[Congressional Record Volume 148, Number 72 (Wednesday, June 5, 2002)]
[Extensions of Remarks]
[Pages E951-E952]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2002

                                 ______
                                 

                               speech of

                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                         Tuesday, May 21, 2002

  Mr. BAKER. Mr. Speaker, after considerable work and consideration by 
the Financial Services Committee, the House considered and passed FDIC 
reform legislation, H.R. 3717. 1 supported and voted for the bill; 
however, I am concerned about the potential effects of possible FDIC 
actions to develop and implement risk-based assessment standards under 
sections 4 and 7 of the legislation. My concern is that the FDIC may 
give excessive weight to Federal Home Loan Bank advances in the 
assessment process so that insured institutions with certain amounts or 
percentages of such advances would be classified as more risky and, 
therefore, pay higher deposit insurance premiums.
  My concern arises from the FDIC's report on deposit insurance reform, 
issued in April 2001, which indicated that, under a risk-based 
assessment system, the FDIC could use a

[[Page E952]]

sample risk ``scorecard'' that would result in institutions with 
increased amounts of FHLB advances paying higher risk-based insurance 
assessments.
  In my opinion, the use by the FDIC of risk-based assessment authority 
in this way would be contrary to Congress' clear intent to broaden 
access to FHLB advances in the Gramm-Leach-Bliley Act of 1999. In the 
Gramm-Leach-Bliley Act, we wanted to ensure that community institutions 
and housing lenders would be able to obtain adequate, reasonably priced 
FHLB advances as a source of funds to serve the borrowing needs of 
their customers. Providing this source of liquidity may actually reduce 
risk. I would anticipate, should the FDIC place undue weight on FHLB 
advances for its risk-based assessment system, the agency will likewise 
account for the risks associated with depository institutions holding 
U.S. agency debt and securities.
  As the principal House sponsor of the FHLB provisions in the Gramm-
Leach-Bliley Act, I will follow very closely the FDIC's implementation 
of any new risk-based assessment standards to ensure such standards do 
not adversely affect the prudent use or cost of advances.

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