCE SYSTEM.

       (a) Study by Comptroller General.--
       (1) Study required.--The Comptroller General shall conduct 
     a study of the following issues:
       (A) The efficiency and effectiveness of the administration 
     of the prompt corrective action program under section 38 of 
     the Federal Deposit Insurance Act by the Federal banking 
     agencies (as defined in section 3 of such Act), including the 
     degree of effectiveness of such agencies in identifying 
     troubled depository institutions and taking effective action 
     with respect to such institutions, and the degree of accuracy 
     of the risk assessments made by the Corporation.
       (B) The appropriateness of the organizational structure of 
     the Federal Deposit Insurance Corporation for the mission of 
     the Corporation taking into account--
       (i) the current size and complexity of the business of 
     insured depository institutions (as such term is defined in 
     section 3 of the Federal Deposit Insurance Act);
       (ii) the extent to which the organizational structure 
     contributes to or reduces operational inefficiencies that 
     increase operational costs; and
       (iii) the effectiveness of internal controls.
       (2) Report to the congress.--The Comptroller General shall 
     submit a report to the Congress before the end of the 1-year 
     period beginning on the date of the enactment of

[[Page H2792]]

     this Act containing the findings and conclusions of the 
     Comptroller General with respect to the study required under 
     paragraph (1) together with such recommendations for 
     legislative or administrative action as the Comptroller 
     General may determine to be appropriate.
       (b) Internal Study by the FDIC.--
       (1) Study required.--Concurrently with the study required 
     to be conducted by the Comptroller General under subsection 
     (a), the Federal Deposit Insurance Corporation shall conduct 
     an internal study of the same conditions and factors included 
     in the study under subsection (a).
       (2) Report to the congress.--The Federal Deposit Insurance 
     Corporation shall submit a report to the Congress before the 
     end of the 1-year period beginning on the date of the 
     enactment of this Act containing the findings and conclusions 
     of the Corporation with respect to the study required under 
     paragraph (1) together with such recommendations for 
     legislative or administrative action as the Board of 
     Directors of the Corporation may determine to be appropriate.
       (c) Study of Further Possible Changes to Deposit Insurance 
     System.--
       (1) Study required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation and the National Credit Union 
     Administration Board shall each conduct a study of the 
     following:
       (A) The feasibility of establishing a voluntary deposit 
     insurance system for deposits in excess of the maximum amount 
     of deposit insurance for any depositor and the potential 
     benefits and the potential adverse consequences that may 
     result from the establishment of any such system.
       (B) The feasibility of privatizing all deposit insurance at 
     insured depository institutions and insured credit unions.
       (2) Report.--Before the end of the 1-year period beginning 
     on the date of the enactment of this Act, the Board of 
     Directors of the Federal Deposit Insurance Corporation and 
     the National Credit Union Administration Board shall each 
     submit a report to the Congress on the study required under 
     paragraph (1) containing the findings and conclusions of the 
     reporting agency together with such recommendations for 
     legislative or administrative changes as the agency may 
     determine to be appropriate.
       (d) Study Regarding Appropriate Deposit Base in Designating 
     Reserve Ratio.--
       (1) Study required.--The Federal Deposit Insurance 
     Corporation shall conduct a study of the feasibility of using 
     actual domestic deposits rather than estimated insured 
     deposits in calculating the reserve ratio of the Deposit 
     Insurance Fund and designating a reserve ratio for such Fund.
       (2) Report.--The Federal Deposit Insurance Corporation 
     shall submit a report to the Congress before the end of the 
     1-year period beginning on the date of the enactment of this 
     Act containing the findings and conclusions of the 
     Corporation with respect to the study required under 
     paragraph (1) together with such recommendations for 
     legislative or administrative action as the Board of 
     Directors of the Corporation may determine to be appropriate.
       (e) Study of Reserve Methodology and Accounting for Loss.--
       (1) Study required.--The Federal Deposit Insurance 
     Corporation, in consultation with the Comptroller General, 
     shall conduct a study of the reserve methodology and loss 
     accounting used by the Corporation during the period 
     beginning on January 1, 1992, and ending December 31, 2002, 
     with respect to insured depository institutions in a troubled 
     condition (as defined in the regulations prescribed pursuant 
     to section 32(f) of the Federal Deposit Insurance Act).
       (2) Factors to be included.--In conducting the study 
     pursuant to paragraph (1), the Federal Deposit Insurance 
     Corporation shall--
       (A) consider the overall effectiveness and accuracy of the 
     methodology used by the Corporation for establishing and 
     maintaining reserves and estimating and accounting for losses 
     at insured depository institutions, during the period 
     described in such paragraph;
       (B) consider the appropriateness and reliability of 
     information and criteria used by the Corporation in 
     determining--
       (i) whether an insured depository institution was in a 
     troubled condition; and
       (ii) the amount of any loss anticipated at such 
     institution;
       (C) analyze the actual historical loss experience over the 
     period described in paragraph (1) and the causes of the 
     exceptionally high rate of losses experienced by the 
     Corporation in the final 3 years of that period; and
       (D) rate the Corporation's efforts of the Corporation to 
     reduce losses in such 3-year period to minimally acceptable 
     levels and to historical levels.
       (3) Report required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation shall submit a report to the 
     Congress before June 30, 2003, containing the findings and 
     conclusions of the Corporation, in consultation with the 
     Comptroller General, with respect to the study required under 
     paragraph (1), together with such recommendations for 
     legislative or administrative action as the Board of 
     Directors may determine to be appropriate.

     SEC. 11. TECHNICAL AND CONFORMING AMENDMENTS TO THE FEDERAL 
                   DEPOSIT INSURANCE ACT RELATING TO THE MERGER OF 
                   THE BIF AND SAIF.

       (a) In General.--The Federal Deposit Insurance Act (12 
     U.S.C. 1811 et seq.) is amended--
       (1) in section 3 (12 U.S.C. 1813)--
       (A) by striking subparagraph (B) of subsection (a)(1) and 
     inserting the following new subparagraph:
       ``(B) includes any former savings association.''; and
       (B) by striking paragraph (1) of subsection (y) (as so 
     designated by section 5(b) of this Act) and inserting the 
     following new paragraph:
       ``(1) Deposit insurance fund.--The term `Deposit Insurance 
     Fund' means the Deposit Insurance Fund established under 
     section 11(a)(4).'';
       (2) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking 
     ``the Bank Insurance Fund or the Savings Association 
     Insurance Fund,'' and inserting ``the Deposit Insurance 
     Fund,'';
       (3) in section 5(c)(4), by striking ``deposit insurance 
     fund'' and inserting ``Deposit Insurance Fund'';
       (4) in section 5(d) (12 U.S.C. 1815(d)), by striking 
     paragraphs (2) and (3);
       (5) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
       (A) in subparagraph (A), by striking ``reserve ratios in 
     the Bank Insurance Fund and the Savings Association Insurance 
     Fund as required by section 7'' and inserting ``the reserve 
     ratio of the Deposit Insurance Fund'';
       (B) by striking subparagraph (B) and inserting the 
     following:
       ``(2) Fee credited to the deposit insurance fund.--The fee 
     paid by the depository institution under paragraph (1) shall 
     be credited to the Deposit Insurance Fund.'';
       (C) by striking ``(1) Uninsured institutions.--''; and
       (D) by redesignating subparagraphs (A) and (C) as 
     paragraphs (1) and (3), respectively, and moving the left 
     margins 2 ems to the left;
       (6) in section 5(e) (12 U.S.C. 1815(e))--
       (A) in paragraph (5)(A), by striking ``Bank Insurance Fund 
     or the Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (B) by striking paragraph (6); and
       (C) by redesignating paragraphs (7), (8), and (9) as 
     paragraphs (6), (7), and (8), respectively;
       (7) in section 6(5) (12 U.S.C. 1816(5)), by striking ``Bank 
     Insurance Fund or the Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (8) in section 7(b) (12 U.S.C. 1817(b))--
       (A) in paragraph (1)(C), by striking ``deposit insurance 
     fund'' each place that term appears and inserting ``Deposit 
     Insurance Fund'';
       (B) in paragraph (1)(D), by striking ``each deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund''; and
       (C) in paragraph (5) (as so redesignated by section 4(e)(4) 
     of this Act)--
       (i) by striking ``any such assessment'' and inserting ``any 
     such assessment is necessary'';
       (ii) by striking subparagraph (B);
       (iii) in subparagraph (A)--

       (I) by striking ``(A) is necessary--'';
       (II) by striking ``Bank Insurance Fund members'' and 
     inserting ``insured depository institutions''; and
       (III) by redesignating clauses (i), (ii), and (iii) as 
     subparagraphs (A), (B), and (C), respectively, and moving the 
     margins 2 ems to the left; and

       (iv) in subparagraph (C) (as so redesignated)--

       (I) by inserting ``that'' before ``the Corporation''; and
       (II) by striking ``; and'' and inserting a period;

       (9) in section 7(j)(7)(F) (12 U.S.C. 1817(j)(7)(F)), by 
     striking ``Bank Insurance Fund or the Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund'';
       (10) in section 8(t)(2)(C) (12 U.S.C. 1818(t)(2)(C)), by 
     striking ``deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (11) in section 11 (12 U.S.C. 1821)--
       (A) by striking ``deposit insurance fund'' each place that 
     term appears and inserting ``Deposit Insurance Fund'';
       (B) by striking paragraph (4) of subsection (a) and 
     inserting the following new paragraph:
       ``(4) Deposit insurance fund.--
       ``(A) Establishment.--There is established the Deposit 
     Insurance Fund, which the Corporation shall--
       ``(i) maintain and administer;
       ``(ii) use to carry out its insurance purposes, in the 
     manner provided by this subsection; and
       ``(iii) invest in accordance with section 13(a).
       ``(B) Uses.--The Deposit Insurance Fund shall be available 
     to the Corporation for use with respect to insured depository 
     institutions the deposits of which are insured by the Deposit 
     Insurance Fund.
       ``(C) Limitation on use.--Notwithstanding any provision of 
     law other than section 13(c)(4)(G), the Deposit Insurance 
     Fund shall not be used in any manner to benefit any 
     shareholder or affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act) of--
       ``(i) any insured depository institution for which the 
     Corporation has been appointed conservator or receiver, in 
     connection with any type of resolution by the Corporation;
       ``(ii) any other insured depository institution in default 
     or in danger of default, in connection with any type of 
     resolution by the Corporation; or

[[Page H2793]]

       ``(iii) any insured depository institution, in connection 
     with the provision of assistance under this section or 
     section 13 with respect to such institution, except that this 
     clause shall not prohibit any assistance to any insured 
     depository institution that is not in default, or that is not 
     in danger of default, that is acquiring (as defined in 
     section 13(f)(8)(B)) another insured depository institution.
       ``(D) Deposits.--All amounts assessed against insured 
     depository institutions by the Corporation shall be deposited 
     into the Deposit Insurance Fund.'';
       (C) by striking paragraphs (5), (6), and (7) of subsection 
     (a); and
       (D) by redesignating paragraph (8) of subsection (a) as 
     paragraph (5);
       (12) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by 
     striking ``, except that--'' and all that follows through the 
     end of the paragraph and inserting a period;
       (13) in section 11(i)(3) (12 U.S.C. 1821(i)(3))--
       (A) by striking subparagraph (B);
       (B) by redesignating subparagraph (C) as subparagraph (B); 
     and
       (C) in subparagraph (B) (as so redesignated), by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraph 
     (A)'';
       (14) in section 11(p)(2)(B) (12 U.S.C. 1821(p)(2)(B)), by 
     striking ``institution, any'' and inserting ``institution, 
     the'';
       (15) in section 11A(a) (12 U.S.C. 1821a(a))--
       (A) in paragraph (2), by striking ``liabilities.--'' and 
     all that follows through ``Except'' and inserting 
     ``liabilities.--Except'';
       (B) by striking paragraph (2)(B); and
       (C) in paragraph (3), by striking ``the Bank Insurance 
     Fund, the Savings Association Insurance Fund,'' and inserting 
     ``the Deposit Insurance Fund'';
       (16) in section 11A(b) (12 U.S.C. 1821a(b)), by striking 
     paragraph (4);
       (17) in section 11A(f) (12 U.S.C. 1821a(f)), by striking 
     ``Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (18) in section 12(f)(4)(E)(iv) (12 U.S.C. 
     1822(f)(4)(E)(iv)), by striking ``Federal deposit insurance 
     funds'' and inserting ``the Deposit Insurance Fund (or any 
     predecessor deposit insurance fund)'';
       (19) in section 13 (12 U.S.C. 1823)--
       (A) by striking ``deposit insurance fund'' each place that 
     term appears and inserting ``Deposit Insurance Fund'';
       (B) in subsection (a)(1), by striking ``Bank Insurance 
     Fund, the Savings Association Insurance Fund,'' and inserting 
     ``Deposit Insurance Fund'';
       (C) in subsection (c)(4)(E)--
       (i) in the subparagraph heading, by striking ``funds'' and 
     inserting ``fund''; and
       (ii) in clause (i), by striking ``any insurance fund'' and 
     inserting ``the Deposit Insurance Fund'';
       (D) in subsection (c)(4)(G)(ii)--
       (i) by striking ``appropriate insurance fund'' and 
     inserting ``Deposit Insurance Fund'';
       (ii) by striking ``the members of the insurance fund (of 
     which such institution is a member)'' and inserting ``insured 
     depository institutions'';
       (iii) by striking ``each member's'' and inserting ``each 
     insured depository institution's''; and
       (iv) by striking ``the member's'' each place that term 
     appears and inserting ``the institution's'';
       (E) in subsection (c), by striking paragraph (11);
       (F) in subsection (h), by striking ``Bank Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (G) in subsection (k)(4)(B)(i), by striking ``Savings 
     Association Insurance Fund member'' and inserting ``savings 
     association''; and
       (H) in subsection (k)(5)(A), by striking ``Savings 
     Association Insurance Fund members'' and inserting ``savings 
     associations'';
       (20) in section 14(a) (12 U.S.C. 1824(a)), in the 5th 
     sentence--
       (A) by striking ``Bank Insurance Fund or the Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund''; and
       (B) by striking ``each such fund'' and inserting ``the 
     Deposit Insurance Fund'';
       (21) in section 14(b) (12 U.S.C. 1824(b)), by striking 
     ``Bank Insurance Fund or Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (22) in section 14(c) (12 U.S.C. 1824(c)), by striking 
     paragraph (3);
       (23) in section 14(d) (12 U.S.C. 1824(d))--
       (A) by striking ``Bank Insurance Fund member'' each place 
     that term appears and inserting ``insured depository 
     institution'';
       (B) by striking ``Bank Insurance Fund members'' each place 
     that term appears and inserting ``insured depository 
     institutions'';
       (C) by striking ``Bank Insurance Fund'' each place that 
     term appears (other than in connection with a reference to a 
     term amended by subparagraph (A) or (B) of this paragraph) 
     and inserting ``Deposit Insurance Fund'';
       (D) by striking the subsection heading and inserting the 
     following:
       ``(d) Borrowing for the Deposit Insurance Fund From Insured 
     Depository Institutions.--'';
       (E) in paragraph (3), in the paragraph heading, by striking 
     ``bif'' and inserting ``the deposit insurance fund''; and
       (F) in paragraph (5), in the paragraph heading, by striking 
     ``bif members'' and inserting ``insured depository 
     institutions'';
       (24) in section 14 (12 U.S.C. 1824), by adding at the end 
     the following new subsection:
       ``(e) Borrowing for the Deposit Insurance Fund From Federal 
     Home Loan Banks.--
       ``(1) In general.--The Corporation may borrow from the 
     Federal home loan banks, with the concurrence of the Federal 
     Housing Finance Board, such funds as the Corporation 
     considers necessary for the use of the Deposit Insurance 
     Fund.
       ``(2) Terms and conditions.--Any loan from any Federal home 
     loan bank under paragraph (1) to the Deposit Insurance Fund 
     shall--
       ``(A) bear a rate of interest of not less than the current 
     marginal cost of funds to that bank, taking into account the 
     maturities involved;
       ``(B) be adequately secured, as determined by the Federal 
     Housing Finance Board;
       ``(C) be a direct liability of the Deposit Insurance Fund; 
     and
       ``(D) be subject to the limitations of section 15(c).'';
       (25) in section 15(c)(5) (12 U.S.C. 1825(c)(5))--
       (A) by striking ``the Bank Insurance Fund or Savings 
     Association Insurance Fund, respectively'' each place that 
     term appears and inserting ``the Deposit Insurance Fund''; 
     and
       (B) in subparagraph (B), by striking ``the Bank Insurance 
     Fund or the Savings Association Insurance Fund, 
     respectively'' and inserting ``the Deposit Insurance Fund'';
       (26) in section 17(a) (12 U.S.C. 1827(a))--
       (A) in the subsection heading, by striking ``BIF, SAIF,'' 
     and inserting ``the Deposit Insurance Fund''; and
       (B) in paragraph (1)--
       (i) by striking ``the Bank Insurance Fund, the Savings 
     Association Insurance Fund,'' each place that term appears 
     and inserting ``the Deposit Insurance Fund''; and
       (ii) in subparagraph (D), by striking ``each insurance 
     fund'' and inserting ``the Deposit Insurance Fund'';
       (27) in section 17(d) (12 U.S.C. 1827(d)), by striking ``, 
     the Bank Insurance Fund, the Savings Association Insurance 
     Fund,'' each place that term appears and inserting ``the 
     Deposit Insurance Fund'';
       (28) in section 18(m)(3) (12 U.S.C. 1828(m)(3))--
       (A) by striking ``Savings Association Insurance Fund'' in 
     the 1st sentence of subparagraph (A) and inserting ``Deposit 
     Insurance Fund'';
       (B) by striking ``Savings Association Insurance Fund 
     member'' in the last sentence of subparagraph (A) and 
     inserting ``savings association''; and
       (C) by striking ``Savings Association Insurance Fund or the 
     Bank Insurance Fund'' in subparagraph (C) and inserting 
     ``Deposit Insurance Fund'';
       (29) in section 18(o) (12 U.S.C. 1828(o)), by striking 
     ``deposit insurance funds'' and ``deposit insurance fund'' 
     each place those terms appear and inserting ``Deposit 
     Insurance Fund'';
       (30) in section 18(p) (12 U.S.C. 1828(p)), by striking 
     ``deposit insurance funds'' and inserting ``Deposit Insurance 
     Fund'';
       (31) in section 24 (12 U.S.C. 1831a)--
       (A) in subsections (a)(1) and (d)(1)(A), by striking 
     ``appropriate deposit insurance fund'' each place that term 
     appears and inserting ``Deposit Insurance Fund'';
       (B) in subsection (e)(2)(A), by striking ``risk to'' and 
     all that follows through the period and inserting ``risk to 
     the Deposit Insurance Fund.''; and
       (C) in subsections (e)(2)(B)(ii) and (f)(6)(B), by striking 
     ``the insurance fund of which such bank is a member'' each 
     place that term appears and inserting ``the Deposit Insurance 
     Fund'';
       (32) in section 28 (12 U.S.C. 1831e), by striking 
     ``affected deposit insurance fund'' each place that term 
     appears and inserting ``Deposit Insurance Fund'';
       (33) by striking section 31 (12 U.S.C. 1831h);
       (34) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)), by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (35) in section 37(a)(1)(C) (12 U.S.C. 1831n(a)(1)(C)), by 
     striking ``insurance funds'' and inserting ``Deposit 
     Insurance Fund'';
       (36) in section 38 (12 U.S.C. 1831o), by striking ``the 
     deposit insurance fund'' each place that term appears and 
     inserting ``the Deposit Insurance Fund'';
       (37) in section 38(a) (12 U.S.C. 1831o(a)), in the 
     subsection heading, by striking ``Funds'' and inserting 
     ``Fund'';
       (38) in section 38(k) (12 U.S.C. 1831o(k))--
       (A) in paragraph (1), by striking ``a deposit insurance 
     fund'' and inserting ``the Deposit Insurance Fund'';
       (B) in paragraph (2), by striking ``A deposit insurance 
     fund'' and inserting ``The Deposit Insurance Fund''; and
       (C) in paragraphs (2)(A) and (3)(B), by striking ``the 
     deposit insurance fund's outlays'' each place that term 
     appears and inserting ``the outlays of the Deposit Insurance 
     Fund''; and
       (39) in section 38(o) (12 U.S.C. 1831o(o))--
       (A) by striking ``Associations.--'' and all that follows 
     through ``Subsections (e)(2)'' and inserting 
     ``Associations.--Subsections (e)(2)'';
       (B) by redesignating subparagraphs (A), (B), and (C) as 
     paragraphs (1), (2), and (3), respectively, and moving the 
     margins 2 ems to the left; and
       (C) in paragraph (1) (as so redesignated), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively, and moving the margins 2 ems to the left.
       (b) Effective Date.--This section and the amendments made 
     by this section shall take effect on the first day of the 
     first calendar

[[Page H2794]]

     quarter that begins after the end of the 90-day period 
     beginning on the date of the enactment of this Act.

     SEC. 12. OTHER TECHNICAL AND CONFORMING AMENDMENTS RELATING 
                   TO THE MERGER OF THE BIF AND SAIF.

       (a) Section 5136 of the Revised Statutes.--The paragraph 
     designated the ``Eleventh'' of section 5136 of the Revised 
     Statutes of the United States (12 U.S.C. 24) is amended in 
     the 5th sentence, by striking ``affected deposit insurance 
     fund'' and inserting ``Deposit Insurance Fund''.
       (b) Investments Promoting Public Welfare; Limitations on 
     Aggregate Investments.--The 23d undesignated paragraph of 
     section 9 of the Federal Reserve Act (12 U.S.C. 338a) is 
     amended in the 4th sentence, by striking ``affected deposit 
     insurance fund'' and inserting ``Deposit Insurance Fund''.
       (c) Advances to Critically Undercapitalized Depository 
     Institutions.--Section 10B(b)(3)(A)(ii) of the Federal 
     Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by 
     striking ``any deposit insurance fund in'' and inserting 
     ``the Deposit Insurance Fund of''.
       (d) Amendments to the Balanced Budget and Emergency Deficit 
     Control Act of 1985.--Section 255(g)(1)(A) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
     905(g)(1)(A)) is amended--
       (1) by striking ``Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (2) by striking ``Federal Deposit Insurance Corporation, 
     Savings Association Insurance Fund (51-4066-0-3-373);''.
       (e) Amendments to the Federal Home Loan Bank Act.--The 
     Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is 
     amended--
       (1) in section 11(k) (12 U.S.C. 1431(k))--
       (A) in the subsection heading, by striking ``SAIF'' and 
     inserting ``the Deposit Insurance Fund''; and
       (B) by striking ``Savings Association Insurance Fund'' each 
     place such term appears and inserting ``Deposit Insurance 
     Fund'';
       (2) in section 21 (12 U.S.C. 1441)--
       (A) in subsection (f)(2), by striking ``, except that'' and 
     all that follows through the end of the paragraph and 
     inserting a period; and
       (B) in subsection (k), by striking paragraph (4);
       (3) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (4) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))--
       (A) in the subparagraph heading, by striking ``SAIF-insured 
     banks'' and inserting ``Charter conversions''; and
       (B) by striking ``Savings Association Insurance Fund 
     member'' and inserting ``savings association'';
       (5) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 
     1441a(b)(10)(A)(iv)(II)), by striking ``Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund'';
       (6) in section 21A(n)(6)(E)(iv) (12 U.S.C. 
     1441(n)(6)(E)(iv)), by striking ``Federal deposit insurance 
     funds'' and inserting ``the Deposit Insurance Fund'';
       (7) in section 21B(e) (12 U.S.C. 1441b(e))--
       (A) in paragraph (5), by inserting ``as of the date of 
     funding'' after ``Savings Association Insurance Fund 
     members'' each place that term appears; and
       (B) by striking paragraphs (7) and (8); and
       (8) in section 21B(k) (12 U.S.C. 1441b(k))--
       (A) by inserting before the colon ``, the following 
     definitions shall apply'';
       (B) by striking paragraph (8); and
       (C) by redesignating paragraphs (9) and (10) as paragraphs 
     (8) and (9), respectively.
       (f) Amendments to the Home Owners' Loan Act.--The Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended--
       (1) in section 5 (12 U.S.C. 1464)--
       (A) in subsection (c)(5)(A), by striking ``that is a member 
     of the Bank Insurance Fund'';
       (B) in subsection (c)(6), by striking ``As used in this 
     subsection--'' and inserting ``For purposes of this 
     subsection, the following definitions shall apply:'';
       (C) in subsection (o)(1), by striking ``that is a Bank 
     Insurance Fund member'';
       (D) in subsection (o)(2)(A), by striking ``a Bank Insurance 
     Fund member until such time as it changes its status to a 
     Savings Association Insurance Fund member'' and inserting 
     ``insured by the Deposit Insurance Fund'';
       (E) in subsection (t)(5)(D)(iii)(II), by striking 
     ``affected deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (F) in subsection (t)(7)(C)(i)(I), by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''; and
       (G) in subsection (v)(2)(A)(i), by striking ``the Savings 
     Association Insurance Fund'' and inserting ``or the Deposit 
     Insurance Fund''; and
       (2) in section 10 (12 U.S.C. 1467a)--
       (A) in subsection (c)(6)(D), by striking ``this title'' and 
     inserting ``this Act'';
       (B) in subsection (e)(1)(B), by striking ``Savings 
     Association Insurance Fund or Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund'';
       (C) in subsection (e)(2), by striking ``Savings Association 
     Insurance Fund or the Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (D) in subsection (e)(4)(B), by striking ``subsection (1)'' 
     and inserting ``subsection (l)'';
       (E) in subsection (g)(3)(A), by striking ``(5) of this 
     section'' and inserting ``(5) of this subsection'';
       (F) in subsection (i), by redesignating paragraph (5) as 
     paragraph (4);
       (G) in subsection (m)(3), by striking subparagraph (E) and 
     by redesignating subparagraphs (F), (G), and (H) as 
     subparagraphs (E), (F), and (G), respectively;
       (H) in subsection (m)(7)(A), by striking ``during period'' 
     and inserting ``during the period''; and
       (I) in subsection (o)(3)(D), by striking ``sections 5(s) 
     and (t) of this Act'' and inserting ``subsections (s) and (t) 
     of section 5''.
       (g) Amendments to the National Housing Act.--The National 
     Housing Act (12 U.S.C. 1701 et seq.) is amended--
       (1) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by 
     striking ``Bank Insurance Fund for banks or through the 
     Savings Association Insurance Fund for savings associations'' 
     and inserting ``Deposit Insurance Fund''; and
       (2) in section 536(b)(1)(B)(ii) (12 U.S.C. 1735f-
     14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for banks 
     and through the Savings Association Insurance Fund for 
     savings associations'' and inserting ``Deposit Insurance 
     Fund''.
       (h) Amendments to the Financial Institutions Reform, 
     Recovery, and Enforcement Act of 1989.--The Financial 
     Institutions Reform, Recovery, and Enforcement Act of 1989 
     (12 U.S.C. 1811 note) is amended--
       (1) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by 
     inserting ``and after the merger of such funds, the Deposit 
     Insurance Fund,'' after ``the Savings Association Insurance 
     Fund,''; and
       (2) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''.
       (i) Amendment to the Bank Holding Company Act of 1956.--The 
     Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended--
       (1) in section 2(j)(2) (12 U.S.C. 1841(j)(2)), by striking 
     ``Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (2) in section 3(d)(1)(D)(iii) (12 U.S.C. 
     1842(d)(1)(D)(iii)), by striking ``appropriate deposit 
     insurance fund'' and inserting ``Deposit Insurance Fund''.
       (j) Amendments to the Gramm-Leach-Bliley Act.--Section 114 
     of the Gramm-Leach-Bliley Act (12 U.S.C. 1828a) is amended by 
     striking ``any Federal deposit insurance fund'' in subsection 
     (a)(1)(B), paragraphs (2)(B) and (4)(B) of subsection (b), 
     and subsection (c)(1)(B), each place that term appears and 
     inserting ``the Deposit Insurance Fund''.
       (k) Effective Date.--This section and the amendments made 
     by this section shall take effect on the first day of the 
     first calendar quarter that begins after the end of the 90-
     day period beginning on the date of the enactment of this 
     Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Oxley) and the gentleman from New York (Mr. LaFalce) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Ohio (Mr. Oxley).


                             General Leave

  Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on this legislation, and to insert extraneous material on the bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. OSE. Mr. Speaker, I am in opposition to the bill, and I have a 
procedural question to ask as to who would claim the time in 
opposition.
  The SPEAKER pro tempore. Is the gentleman from New York (Mr. LaFalce) 
opposed to the motion?
  Mr. LaFALCE. Mr. Speaker, I am not opposed to the motion.
  The SPEAKER pro tempore. The gentleman from California (Mr. Ose) will 
control 20 minutes in opposition to the motion.
  Mr. OXLEY. Mr. Speaker, I yield myself 5 minutes.
  Mr. Speaker, I rise today in strong support of H.R. 3717, the Federal 
Deposit Insurance Reform Act of 2002. The U.S. has the largest, most 
complex, most stable banking system in the world. Deposit insurance is 
one of the major reasons for this stability. Today we will strengthen 
this system so that it continues to serve as a model for the world.
  Depositors, taxpayers, and depository institutions will be well 
served by this legislation which will modernize the Federal deposit 
insurance system. Federal deposit insurance was created by Congress in 
1934 and it has successfully served the American people for 68 years. 
Public confidence has been maintained and the stability of the Nation's 
banking system has been preserved during periods of financial 
uncertainty.

[[Page H2795]]

  The deposit insurance system has been significantly modified only 
twice since 1934, both times in response to the savings and loan crisis 
of the late 1980s and early 1990s. During this crisis, the FDIC and the 
RTC resolved 2,363 failures of insured institutions involving more than 
$700 billion in assets. As FDIC Chairman Powell stated, ``There were no 
bank runs, no panics, no disruptions to financial markets, and no 
debilitating impact on overall economic activity.'' The existence of 
Federal deposit insurance was a critical factor in the financial 
markets remaining relatively stable.
  Mr. Speaker, H.R. 3717, though technical in nature, seeks to apply 
the experiences of the last decade to today's banking marketplace. It 
is 21st century legislation for a 21st century banking industry. While 
the purpose of deposit insurance remains the same, industry growth, 
bank expansion from new powers, and the integration of banking and 
securities activities require that the scope and coverage of deposit 
insurance evolve so as to reflect the realities of a modern financial 
services industry.
  Moreover, the presence of Federal deposit insurance continues to be a 
key consideration for consumers in their decisions about where they do 
their banking and what level of deposit risk they are willing to 
assume.
  Mr. Speaker, there is broad consensus in this body. The Bush 
administration and the Federal banking and thrift regulators and 
business and consumer groups are in favor of improving and 
strengthening the deposit insurance system and making it more 
responsive to the cyclical nature of banking activities in the post-
Gramm-Leach-Bliley financial and economic environment. This legislation 
fulfills our commitment to the American public. Indeed, H.R. 3717 was 
reported out of the committee on a bipartisan vote of 52 to 2, a 
testimony to its responsiveness and timeliness.
  This legislation is both responsive and responsible. It recognizes 
that depositors, savers, and investors have integrated financial needs, 
and that the deposit insurance system must be stronger, more flexible, 
and adaptable to changing depositor behaviors in ``real time.''
  This bill allows the FDIC to do just that. It provides the FDIC with 
the necessary authority and supervisory tools to manage the deposit 
insurance fund in a way that balances all affected interests. It 
recognizes that all financial institutions present some type of risk, 
and that deposit insurance benefits all stakeholders, consumers, 
institutions and taxpayers, and that its associated benefit and costs 
should be allocated evenly and fairly. It expands benefits for 
depositors based upon their current needs and ensures premiums are 
assessed on insured financial institutions based upon their applicable 
risks.
  Finally, this bill has mechanisms to ensure that the deposit 
insurance fund grows responsibly, that it remains at a more than 
adequate level during good and bad times, and that excess funds are 
returned to communities for loans and other economic growth programs.
  I want to thank the gentleman from Alabama (Mr. Bachus), the chairman 
of the Subcommittee on Financial Institutions and Consumer Credit of 
the Committee on Financial Services, for taking on this challenging, 
highly technical legislative project and for engaging all of the major 
stakeholders in developing a bipartisan piece of well-balanced, highly 
effective 21st century legislation. I also want to thank all of the 
bipartisan cosponsors of this bill.
  Mr. Speaker, I strongly urge my colleagues to support this bill. By 
doing so we ensure the public continues to maintain its confidence in 
the U.S. financial services industry, by far the most stable in the 
world.
  Mr. Speaker, I ask unanimous consent that the gentleman from Alabama 
(Mr. Bachus) be permitted to control the remainder of my time for 
consideration of this legislation.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. OXLEY. Mr. Speaker, I reserve the balance of my time.
  Mr. OSE. Mr. Speaker, I rise today to oppose this legislation, and I 
yield myself such time as I may consume.
  Much of this bill is useful, and it is needed reform, and I do want 
to commend the chairman of the full committee, the gentleman from Ohio 
(Mr. Oxley), and the chairman of the subcommittee, the gentleman from 
Alabama (Mr. Bachus) for their hard work. In fact, I fully support most 
of the reforms in this bill that will provide needed flexibility and 
stability to the insurance corporation and the deposit insurance fund. 
I support merging the Bank Insurance Fund and the Savings Association 
Insurance Fund. I support the flexibility provided to adjust reserve 
ratios to reflect risk, and I support the increases in protection that 
are provided for retirement fund accounts.
  However, there is something here that I cannot support, and it, 
frankly, in balance, outweighs the rest of the bill. That is that I 
cannot support a bill that places the taxpayers at greater risk without 
any benefit for consumers.
  This bill, in part, would increase the insured levels of individual 
accounts from $100,000 per account to $130,000 per account, and also it 
includes future automatic increases that would result from inflation. 
The fact of the matter is I do not understand why this particular 
provision was included when every expert has testified or written that 
this is, in fact, a bad idea.
  Let me just highlight a few quotes from some of our Nation's top 
experts on fiscal policy.
  The first I would cite is Alan Greenspan, the chairman of the Federal 
Reserve Board, who testified in opposition to these particular 
increases in deposit insurance coverages in front of both the House and 
Senate committees and followed up his testimony with a written letter. 
In his most recent testimony, Chairman Greenspan said, ``In the Board's 
judgment, it is unlikely that increased coverage, even by indexing, 
would add measurably to the stability of the banking system today. 
Macroeconomic policy and other elements of the safety net, combined 
with the current, still significant level of deposit insurance, 
continue to be an important bulwark against bank runs. Thus, the 
problem that increased coverage is designed to solve must be related to 
either the individual depositor, the party originally intended to be 
protected, or to the individual bank or thrift. Clearly, both groups 
would prefer higher coverage if it costs them nothing, but Congress 
needs to be clear about the nature of a specific problem for which 
increased coverage would be the solution.''
  Clearly he is suggesting in no uncertain terms that this is a 
solution in search of a problem.
  The Bush administration also opposes increases in the coverage. Both 
Secretary of the Treasury Paul O'Neill and Under Secretary of the 
Treasury for Domestic Monetary Policy Peter R. Fisher have testified on 
this issue. Secretary O'Neill also wrote to the committee noting that, 
``However, the administration continues to believe that the deposit 
insurance coverage level should remain unchanged. There is no evidence 
that an increase in the coverage level would promote competition or 
materially improve the ability of community banks to obtain funds. 
Moreover, raising coverage could weaken market discipline and increase 
risk to the FDIC and, ultimately, the taxpayers.''
  Under Secretary Fisher said just 2 weeks ago, ``Given the lack of 
potential benefits for consumers or of potential improvement in banking 
system competition, we cannot justify the increase in the government's 
off-balance sheet liabilities that would result from higher deposit 
insurance coverage limits. These higher contingent liabilities enlarge 
the exposure of the insurance fund and ultimately of taxpayers to 
potential future losses. Moreover, increasing the overall coverage 
limit could weaken market discipline and further increase the level of 
risk to the FDIC and taxpayers.''

  My colleagues will note the similarity between that last piece of 
quote of Mr. Fisher and Mr. O'Neill, Secretary O'Neill's. Again, I 
repeat, Secretary O'Neill said, ``Raising coverage could weaken market 
discipline and increase risk.'' Mr. Fisher said, ``Increasing the 
overall coverage limit could weaken market discipline and further 
increase the level of risk.''
  However, this is not all of the people who have testified. Other 
leaders have also spoken up. The Comptroller of the

[[Page H2796]]

Currency, John D. Hawke, Jr. testified, ``We see no compelling evidence 
that increased coverage levels would offer depositors substantial 
benefits. Anyone who wants to use insured bank deposits as a means of 
holding their wealth can do so virtually without limits, subject only 
to the minor inconvenience of having to open accounts at multiple 
banks. Despite the ability of depositors to achieve almost unlimited 
coverage at banks, money market mutual funds, which have some of the 
same features as bank transactions accounts and generally offer higher 
returns than bank deposits, today hold over $2 trillion. Because these 
funds could easily be placed in insured accounts, these facts suggest 
that many depositors are not concerned about the additional risk 
involved in holding their liquid funds in uninsured form, and that 
households are comfortable with the status quo.''
  The Director of the Office of Thrift Supervision, Mr. James Gilleran, 
also testified on this subject saying, ``While I applaud efforts to 
increase the ability of institutions, particularly small community-
based depositories, to attract more deposits, I am not convinced that 
increasing the insurance cap will achieve this result. I do not think 
this approach can be supported from a cost-benefit standpoint. 
Increasing the current insurance coverage level to $130,000 would incur 
significant costs for insured institutions, since premiums would 
necessarily be increased. The benefits of an increase are unclear. I 
have heard from many of our institutions that they see no merit to 
bumping up the current limit for standard accounts. In their view, 
projected increases in insured deposits would not lead to a substantive 
increase in new accounts. Moreover, individuals with amounts in excess 
of $100,000 already have numerous opportunities to invest their funds 
in one or more depository institutions and obtain full insurance 
coverage for their funds.''
  Mr. Speaker, I want to again just repeat, the Comptroller of the 
Currency John Hawke says people have the ability to open multiple 
accounts to hold their money, and that, in fact, they seem to have 
personally gotten comfortable with the level of risk in excess of 
$100,000; and Director of the Office of Thrift Supervision James 
Gilleran says people have significant and ample opportunities to open 
accounts at multiple depository institutions and provide themselves 
with the insurance coverage that they might otherwise seek.
  Now, interestingly enough, it is not just the administration 
officials who are speaking out. The Financial Services Roundtable wrote 
to the chairman, the gentleman from Ohio (Mr. Oxley), with their 
concerns noting, ``We are writing in opposition to the provisions of 
H.R. 3717 that would raise deposit insurance coverage levels and 
increase premiums on all institutions. Raising coverage could weaken 
market discipline and increase risk to the FDIC, all insured 
institutions and, ultimately, taxpayers. The FDIC has said that these 
coverage increases could dilute the fund by as much as 13.6 basis 
points or $6.1 billion,'' $6.1 billion. ``We believe that this is too 
high a price to pay for something that could yield minimal, if any, 
benefit.'' This letter was signed by a former Congressman, Steve 
Bartlett.
  In addition, the Association for Financial Professionals, which 
represents many of the men and women in the business community who deal 
with finances every day, wrote just this week that, ``The deposit 
insurance coverage level should remain unchanged. It is not clear to us 
that a higher coverage limit would address funding concerns at smaller 
institutions. But, more importantly, we do not believe that the use of 
the deposit insurance system for the competitive purpose of trying to 
help some banks with their funding is an appropriate public policy 
position. Deposit insurance coverage is not a competitive issue. 
Coverage is intended to benefit the depositors, not banks.''

                              {time}  1945

  The Association of Financial Professionals chair also testified 
before the subcommittee of the gentleman from Alabama (Mr. Bachus) on 
this very issue. George Kauffman, a professor of banking and finance at 
Loyola University in Chicago, Illinois, also wrote on the issue, noting 
that an increase in coverage ``is likely to encourage some depositors 
to become less concerned about the financial health of their banks, and 
banks to take more risks, which would increase the chances of bank 
losses and failures.''
  Many of the expert witnesses who testified before the subcommittee of 
the gentleman from Alabama spoke at great detail in opposition to an 
increase in coverage. I do not know why Members disregarded the advice 
they solicited.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BACHUS. Mr. Speaker, I yield 5 minutes to the gentleman from New 
York (Mr. LaFalce), the ranking member of the Committee.
  Mr. LaFALCE. Mr. Speaker, I thank the distinguished chairman of the 
Subcommittee on Financial Institutions and Consumer Credit for yielding 
time to me.
  Mr. Speaker, our Federal deposit insurance system is a critically 
important element in our economic stability, and it has served our 
people quite well for almost 70 years. I do believe that H.R. 3717 
makes some very important improvements to that system.
  Among the bill's strong points: it would merge the bank insurance 
fund, the BIF, and the savings association insurance fund, the SAIF. It 
would make the system less pro-cyclical by permitting the FDIC to 
charge risk-based assessments at all times, and it would eliminate the 
so-called ``cliff'' of extremely high required assessments should the 
fund fall below the Designated Reserve Ratio for an extended period.
  It also deals with the so-called ``free rider'' problem. It also 
provides the FDIC with enhanced flexibility to manage the fund.
  Now, for years I and a number of other Members and industry leaders 
and regulators have been calling for these reforms; and I am pleased, 
very pleased, that these reforms are included in this legislation that 
we consider today.
  I am also very pleased that the long-standing law encouraging life-
line banking that the gentlewoman from California (Ms. Waters) has 
promoted since she has been in Congress will be made operational by a 
provision in this bill that she drafted. All those factors persuaded me 
to support going forward on this bill.
  On the other hand, there are some provisions of the bill, most of 
them articulated by the gentleman from California (Mr. Ose), that do 
give me some concern. I hope we will be able to give closer attention 
to them in conference, should we ever get to a conference. These are 
features that could result in increased risk to the Federal deposit 
insurance funds and the banking system.
  Specifically, I am concerned that the increase in the coverage limits 
for standard bank deposits and the increase in the limits for municipal 
deposits, especially, could create increased incentives for risk-taking 
by banks, thrifts, and credit unions without an appropriate 
compensating benefit for depositors, and without any assurance that the 
increased limits will result in a net increase in deposit in the 
institutions that claim these increases are needed to fund loans to 
their customers.
  My concerns are not isolated. They are shared by Federal Reserve 
Chairman Alan Greenspan, by the FDIC chairman, by the former Secretary 
of the Treasury, Larry Summers, and by the present Secretary of the 
Treasury, Paul O'Neill. Mr. O'Neill points out that ``an increase in 
coverage would primarily benefit high net worth individuals, and do 
little for the great majority of savers who have deposit balances far 
below the current coverage limit.''
  To raise the general coverage level to $130,000 would, the FDIC 
estimates, reduce the fund balance by almost four basis points 
immediately, and more than an additional four basis points in the 
future. Now, eight basis points may not seem like much, but it would be 
the difference today between a combined fund ratio of 1.29 above 
today's statutory designated reserve ratio and 1.21, which is below the 
current DRR of 1.25.
  Under current law, a fund ratio at that level would definitely result 
in increased premiums and under this legislation would likely prompt 
the FDIC to begin to assess higher insurance premiums.

[[Page H2797]]

  Every basis point of premiums takes money out of the banking system 
and away from lending to communities. The CBO predicts that the bill 
will result in a net premium increase to banks, thrifts, and credit 
unions of $3.5 billion over 10 years. That is $3.5 billion that could 
be used for community lending.
  I am encouraged that the gentleman from Ohio (Chairman Oxley) and the 
subcommittee chairman, the gentleman from Alabama (Mr. Bachus), have 
been willing to address some of my concerns about the increased 
coverage by agreeing to reduce the maximum municipal deposit insurance 
limit from $5 million to $2 million. The lower limit reduces risk to 
the deposit insurance fund and the banking system, but it still permits 
more than 80 percent of the Nation's local governments to place all 
their cash in their local community banks, while enjoying the maximum 
FDIC protection provided by the bill.
  On balance, however, especially because of the merger of the BIF and 
the SAIF, the Federal Deposit Insurance Reform Act of 2002 represents a 
serious effort to reform our current deposit insurance system, and it 
should be taken to the next step in the legislative process.
  I look forward to working with the chairman of the full committee, 
the subcommittee, the ranking members, and the Members of the other 
body to reduce the legislation's potential increased risk to the 
Federal insured deposit system, and hence, the American taxpayer.
  Mr. OSE. Mr. Speaker, I yield 4 minutes to the gentlewoman from New 
York (Mrs. Maloney).
  Mrs. MALONEY of New York. Mr. Speaker, I thank my colleague and 
friend, the gentleman from California (Mr. Ose), for yielding me the 
time.
  Mr. Speaker, today we are considering one of the most important 
reforms to our Nation's banking system that Congress will vote on for 
many years. It was at our Nation's darkest economic hour that the 
deposit insurance system was founded to save our country's banking 
system. The bill we are considering on the floor today makes many 
positive changes to the system, but also includes one provision that in 
my opinion is seriously damaging.
  As other Members have stated, the underlying bill takes some very 
important steps forward. We increase the long-term stability of the 
deposit insurance funds by combining the BIF and the SAIF. This merger 
is long past due.
  We also eliminate the 23 basis point ``cliff'' that mandated a 
massive potential charge to the system at the worst possible time. 
Additionally, the bill contains language added during the full 
committee markup in the amendment in the nature of a substitute dealing 
with calculating dividends and credits that I authored with the 
gentleman from Nebraska (Mr. Bereuter).
  Minor changes to the language of this provision have been made, in 
full agreement with the FDIC and the bill on the floor before us today.
  At its heart, the provision ensures that any excess funds that are 
returned to financial institutions under the bill, either through 
assessment credits or dividends, be given in proportion to the 
contributions these institutions have made to capitalize the insurance 
funds. Banks and thrifts have made sizeable contributions to the 
deposit insurance funds over the years. Those contributions should be 
given great weight when determining what proportion of any excess in 
the deposit insurance fund those institutions are entitled to.
  Importantly, not only do these provisions recognize the contributions 
of those institutions that originally capitalized insurance funds, but 
they also recognize the new capital put in by institutions now and in 
the future. In this way, a fair distribution of any excess capital in 
the insurance fund will occur. This is a very positive step, and I 
thank the gentleman from Nebraska (Mr. Bereuter) and his staff for 
working with me and my staff on this language.
  Unfortunately, this bill also plays a dangerous game by increasing 
deposit insurance coverage by 30 percent, and increasing risk to the 
deposit insurance fund.
  I sat through many hearings on this issue and listened to all the 
testimony. Today, I am in general agreement with statements by FDIC 
Chairman Don Powell, Federal Reserve Chairman Alan Greenspan, Treasury 
Secretary Paul O'Neill, and many if not most in the banking industry 
itself who do not see a reason for a major increase in basic insurance 
coverage.
  As Secretary O'Neill wrote to the committee, and I quote, ``An 
increase in coverage would primarily benefit high net worth individuals 
and do little for the great majority of savers.''
  Alan Greenspan weighed in writing that ``The FDIC's recent 
projections of losses suggest that any expansion in coverage would have 
to be matched by increases in premiums in order to raise the reserve 
coverage of the fund.''
  Accordingly, I had planned to offer an amendment with my good friend, 
the gentleman from California (Mr. Ose), to keep the coverage level at 
the $100,000 level. This is a huge issue that Congress should have to 
decide on the record, and I would have preferred that this bill come to 
the floor under such a rule.
  While I strongly oppose this increase in coverage, I am supporting 
the bill on the floor today because I believe it improves the system 
overall. I am truly hopeful that the Senate is able to fix the coverage 
level as the process moves forward; and I want to thank the ranking 
member, the gentleman from New York (Mr. LaFalce), and the gentlewoman 
from California (Ms. Waters) and the gentleman from Ohio (Chairman 
Oxley) and the gentleman from Alabama (Mr. Bachus) for moving this very 
important bill forward. I hope the final product that returns from the 
Senate repairs the flaws with the legislation we are voting on today.
  Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
New York (Mrs. Kelly) to speak in support of the legislation.
  Mrs. KELLY. Mr. Speaker, I thank the gentleman from Alabama for 
yielding me the time.
  Mr. Speaker, I rise today in strong support for H.R. 3717, the 
Federal Deposit Insurance Reform Act. This legislation should be 
supported for two important reasons: first, it increases deposit 
insurance coverage for the first time since 1980; and, second, the bill 
introduces flexibility into the designated reserve ratio.
  As we are all aware, the FDIC insurance plays a critical role in our 
Nation's financial system, ensuring both consumer confidence in banks 
and stability in the system. Today, community banks are facing serious 
funding challenges due to the lack of core deposits, which is why an 
increase in the deposit insurance coverage levels is such an important 
issue.
  While I support higher deposit insurance levels, I also support the 
increase in the bill which raises the Federal deposit coverage to 
$130,000. It provides for automatic inflation adjustments and provides 
for up to $2 million in municipal deposit coverage.
  Increasing coverage levels would benefit communities, retirees, 
consumers, farmers, the economy, and small business customers by 
enabling depositors to keep more of their money in local banks where it 
can be reinvested for community projects and local lending.
  In addition, the legislation removes the current hard target of the 
designated reserve ratio and replaces it with a flexible range. This 
change will allow banks to do their job and provide credit when it is 
most important: when the economy is struggling.
  This is an acknowledgment of the harsh effect these assessments can 
have on the economy and allows the FDIC to coordinate the imposition of 
such assessments with the Federal Reserve. This legislation enjoys 
strong bipartisan support, having passed the Committee on Financial 
Services by a vote of 52 to 2.
  I ask all my colleagues to join me in support of strong legislation 
which will enhance the effectiveness of the FDIC and help consumers and 
our communities.
  Mr. OSE. Mr. Speaker, I yield myself such time as I may consume. I 
feel like Churchill up here when I hear the 52 to 2 vote.
  Mr. Speaker, I do want to say, one of the things that the gentlewoman 
from New York (Mrs. Kelly) mentioned was the impact on, in particular, 
rural communities, where we have such trouble keeping deposits in the 
community because of the ability to go get higher returns outside.

[[Page H2798]]

  Representing a rural community, we could have dealt with this 
particular issue by crafting, in my opinion, some sort of vehicle 
whereby banks in rural communities, under some set of conditions, could 
have addressed that. I regret that this idea only came to me late in 
the process, but I would hope that the conference committee would at 
least consider that in their deliberations.
  Mr. Speaker, I yield 3 minutes to the gentleman from California (Mr. 
Rohrabacher).

                              {time}  2000


                         Parliamentary Inquiry

  Mr. BACHUS. Mr. Speaker, parliamentary inquiry.
  Mr. Speaker, the gentleman consumed about a minute on that 
explanation, and that does go towards his time, does it not?
  The SPEAKER pro tempore (Mr. Simpson). It does.
  Mr. OSE. Mr. Speaker, I yield 4 minutes to the gentleman from 
California (Mr. Rohrabacher).
  Mr. ROHRABACHER. Mr. Speaker, I rise in strong opposition to H.R. 
3717. The last speaker, my colleague, the gentlewoman from New York 
(Mrs. Kelly), mentioned that this proposal would be the first major 
increase in the Federal deposit insurance in 20 years. Well, let us 
take a look at what happened 20 years ago when we had a major increase 
in federal deposit insurance. What happened? Let us think about it.
  What happened 20 years ago when there was a major increase? There was 
a complete meltdown of the savings and loan industry and it ended up 
costing us, the taxpayers, tens of billions, if not hundreds of 
billions, of dollars. I am not sure exactly what it was, but it was one 
of the worst economic catastrophes this country has had to deal with.
  So here we are again. We want to have a major increase in Federal 
deposit insurance. Now, let us make this clear, what Federal deposit 
insurance is supposed to be all about. Federal deposit insurance came 
about in the 1930s as a way of trying to protect the little guy and 
give the little guy some confidence to put his or her money into a 
small bank so that that person would have some confidence and their 
savings would be protected. I think it started out at $3,500. For a 
long time it stayed at $10,000. It stayed there for a long time at 
$10,000 because that is how much regular Americans could expect to try 
to save.
  Well, guess what? Back in 1980 they took it up to $100,000 for a 
deposit insurance; and then on top of that, it is not just one account 
of $100,000 we are talking about.
  Now, we are talking about not just protecting the little guy who 
wants to save 5 or $10,000 in an account, we are talking about rich 
people taking advantage of a program that was established to help 
little guys, so you have multiple accounts. As the gentleman from 
California (Mr. Ose) pointed out, rich people can take $100,000 and 
just pour it into account after account after being in various 
different banks. And, in fact, your own bank, one bank can sort of 
manipulate the system so that an individual, a wealthy individual, can 
have seven individual accounts in one bank.
  Now, this was not set up to try to protect people who are multi, 
multi-millionaires, but that is what it has turned into. And, by the 
way, this increase, this increase in the level will only make that 
matter worse. What we could do is we should be going in the opposite 
direction. What this has evolved into and what this continues to evolve 
into is the little guys now are being taxed in order to take away the 
risk for the big guys.
  So what we now have is a Federal deposit insurance program that taxes 
the little guy in order to protect the fat cats from any risk. That is 
not the way it was supposed to be. And by increasing that deposit 
insurance, we are making that even worse.
  And by the way, the gentleman from California (Mr. Ose) quoted expert 
after expert after expert saying that this would have the same 
destabilizing effect that it had in 1980, to increase this deposit 
insurance. It takes away from people's consideration of where they are 
placing their money. It takes risk off their shoulders so it makes them 
more irresponsible even to a certain degree. We do not want to put more 
irresponsibilities into our system. Let us do the opposite. Let us 
decrease Federal deposit insurance so it only protects the little guy 
instead of opening up our system to be exploited by a bunch of fat cats 
at the expense of the little guy.
  I would ask all of my colleagues to oppose this dramatic increase in 
Federal deposit insurance even though there are some reforms that were 
part of this legislation that are certainly good reforms.
  Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from 
South Dakota (Mr. Thune) in support of the legislation.
  Mr. THUNE. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, I rise today in support of the Deposit Insurance Reform 
Act and I am pleased that it has been brought to the floor. I credit 
the gentleman from Alabama (Mr. Bachus) for his hard work and 
leadership as well as colleagues on both sides of the aisle and the 
Committee on Financial Services for getting this bill to the House 
floor for a vote.
  Deposit insurance helps banks keep local deposits at work in local 
communities. In the communities of South Dakota, deposit insurance 
helps banks attract deposits to fund consumer and small business loans, 
community development projects, mortgages, education assistance and 
small business start-ups.
  As we know, this legislation increases deposit insurance coverage to 
$130,000 and that indexes it for inflation. This will be helpful to 
rural communities as it helps to mitigate the impact of the declining 
rural population and fewer depositors. I believe that local dollars 
should be invested locally and this bill will make that happen. Rural 
banks often find depositors see the current $100,000 insurance limit as 
a deposit cap, limiting their ability to grow, thrive and serve their 
communities. Additional deposits over $100,000 often force rural 
residents to send deposits to other banks outside of their area. Rural 
residents, oftentimes elderly, should not have to send their deposits 
elsewhere. They ought to feel safe and secure depositing their funds in 
the local banks where the money can be used to support local lending 
and local economies.
  If it stays in the community, this money can serve as lendable funds 
for local projects in development in a small community. When depositors 
send their money to other communities, the cycle of reduced investment 
and opportunity and increased population flights only continues.
  This legislation will also help farmers keep on pace with the 
dynamically changing agricultural economy. As production input costs 
and technology increase, local banks are constrained by artificially 
low deposit insurance caps, while at the same time being asked to make 
loans for increasingly costly farming operations. These loans can 
easily exceed what the business or farming operation can have insured 
at that banking institution.
  Mr. Speaker, I believe H.R. 3717 is common-sense legislation. It will 
provide security for bank customers and diversify the economies of 
small communities. I ask my colleagues to vote yes. This reform will be 
good for rural communities across this country that many of us 
represent.
  The SPEAKER pro tempore. The gentleman from Alabama (Mr. Bachus) has 
6\1/2\ minutes remaining. The gentleman from California (Mr. Ose) has 1 
minute remaining.
  Mr. OSE. Mr. Speaker, I reserve the balance of my time.
  Mr. BACHUS. Mr. Speaker, I yield 3\1/2\ minutes to the gentlewoman 
from California (Ms. Waters) to speak in support of the legislation.
  Ms. WATERS. Mr. Speaker, I rise in support of H.R. 3717. Deposit 
insurance has served America well for over 65 years. It has maintained 
public confidence in our banking system throughout times of prosperity 
and times that were not so good.
  The bill we reported out of the Committee on Financial Services is 
designed to maintain and strengthen today's system for tomorrow's 
consumers so that we can ensure that we have a deposit insurance system 
that will serve us well throughout the new millennium. I am 
particularly concerned

[[Page H2799]]

about our small independent community banks and I believe they will 
benefit from this legislation.
  Not everyone agrees with this increase in FDIC. However, the Senate 
will continue to reconcile some of the differences that have been 
articulated, but I believe we should vote to pass this bill off the 
floor. This legislation merges the bank insurance funds and the savings 
association insurance funds into one deposit insurance fund. It also 
grants the FDIC increased flexibility to manage the funds, particularly 
in replacing the hard trigger designated reserve ratio with a range 
which will permit the FDIC to respond to economic conditions in setting 
the designated reserve ratio.
  I am particularly pleased that the legislation includes an amendment 
that I offered during subcommittee consideration. This amendment 
represents a small but important change that will implement a law that 
has been on the books since 1991. During the consideration of the FDIC 
Improvement Act, then-Congressman Tom Ridge and Floyd Flake sponsored 
legislation to provide for a discount in deposit insurance assessment 
for deposits attributable to lifeline for basic banking accounts.
  Basic banking is just what it sounds like. At least one quarter of 
low income families are currently unbanked, that is, they exist outside 
of the traditional banking system, often relying on check-cashing 
services or notorious payday lenders to facilitate basic transactions, 
generally paying exorbitant fees in the process.
  We all take for granted the ease and convenience of having a checking 
account, but many families lack that luxury because they are unable to 
maintain large minimum balances in these accounts. These lifeline 
accounts, by their very nature, do not hold large deposits.
  Furthermore, the FDIC concedes that any effect on the fund would be 
negligible. However, implementation of the Flake/Ridge provision was 
wholly dependent on appropriated funds which never materialized.
  My amendment simply removes the requirement for appropriated funds so 
that this provision, after more than a decade on the books, can finally 
be implemented. My amendment was adopted by voice vote at subcommittee 
and upheld at full committee by a bipartisan vote. It attracted the 
support of both industry and consumer groups, including AARP, the 
Independent Community Bankers of America, the New Jersey League of 
Community Bankers, the Consumer Federation of America, U.S. Public 
Interest Research Group, Consumers Union and the National Consumer Law 
Center.
  I would like to thank all of my colleagues on the Committee on 
Financial Services who supported the amendment, especially the 
gentleman from Alabama (Mr. Bachus). He has worked tirelessly in 
support of this provision because he truly understands that providing a 
small incentive for banks to offer these accounts can make all the 
difference in the world for millions of American families. I thank him 
once again.
  Mr. BACHUS. Mr. Speaker, we had several speakers that wanted to speak 
out in favor of this measure and we have only got a limited amount of 
time. I ask unanimous consent that both sides be given an additional 10 
minutes.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Alabama?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from Alabama (Mr. Bachus) now 
has 13 minutes remaining. The gentleman from California (Mr. Ose) has 
11 minutes remaining.
  Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, first of all, I want to stress the great consensus of 
opinion on most aspects of this deposit insurance legislation, and I 
mean that sincerely. There is broad support from the administration. 
There is broad support from the regulatory agencies. There is broad 
support from Members of the House and members of the Senate, from those 
of the Democratic party and the Republican party for most aspects of 
this bill. And as I think this debate has pretty clearly identified, it 
is 10 percent of this bill that has caused 90 percent of the problems 
for certain members of the committee.
  What I want to address, first of all, is that 90 percent of the bill 
which I find really no opposition for, and I want to stress those 
things because I think they are the heart of this bill. The first one 
is that we merge the bank and thrift insurance funds. That would not 
only diversify the risk, and everyone agrees on that, the Treasury, the 
Federal Reserve, both the Senate and the House, because the BIF reserve 
ratio has recently declined to 1.26. So by combining these funds it 
reduces the risk that any of our financial institutions will have to 
pay any premiums in the future. It reduces that risk. So whatever else 
happens, this legislation will reduce the risk of paying premiums to 
the majority of our institutions.
  Now, Mr. Speaker, there are certain rapid insured deposit growth, 
well, what I am saying is sweep programs have caused a reduction of 
four basis points in the BIF program or the BIF reserve ratio funds.

                              {time}  2015

  This is from a very few financial institutions that have set up 
multiple subsidiary banks and they are using sweep accounts, and they 
are sweeping all that money into FDIC, and they are not compensating 
the FDIC and the Federal Reserve, the Treasury, the administration; and 
I think every Member of our committee agrees that this should not go 
on. We have addressed this.
  We have reforms in this bill that compensate banks for the adverse 
effect of these so-called free riders. We give transition assessment 
credits, recognizing the contribution of those banks to the insurance 
reserves that they made during the early and mid-1990s, and those 
credits will offset future premiums for all but the newest and the most 
recent new institutions and also those fast-growing institutions.
  The premium-setting reforms prevent future free rider inequity, and 
there is consensus on this and there is consensus that that ought to be 
done.
  Finally, we have eliminated the hard trigger in the current system 
that can force banks to pay significantly higher premiums during 
economic downturns. That promotes economic stability and the well-being 
of the financial system. I have not heard a dissenting voice from us 
doing that. So those are the main components of the bill.
  Where the disagreement is is the coverage rates; and Mr. Speaker, let 
me simply point out these things about the coverage rates, and I am 
going to go back for a minute to those few large institutions, 
financial institutions that have established sweep accounts and have 
established multiple subsidiary banks.
  What those institutions are doing is they are going out and they are 
advertising $700,000, $800,000, $1 million worth of coverage, and my 
colleagues have heard testimony from those who oppose a coverage 
increase, that the people do not want an increase of coverage, they do 
not need an increase of coverage. The same Treasury Department that 
says people do not want it have also come to us and said these very 
institutions that are offering $700,000 worth of coverage or $800,000 
worth of coverage, ``that they have reduced these large financial 
companies controlling multiple industry banks, have reduced the BIF 
reserve ratio by four basis points to an alarming level without 
compensating the FDIC.''
  Now, I ask all the Members this question: If they are sweeping all 
this money into these accounts by offering additional coverage, where 
is the money coming from if it is not coming from people who want 
additional coverage? How can the Treasury and how can the Federal 
Reserve and how can certain Members of the House and Senate say that 
people do not need additional coverage, they will not use additional 
coverage, and yet at the same time agree that these, really a couple of 
financial institutions mainly, are sweeping millions and millions and 
millions of dollars into these accounts? Well, obviously the people are 
using these accounts, and obviously they feel the need for this 
protection; and that is why we need additional coverage.
  In 1974, we increased coverage. We over-doubled coverage. Was there a 
crisis then? No, there was no crisis then. So increasing it 150 percent 
did not cause any crisis then. In 1980 we increased the coverage for 
all the banks

[[Page H2800]]

in this country. Did banks fail? No, banks did not fail. It was savings 
and loans that fell. Yes, we increased it for savings and loans; but if 
it was because of increase of coverage, do my colleagues not think 
banks would have failed, along with the savings and loans? Of course 
they would have, but it was only the savings and loans.
  Yes, we got a lot of testimony about, oh, the last time we did this 
there was the savings and loans, several of them failed, but they do 
not say the banks did not fail and we increased it for banks. It just 
does not fly.
  In 1974, the coverage was at $40,000. If we went back to 1974 and we 
increased it allowing for inflation, we would have gone to $140,000. We 
only go to $130,000. So we are not even keeping pace with 1974 when the 
chairman of the Federal Reserve said we had a safe amount and it was at 
a safe level. Well, if that is the case, then I guess he is advocating 
for $140,000, not $130,000. When we increased it to $100,000, if we 
only adjusted for that inflation today, it would be $200,000, not 
$130,000. What we do in this bill is increase it to $130,000, which is 
less coverage than the people of the United States had enjoyed in 1974, 
in 1980 and at any time.
  We do not take care of all the inflationary loss, and we hear a lot 
of strange talk up here in Washington. We hear talk that the people do 
not need this coverage, but Mr. Speaker, we heard that every time there 
was a bank failure, there were people who lost a great amount of their 
retirement funds because the coverage was not there. Five thousand 
Americans every day sell their home, and the vast majority of them 
deposit the proceeds from those sales in their bank account.
  The gentleman from California would tell us, and the Federal Reserve 
and the Treasury would tell us, that people have an opportunity to open 
multiple accounts and establish that money in multiple accounts. Well, 
I ask my colleagues, Mr. Speaker, I ask the Members of this body, When 
people sell their home, how many of them go out and establish three 
bank accounts and deposit that money in three different accounts? 
Experience tells us that almost no one does that, and when they deposit 
it, when they deposit that $200,000 or $300,000 in a bank account and 
that bank fails, they lose two-thirds of their life savings.
  Retirement accounts, $150,000, $200,000, not unusual. How many people 
go out and establish multiple IRA accounts? Well, I think we know the 
answer to that. The AARP has strongly, in fact, they have urged a 
greater increase in coverage than we give, because people do not run 
around all over town establishing one account here, another account 
there, another account there; and they should not have to do that.
  They should not have to rely on a couple of large financial 
institutions of this country that have come in here and battled against 
this bill, and they have said we do not need over $100,000; but those 
same companies and the financial services roundtable that has 
represented their interests have come up here and told them they do not 
need $100,000. Those same companies that were on this hill lobbying 
against an increase were going out and buying six or eight banks and 
advertising $800,000 worth of coverage, bankrupting the funds; and then 
they had the audacity to come up here and oppose this bill and oppose 
our efforts to stop their raid on the FDIC.
  Thank goodness in committee, thank goodness in subcommittee and thank 
goodness in the morning when we vote on this legislation we will pass 
it, and we will stop the abuse that we have seen in the last couple of 
years on free riders who not only free ride on the FDIC, they come to 
the Members of this body and lobby against our efforts to stop their 
efforts to, as Peter Fisher said, to reduce the BIF reserve ratio by 
four basis points without compensating the fund.
  That is what they have done. Certainly they have gimmicked the 
system. They are getting a free ride. They are paying nothing; and they 
are going to communities like the communities in South Dakota, like 
communities in Alabama, communities all over the Nation, and they are 
saying we will offer $700,000 worth of coverage; and then they and 
friends and supporters that they have at the Federal Reserve and the 
Treasury are coming over here and telling us to do something about 
these free riders but do not do anything about the free riders which 
would interfere with a free ride, do not do anything which allows the 
community banks to increase coverage, we do not need an increase of 
coverage.
  Well, the marketplace is demanding it. The marketplace is getting it. 
The free riders have gone out and gotten an increase in coverage, and 
it is absolutely ludicrous for us to let this continue to go on.
  Mr. Speaker, I reserve the balance of my time.
  Mr. OSE. Mr. Speaker, I yield myself such time as I may consume.
  Lacking any other speakers, I do want to make a few remarks. I think 
the gentleman from Alabama started out very accurately reflecting the 
broad consensus on 90 percent of this bill, and I think he closed here 
just this moment with a very eloquent case as to why we need to stop 
the free rider practice from continuing, but the free rider issue is 
not related to the deposit insurance level issue. They are two separate 
issues, and they need to be considered separately.
  I would just for clarification, I think the gentleman from Alabama 
did say that few, if any, banks had failed; and I will say that to my 
recollection that Continental Bank failed and that there were a lot of 
banks in agricultural areas around this country that failed. 
Manufactures Hanover I think had its doors closed, related to the risk 
that they undertook in taking the increase in deposits, they received 
subsequent to the jump up in 1982 and trying to put them to work to 
defray the added costs that they bore from carrying those deposits.
  So I agree with him on the free rider thing. But the free rider issue 
is separate from the deposit insurance increase issue, and I want to be 
clear about that.
  The average size in a deposit account, a demand account across this 
country is about $10,000, $10,000, not $100,000, not $130,000. The 
market sector that the gentleman from Alabama referred to as ``known as 
a high income sector,'' they get a lot of preferential treatment from 
many financial institutions. It is a marketing aspect of what those 
institutions do, and it works very well; but this is not about the free 
rider issue. This is about the added risk that comes by increasing 
deposit insurance levels and the cost that goes with that that a bank 
would have to confront.
  I do think, going back to the gentleman from Alabama's (Mr. Bachus) 
point about the retirement accounts, absolutely concur about increasing 
the level of coverage for retirement accounts. That money is very 
conservatively managed. It is a very stable source of funds. The fact 
of the matter is the bill takes it to a certain level I would actually 
advocate for taking it even further, if I had thought to put an 
amendment in at the committee. So I concur with the gentleman that 10 
percent of the bill is causing 90 percent of the heartache here.
  I do want to complete my statement from earlier, and then I would be 
happy to reserve the balance of my time after that. Mr. Speaker, let me 
just point out two witnesses who presented extensive, in addition to 
all these others that I cited earlier, presented extensive scholarly 
materials to the subcommittee in opposition to an increase in the 
coverage levels.
  First was Mr. Richard Carnell who is an associate professor of law at 
Fordham University School of Law who testified: ``I urge Members to 
take a skeptical view of proposals to index or otherwise increase the 
$100,000 limit on deposit insurance coverage. Proponents of increasing 
the coverage limits stress the effects of inflation since 1980. But the 
1980 level was by no means normal; adjusted for inflation, it amounted 
to an all-time high.''
  Professor Carnell was joined by Dr. Kenneth Thomas who is a lecturer 
in finance at the Wharton School at the University of Pennsylvania, who 
listed 21 major reasons, I will not cite all 21, Mr. Speaker, but 21 
major reasons to oppose an increase in the coverage limit. Among those 
reasons were, Dr. Thomas spoke at length on the savings and loan 
bailout and how increases in 1980 in the deposit insurance coverage 
levels led to risky behavior and even larger bailouts.

[[Page H2801]]

                              {time}  2030

  Dr. Thomas highlighted the historical perspective from former FDIC 
and Resolution Trust Corporation chairman, and if my colleagues will 
recall, the Resolution Trust Corporation was the entity the Federal 
Government used to solve the early 1980s problem in the financial 
industry, the Resolution Trust Corporation Chairman Seidman, who said, 
``The original intent of deposit insurance, which began with a $2,500 
insurance limit, was to protect `small savers.' The primary 
beneficiaries of the 1980 increase to $100,000 were Wall Street firms 
and deposit brokers. The currently proposed increase to $200,000,'' 
which is not what we are talking about today, we are talking about 
$130,000, but the premise still holds, ``the currently proposed 
increase to 200,000 has nothing to do with small or even midsized 
savers. Besides Wall Street and other money brokers, the only 
beneficiaries would be very wealthy and high net worth depositors, a 
far cry from the small savers originally envisioned by the FDIC.''
  This speaks directly to the comments of the gentleman from Alabama a 
moment ago about the sweeps. Dr. Thomas also noted that, ``Considering 
the present environment's increased level of risk exposure for the 
deposit insurance funds, good public policy dictates consideration of 
proposals that reduce, not increase, risk exposure. Any increase in the 
deposits covered by the FDIC will increase risk exposure to the 
funds.''
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore (Mr. Simpson). The gentleman from Alabama 
(Mr. Bachus) has three-quarters of 1 minute remaining and the gentleman 
from California (Mr. Ose) has 5 minutes remaining.
  Mr. BACHUS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Ohio (Mr. Gillmor).
  (Mr. GILLMOR asked and was given permission to revise and extend his 
remarks.)
  Mr. GILLMOR. Mr. Speaker, I rise in strong support of the bill, 
particularly the municipal deposit part.
  I rise today in strong support of H.R. 3717, the Federal Deposit 
Insurance Reform Act of 2002. I am very proud to be an original 
cosponsor of this legislation and commend Chairman Oxley and 
Subcommittee Chairman Bachus for their diligent work and dedication in 
crafting this reform package and delivering it to the full House for 
consideration. Significant reform of the Federal Deposit Insurance 
system is long overdue, specifically with regard to municipal deposit 
coverage.
  I have worked hard with the cooperation of several other members of 
the Financial Services Committee to see a meaningful increase in FDIC 
coverage for public deposits included in HR 3717. The Federal Deposit 
Insurance Reform Act will provide full FDIC coverage for 80% of all in-
state municipal deposits at an FDIC insured institution up to two 
million dollars. This is a vast improvement from the current coverage 
cap of 100,000 dollars on each account.
  Providing this essential coverage will help local communities keep 
public moneys in their area, which will improve the economic climate by 
enabling local banks to offer more loans for cars, homes, education and 
community needs.
  Currently, municipalities are faced with a hard choice when deciding 
where to place their deposits. Local officials care about their 
communities and would like to foster economic development by putting 
their funds in local banks. However, without the guarantee of FDIC 
coverage, they are often instead forced to put the money in large out 
of state institutions.
  It may also be the case that small banks are not even in a position 
to accept such deposits. Many states require institutions to 
collateralize municipal deposits. This makes it harder for community 
and small banks to compete for these funds with larger banks. Many 
community banks are so loaned-up that they do not have the available 
securities to use as collateral.
  Just a few months ago, the FDIC closed a bank in my congressional 
district: the Oakwood Deposit Bank in Oakwood, OH. Local municipalities 
and other public entities that held deposits at this institution are 
now put at risk due to the $100,000 cap in FDIC coverage. In cases of 
fraud such as this one, securitization may not have been adequate 
insurance as many bonds and securities appearing on the bank's balance 
sheet may not still be held. The expansion of FDIC coverage is the only 
way to truly alleviate this risk to local public entities.
  Again, I would like to thank Chairman Oxley and Chairman Bachus for 
their leadership on this important issue and ask all my colleagues to 
strongly support this legislation.
  Mr. BACHUS. Mr. Speaker, I yield 1 minute to the gentleman from 
Tennessee (Mr. Ford).
  Mr. OSE. Mr. Speaker, I yield 1 minute as well to the gentleman from 
Tennessee (Mr. Ford).
  The SPEAKER pro tempore. The gentleman from Tennessee is recognized 
for 2 minutes.
  Mr. FORD. Mr. Speaker, there is nothing like bringing your colleagues 
together. I appreciate both the gentleman from California (Mr. Ose) and 
the gentleman from Alabama (Mr. Bachus) for yielding me this time, and 
I thank my friend, the gentlewoman from California (Ms. Waters), and 
certainly the ranking member, the gentleman from New York (Mr. 
LaFalce), for all their hard work. I stand here in support of this 
legislation and thankful the subcommittee decided to take up the issue 
concerning the FDIC's treatment of loss reserves in its calculation of 
its reserve ratio, Mr. Speaker. With that issue resolved, I think many 
of us feel more comfortable in supporting this legislation.
  I want to take this opportunity to discuss one final issue, and I 
hope that at some point we can take this up. As enthusiastic as I am 
about supporting the legislation, I am disappointed in one decision the 
FDIC has made in recent weeks involving a proposed reorganization of 
the regional office structure. In particular, the FDIC has proposed to 
fold the Memphis regional office, which is in my district, and the 
Boston regional office, which is represented by many of my colleagues 
here in the Congress. The Memphis office would be folded into the 
Dallas region and Boston into New York. I believe this proposed change 
would lessen the FDIC's responsiveness to the concerns of financial 
institutions presently within the region of the country in which I 
live.
  Moreover, it would not save much money at all. I think it is 
estimated to save somewhere around $100,000 to $150,000, which is a 
decent chunk of change, but when you consider the relationship that has 
developed over the years between bankers in the Mississippi, Arkansas, 
Kentucky, and Tennessee area, and then having to move that office to 
Dallas, I do not think the benefits outweigh the cost to those in this 
area of the country.
  It is my hope that my colleagues in the New England area, as well as 
in those 4 or 5 States covered in my region, can work together to 
persuade Chairman Powell and those in the FDIC that this is not the 
right move nor is it the right time to make this move.
  With that, Mr. Speaker, I again wish to thank both the gentleman from 
California (Mr. Ose) and the gentlemen from Alabama (Mr. Bachus), and 
would close by saying that I do think this increase of $130,000 is 
fair, though I hear some of the concerns being raised by the gentleman 
from California.
  And I might add, the University of Pennsylvania professor, I think I 
had him when I was there. He did not give me a good grade, so he may 
not be right all the time.
  Mr. OSE. Mr. Speaker, I yield myself such time as I may consume, and 
I want to go back, finally, to Dr. Thomas' 21 citations. Again, I am 
not going to cite the remaining 18 or 19 of them, but I do want to run 
through his testimony here.
  Dr. Thomas raises the issue that ``There is absolutely no public 
outcry over or even widespread interest in the proposal to,'' he says, 
``double the FDIC insurance limit. Most people know or should know from 
their banks that any couple can get multiple account coverage, and 
singles need only open another account at any bank via a personal 
visit, a telephone call, or even the Internet. There is no shortage of 
$100,000 insured deposit investment opportunities. Some seniors may 
have a preference to keep their jumbo CDs spread out among several 
banks in $100,000 or less amounts, even if they have the opportunity to 
keep $200,000 at one bank.''
  This speaks directly to what the current situation is. The current 
situation allows people to protect themselves under the current 
$100,000 limit. The testimony we have had at the subcommittee from high 
ranking government officials, from people in the business to academia, 
is that increasing this limit significantly increases the risk to the 
insurance funds.

[[Page H2802]]

  Speaking from personal experience, I actually weathered the last time 
we went through this. Many of my colleagues in the real estate business 
did not. The fact of the matter is, it was a wholesale winnowing of the 
real estate business in California and it took us years to recover. My 
colleagues, increasing the deposit insurance coverage limit will lead 
to a potential for repeating that.
  California leads this country's economy up and down. If we increase 
the risk to the insurance fund by placing on our bankers the 
requirement to put more money to work in a quick or hasty fashion, we 
are going to replay the nightmare of the early 1980s and pay billions 
more the next time this occurs. This body does not need to fund 
additional billion dollar bailouts.
  I am in favor of 90 percent of this bill. There are good things in 
this bill. But when we look at the hands of Lady Justice balancing, in 
her case justice, in this case we are talking about the security and 
sanctity of the economy and deposits across this country, if we look at 
how that is balanced, in Lady Justice's case her hands are even. In the 
case of today's bill, the increase in deposit insurance skews that 
balance. We do not need to do this, my colleagues. This is unnecessary.
  Unfortunately, I am forced to go against my chairman, and I ask my 
colleagues to oppose this bill in its current form.
  Mr. Speaker, how much time do I have remaining?
  The SPEAKER pro tempore. The gentleman from California has 45 seconds 
remaining.
  Mr. OSE. Mr. Speaker, I yield the balance of my time to the gentleman 
from Alabama (Mr. Bachus).
  Mr. BACHUS. Mr. Speaker, I thank the gentleman for yielding me this 
time, and let me just close by saying that there has been a rapid 
insurance deposit growth. In other words, people are putting a lot of 
money in accounts, in 2 or 3 financial institutions in this country, 
which have gone out and bought multiple subsidiaries and are 
advertising $500,000, $600,000, and $700,000 worth of coverage.
  Now, where is that money coming from, those hundreds of millions of 
dollars? It is coming from community banks in small towns and 
mainstream banks. People ought to have an option not to put that money 
in a Wall Street financial institution. A small business that has 
$300,000 or $400,000 deposited, they ought to have the option of 
putting that in their hometown bank.
  We talk about $100,000. Yes, $10,000 may be the average account, but 
there are a lot of small businesses in this country that maintain one 
bank account in their local bank. They ought to have more coverage.
  Mr. BENTSEN. Mr. Speaker, I rise today in strong support of H.R. 
3717, the Federal Deposit Insurance Reform Act of 2002, legislation 
that will reform our federal deposit insurance programs. As a member of 
the Financial Services Committee, I am pleased that the House of 
Representatives is now acting to consider this legislation.
  H.R. 3717 would combine the Bank Insurance Fund (BIF) and the Savings 
Association Insurance Fund (SAIF) into one insurance Fund. This 
legislation would also permit the Federal Deposit Insurance Fund 
greater flexibility in setting the designated reserve ratio (DRR). 
Under current law, the BIF and SAIF have target DRR ratios of 1.25 
percent. Today, both the BIF and SAIF have DRR levels which are higher 
than this target rate with the DRR for BIF at 1.26 percent and the DRR 
for SAIF at 1.37 percent. I believe another important part of this bill 
would allow the FDIC to set the DRR between the range of 1.15 percent 
to 1.4 percent in order to ensure that the new insurance fund is 
counter cyclical and avoid sharp rate swings. When the insurance fund 
is in distress under current law, it is likely that premiums would be 
increased on those institutions which may be facing increased costs and 
financial pressures. By charging premiums when institutions are 
healthy, they will be better prepared to deal with any unforeseen 
financial hardships.
  Finally, this bill increases the maximum deposit insurance coverage 
for an individual from $100,000 to $130,000. I believe that this higher 
insurance coverage is long overdue. The deposit insurance coverage 
limit has not been changed since 1980. I believe that this higher 
coverage will help smaller financial institutions to compete for 
customers. Another important provision in this bill would permit 
consumers to get insurance coverage of $260,000 for their Individual 
Retirement Accounts (IRAs). In this time when we are working to 
encourage consumers to save for their futures, I believe that this 
higher IRA coverage will ensure that consumers have several options for 
where to keep their IRAs.
  I am also pleased that this legislation includes a provision to 
increase the number of ``lifeline'' accounts for underserved consumers. 
This provision is based upon an amendment offered by Rep. Maxine Waters 
(D-CA) to ensure that the underserved consumers have access to low-cost 
accounts. Many poor elderly do not currently have checking accounts and 
may be able to use this lifeline accounts to receive electronic 
transfers of their social security and other direct deposits.
  I urge my colleagues to support H.R. 3717, legislation to improve our 
federal deposit insurance program.
  Mrs. ROUKEMA. I rise in strong support of HR 3717, the Federal 
Deposit Insurance Reform Act of 2002. This is an important bill and I 
want to commend the Chairman Oxley of the Full Committee and Chairman 
Bachus of the Subcommittee for pushing this bill forward. This is the 
most opportune time for Congress to implement these changes--when the 
industry is still strong and healthy.
  There is no doubt that the passage of Gramm-Leach-Bliley created a 
brave new financial world--with new challenges for the regulators and 
our deposit insurance fund. This legislation makes adjustments that 
will not only enhance the safety and soundness of the entire financial 
service industry by preserving the value of insured deposits, advancing 
the national priority of enhancing retirement savings for all 
Americans, and ensuring that the value, benefit and cost of deposit 
insurance is fair to consumers and institutions alike.
  Many of the provisions in HR 3717 are provisions that I have long 
supported. In fact, I introduced legislation including many of these 
provisions in the last Congress. For example, HR 3717 mergers the two 
insurance funds. Merging the funds will create a more stable, 
actuarially strong insurance fund, and reduce the risk of fund 
insolvency.
  Second, the bill increases the standard maximum deposit insurance 
limit from $100,000 to $130,000 and indexes future coverage limits to 
inflation. The $100,000 coverage limit was set in 1980 and it is time 
to increase that coverage for consumers. In addition, Federal Credit 
Unions are provided with parity in general standard maximum deposit 
insurance coverage, coverage for retirement accounts and municipal 
deposits.
  This bill provides double coverage limits for certain types of IRAs & 
401(k)s--up to $260,000. Finally, this bill provides rebates requiring 
that \1/2\ of the excess funds be returned to banks when the DRR is 
above 1.35 percent, and all of the excess reserves when the DRR reaches 
1.4 percent. With the current fund balances, much above the 1.2 
designated reserve ratio, certainly this is appropriate.
  This is important legislation that deserves our support. The Federal 
Deposit Insurance Fund has served this Nation well for the last 68 
years--public confidence and stability in the Nation's banking system 
were preserved through one of the largest banking crises--the 1980 
Savings and Loan crisis. HR 3717 makes the necessary changes that will 
protect not only depositors but our financial system in times of 
crisis.
  Mr. PAUL. Mr. Speaker, H.R. 3717, the Federal Deposit Insurance 
Reform Act, expands the federal government's unconstitutional control 
over the financial services industry and raises taxes on all financial 
institutions. Furthermore, this legislation could increase the 
possibility of future bank failures. Therefore, I must oppose this 
bill.
  I primarily object to the provisions in H.R. 3717 which may increase 
the premiums assessed on participating financial institutions. These 
``premiums,'' which are actually taxes, are the premier sources of 
funds for the Deposit Insurance Fund. This fund is used to bail out 
banks who experience difficulties meeting their commitments to their 
depositors. Thus, the deposit insurance system transfers liability for 
poor management decisions from those who made the decisions, to their 
competitors. This system punishes those financial institutions which 
follow sound practices, as they are forced to absorb the losses of 
their competitors. This also compounds the moral hazard problem created 
whenever government socializes business losses.
  In the event of a severe banking crisis, Congress will likely 
transfer funds from the general revenue into the Deposit Insurance 
Fund, which could make all taxpayers liable for the mistakes of a few. 
Of course, such a bailout would require separate authorization from 
Congress, but can anyone imagine Congress saying ``No'' to banking 
lobbyists pleading for relief from the costs of bailing out their 
weaker competitors?
  Government subsidies lead to government control, as regulations are 
imposed on the recipients of the subsidies in order to address the 
moral hazard problem. This is certainly the case in banking, which is 
one of the most

[[Page H2803]]

heavily regulated industries in America. However, as George Kaufman, 
the John Smith Professor of Banking and Finance at Loyola University in 
Chicago, and co-chair of the Shadow Financial Regulatory Committee, 
pointed out in a study for the CATO Institutes, the FDIC's history of 
poor management exacerbated the banking crisis of the eighties and 
nineties. Professor Kaufman properly identifies a key reason for the 
FDIC's poor track record in protecting individual depositors: 
regulators have incentives to downplay or even cover-up problems in the 
financial system such as banking facilities. Banking failures are black 
marks on the regulators' records. In addition, regulators may be 
subject to political pressure to delay imposing sanctions on failing 
institutions, thus increasing the magnitude of the loss.
  Immediately after a problem in the banking industry comes to light, 
the media and Congress will inevitably blame it on regulators who were 
``asleep at the switch.'' Yet, most politicians continue to believe 
that giving the very regulators whose incompetence (or worst) either 
caused or contributed to the problem will somehow prevent future 
crises!
  The presence of deposit insurance and government regulations removes 
incentives for individuals to act on their own to protect their 
deposits or even inquire as to the health of their financial 
institutions. After all, why should individuals be concerned with the 
health of their financial institutions when the federal government is 
insuring banks following sound practices and has insured their 
deposits?
  Finally, I would remind my colleagues that the federal deposit 
insurance program lacks constitutional authority. Congress' only 
mandate in the area of money, and banking is to maintain the value of 
the money. Unfortunately, Congress abdicated its responsibility over 
monetary policy with the passage of the Federal Reserve Act of 1913, 
which allows the federal government to erode the value of the currency 
at the will of the central bank. Congress' embrace of fiat money is 
directly responsible for the instability in the banking system that 
created the justification for deposit insurance.
  In conclusion, Mr. Speaker, H.R. 3717 imposes new taxes on financial 
institutions, forces sound institutions to pay for the mistakes of 
their reckless competitors, increases the chances of taxpayers being 
forced to bail out unsound financial institutions, reduces individual 
depositors' incentives to take action to protect their deposits, and 
exceeds Congress's constitutional authority. I therefore urge my 
colleagues to reject this bill. Instead of extending this federal 
program, Congress should work to prevent the crises which justify 
government programs like deposit insurance, by fulfilling our 
constitutional responsibility to pursue sound monetary policies.
  Mr. NEY. Mr. Speaker, I rise in support of H.R. 3717, the ``Federal 
Deposit Insurance Reform Act of 2002.''
  I want to commend my colleagues, Mike Oxley, the chairman of the 
House Financial Services Committee and Spencer Bachus, the chairman of 
the House Financial Institutes Subcommittee, for crafting sound 
legislation to improve the federal deposit insurance system. This bill 
will reform the FDIC so that it can continue to provide the stability 
that Americans have depended on for years.
  Last year, I introduced H.R. 1293, the ``Deposit Insurance 
Stabilization Act.'' This bipartisan piece of legislation addressed 
three of the most pressing needs of the deposit insurance system. My 
legislation merged the Bank Insurance Fund and the Savings Association 
Insurance Fund into a single sounder deposit insurance fund. My 
legislation also eliminated the 23 basis point cliff facing FDIC-
insured institutions if the deposit insurance fund were required by law 
to be recaptilized. I am pleased that both of these provisions are 
included in the bill before us today.
  My legislation included a third important component, commonly 
referred to as the ``free rider'' provision. This provision would give 
the FDIC statutory authority to assess a special premium on any insured 
institution with excessive net deposit growth. It was drafted to 
address the possible dilution of the deposit insurance fund by a 
handful of institutions. It was not meant to serve as a penalty or 
impediment to legitimate growth, but rather as an equitable to ensure 
that the cost of doing the business of deposit insurance is borne by 
those who benefit from that business.
  I was pleased that the Ney free rider provision was included as part 
of this bill, as reported by the Financial Services Committee. It 
represented a good faith effort to fairly resolve a problem first 
brought to my attention by bankers in my state and across the country.
  Unfortunately, because of the controversy it generated, this 
provision is not part of the managers' amendment before us today. While 
other provisions of the managers' amendment address the free rider 
problem, the absence of statutory authority for the FDIC to deal with 
prospective free riding could remain a problem. I am anxious to work 
with my colleagues in Congress and organizations like America's 
Community Bankers to adequately address this problem as this bill moves 
forward.
  Again, I would like to commend the sponsors of this bill for 
addressing the challenges facing the federal deposit insurance system, 
and urge my colleagues to support this bill.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Alabama (Mr. Bachus) that the House suspend the rules 
and pass the bill, H.R. 3717, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have not voted in the affirmative.
  Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

                          ____________________