Congressional Record, Volume 149 Issue 53 (Wednesday, April 2, 2003)

[Congressional Record Volume 149, Number 53 (Wednesday, April 2, 2003)]
[House]
[Pages H2603-H2625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2003

The SPEAKER pro tempore (Mr. Linder). Pursuant to the order of the
House of Tuesday, April 1, 2003 and rule XVIII, the Chair declares the
House in the Committee of the Whole House on the State of the Union for
the consideration of the bill, H.R. 522.

{time} 1039

In the Committee of the Whole

Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 522) to reform the Federal deposit insurance system, and for
other purposes, with Mr. LaHood in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the order of the House of Tuesday, April 1,
2003, the bill is considered as having been read the first time.
Under the rule, the gentleman from Alabama (Mr. Bachus) and the
gentleman from Massachusetts (Mr. Frank) each will control 30 minutes.
The Chair recognizes the gentleman from Alabama (Mr. Bachus).
Mr. BACHUS. Mr. Chairman, I yield myself 7 minutes.
Mr. Chairman, I rise in support of H.R. 522, the Federal Deposit
Insurance Reform Act of 2003. I want to begin by thanking the gentleman
from Ohio (Mr. Oxley), the chairman of the committee, for his
tremendous leadership in steering what is a complex bill through the
legislative process. I also want to thank the ranking member of the
committee, the gentleman from Massachusetts (Mr. Frank), for his
support of this important piece of legislation. The committee and the
Congress in its votes on this legislation in the past, legislation very
similar, has shown that it can work together in a very bipartisan
manner.
Deposit insurance reform has been thoroughly discussed and debated
over the past several years. During the 107th Congress, I introduced
comprehensive deposit insurance reform, H.R. 3717. The legislation was
a by-product of recommendations by the FDIC in early 2001, industry
representatives coming together urging that we take action. The
American Banking Association, The Credit Union National Association,
Independent Bankers and Financial Services Roundtable, all urging the
Federal Reserve, the administration, urging us to take action to reform
Federal deposit insurance. We did take action, and the 107th Congress
passed H.R. 3717 by a vote of 408 to 18.
Unfortunately, that bill died in the other body.
Earlier this year, I introduced the same legislation. This time it is
H.R. 522, the Deposit Insurance Reform Act of 2003. The gentleman from
Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank)
joined me in introducing this legislation, along with 57 other
cosponsors on both sides of the aisle. It was approved by the Committee
on Financial Services by a unanimous voice vote. I am pleased that the
Senate now plans to act on similar legislation in the very near future,
and that the President's budget for fiscal year 2004 outlines a
proposal similar to our legislation.
The legislation is supported not only by American bankers, the
Financial Services Roundtable made up of the 100 largest financial
corporations in America, but also by the credit unions, the thrift
associations, the community bankers, the securities industry, and also
by groups that we sometimes do not find on the same side; the American
Association of Retired Persons has recently endorsed this legislation.
Federal deposit insurance has been the hallmark of our Nation's
banking system for almost 70 years. The reforms made by this
legislation will ensure that the system that serves savers and
depositors so well for so long will continue for future generations.
What does the legislation do? First, it merges separate insurance
funds that currently apply to deposits held by banks on the one hand
and savings associations on the other, creating a stronger, more stable
fund that benefits banks and thrifts alike.
Second, it changes the ``pro-cyclical'' bias of the current system.
In other words, it spreads out over time the assessments to the
institutions which results in, by doing this, a more uniform
assessment. Presently we have sharply higher premiums served during
recessionary times and much lower premiums during good times. Banks can
least afford to pay a higher premium during recessions, and we found
that out, and this corrects that.

{time} 1045

Third, the legislation includes modest increases in the amount of
coverage available. The system has gone from 1980 without an increase
in coverage. If we took 1980 as our basis and we increased coverage
based on inflation, we would go to $200,000. If we went back to 1980,
the $100,000, and we increased it based on per capita income, it would
actually go to $300,000. So we are proposing $130,000, a very modest
increase.
If we went back to 1974, because some have said they should not have
raised it in 1980, they should have kept it at the 1974 level, and we
increased it for inflation, it would go to $140,000.
Mr. Chairman, there are some who will offer amendments who have
actually publicly stated that they do not believe in Federal deposit
insurance, one of the gentlemen offering an amendment later on. So
there are Members of the body who do not believe that our deposits in
banks should be federally insured.
I understand that; but I, for one, disagree with that. I think
Americans have come to rely and have a sense of security in knowing
that when they put their retirement funds in a bank or thrift that it
is federally insured. Particularly in light of the recent volatility on
Wall Street, people have, I think, come to rely more and value more the
fact that they can put their money in a federally insured financial
institution and not lose that money.
All of us have heard from community bankers in our districts about
the challenges that they face in competing for deposits with large-
money center banks that are perceived by the market, rightly or
wrongly, as being too big to fail. By strengthening the deposit
insurance system, our legislation will help small neighborhood-based
financial institutions across the country, especially in rural areas,
continue to play an important role in financing economic development.

[[Page H2604]]

The independent bankers have actually said that this legislation is
key to maintaining local home-owned banking institutions. The deposits
that community banks are able to attract through Federal deposit
insurance guarantees are cycled back into local communities in the form
of consumer and small business loans. One reason for this legislation
is we value the right of every American to go down to his corner
financial institution.
My thanks go to the chairman of the committee.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
Mr. Chairman, I support this legislation. It is a very useful
synthesis of several important elements. It merges the two bank funds.
We have had two bank funds because we previously had a separate thrift
and commercial system that was undone by earlier events. We deal here
to some extent with the complication of newer entities now coming into
the system as a result of the previous legislation we adopted repealing
the old restrictions on banking.
There is one particular point I want to stress, that is, that an
amendment that is included in this, and I thank the gentleman from
Alabama (Mr. Bachus) and the chairman of the committee, the gentleman
from Ohio (Mr. Oxley), for agreeing to this, cosponsored, when we last
debated this bill last year when it passed in our body and did not go
further, sponsored by our colleague, the gentlewoman from California
(Ms. Waters).
Years ago, two Members, two former Members, a Member from
Pennsylvania named Ridge and a Member from New York named Flake,
sponsored a bill to get low-income people who are outside the banking
system into the banking system. The bankers of America should recognize
this for what it is, a great compliment, a tribute to the role that a
banking system plays in enhancing the ability of consumers to manage
their lives well.
We have people who are victimized by unscrupulous lending practices.
We have people who pay too much to do remittances to other countries,
hard-working people in this country who are sending money to family
elsewhere. We have payday lending exploitation. Getting people into the
banking system is a way to resolve that.
The problem was, there was no funding source for that. In this bill
there is a funding source. It comes through deposit insurance. I know
there are people in the banking industry, with whom I agree on many
issues, who do not like that funding source. If they can come up with
an equally reliable alternative funding source, I will work with them.
But I want to make clear, this bill is a synthesis. It helps the
people in the banking industry, who are a very important part of our
economy; and I am all for it for that reason. It also, and there is one
provision, does something about equity. I think that is the model we
ought to be following. We ought to be doing what we can to enhance the
ability of the free market system to create wealth, which it does so
well; but we ought also to be looking for opportunities to accompany
those moves with smaller measures, generally, in scope, measures that
do not cost any great deal of money very often, although sometimes it
might be more, that provide some equity, as well.
This bill does both. It is to me a whole joined together; and it will
leave here, and I appreciate the support of the leadership of the
committee on the majority side, with those two elements conjoined. I do
want to note that if it came back and somebody has put asunder what we
have joined, the support for this bill would not be what it is. So I
thank the gentleman from Alabama for his leadership.
Mr. Chairman, I reserve the balance of my time.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Ohio (Mr. Tiberi).
Mr. TIBERI. Mr. Chairman, I rise today in support of H.R. 522,
legislation to reform the Federal deposit insurance system. As a member
of the Committee on Financial Services, I am pleased to see the House
take up this legislation today, and provide my colleague, the gentleman
from Alabama, kudos for bringing this measure to the floor and to the
debate today.
One of the provisions of H.R. 522 is it increases deposit insurance
coverage from $100,000 to $130,000 per account. The hike in coverage
limits is most appropriate, as the current ceiling was set in 1980; and
inflation has eroded the real value of that coverage by more than 50
percent. Increased coverage limits will be especially helpful to
community banks in bringing, and just as importantly keeping, deposits
in their institutions that can be used in local economies and local
communities.
In addition, the bill would provide $260,000 in coverage for certain
retirement products, certain IRAs, certain 401(k)s, a key step in an
ongoing effort here in the Capitol to encourage consumers to build
their savings. This provision in particular is relevant to our seniors,
who benefit by being able to be more savers as they move toward
retirement savings and retirement age to the security of the insured
deposit system.
Mr. Chairman, I strongly support this provision and urge all of my
colleagues to support it, as well, and vote in favor not only of this
important piece of legislation, but also against the amendment that
will be offered later to move this provision from $130,000 back to
$100,000.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Kansas (Mr. Moran).
Mr. MORAN of Kansas. Mr. Chairman, I appreciate the gentleman from
Alabama for yielding time to me, and I commend him on his leadership
and persistence with regard to this legislation. It has been a long
time coming, and I am pleased today to support H.R. 522.
Much of my focus as a Member of Congress has been on what can we do
to improve the chances that rural America will survive, what can we do
to make certain that the communities across our country and the people
who live there have a little prosperity today, but they also are able
to preserve that way of life in small-town America for future
generations.
One of the concerns that is clearly there and can be demonstrated is
the need for credit for small loans, the need for credit for small
business, the need for credit for small farmers and ranchers. We must
take steps that will strengthen the financial opportunities available
for citizens of our communities across the country to save, to set
their money aside. This will encourage those individuals to be able to
do that in larger amounts, without having to take the necessary risks
of investing in some more volatile kind of market or shopping for
deposit ability in towns far away.
Perhaps, even more importantly, if we want rural America to survive,
if we want small business and agriculture to have an opportunity to
succeed, they have to have access to credit. The opportunity that this
legislation presents is a step in the right direction toward making
certain that credit is available to our creditworthy business owners,
farmers, and ranchers.
I commend the committee and thank them for their efforts in this
regard. I lend my wholehearted support toward increasing the amount of
coverage and making it possible for our communities to have a greater
volume of assets on deposit in their local bank.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Texas (Mr. Hensarling).
Mr. HENSARLING. Mr. Chairman, I rise today in support of H.R. 522,
the Federal Deposit Insurance Reform Act of 2003. As a member of the
Committee on Financial Services, I want to thank the gentleman from
Ohio (Chairman Oxley) and the subcommittee chairman, the gentleman from
Alabama (Mr. Bachus), for their work on this legislation and for acting
quickly in this new Congress to address this matter of importance to
banks and depositors alike.
This legislation will help create a more stable and a more fair and
secure banking system. By combining the Banking Insurance Fund and the
Savings Association Insurance Fund into one fund, the risks that a
couple of large institutions could fail and impair each fund is greatly
reduced.
Merging these funds will help increase fairness in our banking system
as well by eliminating the possibility that two institutions of similar
sizes would essentially be paying two completely different premiums.
Further,

[[Page H2605]]

the merged fund will make reporting and accounting less burdensome for
both the institutions and the FDIC as well.
Our deposit insurance system plays a vital role in our economic
security. This legislation will give the FDIC the necessary flexibility
to respond to varying economic conditions and allow them to properly
price premiums to reflect actual risk. By eliminating the 23 basis
point premium ``rate cliff'' required under current law, more
institutions will have more capital to invest in our economy. That
means more jobs, more hope, more opportunity.
Mr. Chairman, FDIC Chairman Powell stated in his testimony before the
Committee on Financial Services last month that H.R. 522 gives Congress
``an opportunity to remedy flaws in the deposit insurance system before
those flaws cause actual damage, either to the banking industry or our
economy as a whole.''
As a member of that committee, I am glad to see this body act so
expeditiously on this legislation. I urge all of my colleagues to vote
for H.R. 522.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentlewoman from
Florida (Ms. Ginny Brown-Waite).
Ms. GINNY BROWN-WAITE of Florida. Mr. Chairman, I thank the gentleman
for yielding time to me.
I rise today in very strong support of the Federal Deposit Insurance
Reform Act of 2003. This very critical legislation increases the
standard maximum deposit coverage from $100,000 to $130,000, and then
indexes the increase every 5 years to account for inflation.
However, most importantly to the seniors in my district, H.R. 522
calls for a doubling of the maximum deposit coverage for retirement
accounts. This would allow seniors to maintain coverage on up to
$260,000 in their retirement accounts.
The amendment offered today would strike this coverage without doing
it for any good reason. The increases are modest and necessary in this
bill. If the coverage limit actually had been keeping pace with
inflation, today the standard limit would be about $200,000. This bill
proposes an increase to only $130,000.
The FDIC is in great need of these commonsense reforms, and I urge my
colleagues to join with me in support of H.R. 522 and to oppose any
amendment that would strike the coverage increases.

{time} 1100

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 3 minutes to the
gentleman from Texas (Mr. Gonzalez).
Mr. GONZALEZ. Mr. Chairman, I rise in support of H.R. 522. I believe
this bill makes important changes to the deposit insurance system to
improve its effectiveness and increases incentives for people to save.
I wish to particularly speak in support of the provision in this bill
that will require the FDIC to report annually on efforts by insured
institutions to increase their deposit base by encouraging unbanked
households to enter the conventional finance system and to avail
themselves of bank accounts and other conventional services offered by
depository institutions.
Unbanked families as defined by this provision are those individuals
who rarely, if ever, held a checking account or savings account or
other type of conventional account in an insured depository
institution. Joining me attaching this provision in committee was the
gentleman from Illinois (Mr. Gutierrez) and the gentleman from Texas
(Mr. Hinojosa).
Mr. Chairman, too many families lack access to basic fundamental
services. It is currently estimated that nearly 10 million American
families are unbanked. Unfortunately, for unbanked families there are
no real financial alternatives but payday lenders or check cashers,
which is often the worst form of financing for a struggling American
family.
The Hispanic community particularly struggles with high rates of
unbanked families. One recent survey found that 35 percent of Hispanic
families did not have a bank account, with that number rising to 42
percent for those Hispanics who are foreign born. With limited access
to formal saving tools, it is no surprise that the financial net worth
of the median Hispanic family in the United States today is estimated
to be zero.
Fortunately, great strides have been made by major financial
institutions to increase their presence in the Hispanic community
through the use of such things as money remittance technology and the
matricula card. It is my hope and expectation that all major depository
institutions will look at unbanked minority families as a business
opportunity and aggressively attempt to include them in the
conventional finance system.
A relationship to a mainstream financial institution has long-term
positive economic and financial effects on families and the communities
where they reside, fostering their greater integration into the United
States economy. The best defense against predatory financing is
education and a bank account. The unbanked provision in H.R. 522 is
intended to highlight those efforts which are most effective in
expanding the banking system to every American family. I urge the
passage of this bill.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Colorado (Mr. Beauprez).
Mr. BEAUPREZ. Mr. Chairman, I thank the gentleman for yielding me
time. I particularly commend him for bringing H.R. 522 to the floor of
this body.
Before I was sworn in as a Member of Congress I was a community
banker. Our family still operates a community bank back home, and I
want to highlight why I am supporting this bill from particularly a
community banker's position.
Chairman Powell, Chairman of the FDIC, has indicated that the buying
power of the $100,000 that is in reference today has deteriorated since
1980, the last time that FDIC insurance rates were adjusted to just
$47,000 currently. Well, the same holds true on the lending side, and
that is what I want to focus on is credit availability.
One of the biggest challenges, especially for community banks like I
ran back home, was to have adequate deposits to meet credit demand.
Now, if the $100,000 in 1980 is representative of $47,000 worth of
buying power today, similarly, demand for credit has escalated the same
way. Access to those deposits is critical and insurance coverage for
those deposits is one of the main criteria for large deposit customers
to bring their cash to the bank, knowing that it is covered. They
either spread it out among other financial institutions at tremendous
burden to them, or they put it in uninsured accounts out in the
marketplace, both poor options. They like to establish a relationship
and like to keep that relationship. This only makes good sense.
Another reason it makes such good sense is that it is a self-
insurance program. The banks pay the premium that guarantees the
insurance protection for these deposits.
Mr. Chairman, let me again commend the gentleman for bringing this
legislation to the floor of this body. It is legislation I have long
supported and long encouraged, and I thank the gentleman from Alabama
(Mr. Bachus) for his leadership on this issue.
Mr. BACHUS. Mr. Chairman, I yield 4 minutes to the gentleman from
Ohio (Mr. Oxley), the chairman of the Committee on Financial Services.
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Mr. Chairman, I rise today in strong support of H.R. 522,
the Federal Deposit Insurance Reform Act of 2003. Our country has the
largest, most complex, most stable banking system in the world. Deposit
insurance is one of the major reasons for this stability. And today we
will strengthen this system so that it continues to serve as a model
for the rest of the world.
Depositors, taxpayers, and depository institutions would be well-
served by this legislation which will modernize the Federal deposit
insurance system. Federal deposit insurance was created by the Congress
in 1934 and it has successfully served the American people for almost
70 years. Public confidence has been maintained, and the stability of
the Nation's banking system has been preserved during periods of
financial uncertainty.
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 1990s. During this crisis the

[[Page H2606]]

Federal Government resolved 2,363 failures of insured institutions
involving more than $700 billion in assets. As FDIC Chairman Powell has
stated, ``There were no bank runs, no panics, no disruptions to
financial markets, and no debilitating impact on overall economic
activity.''
The existence of the Federal deposit insurance was a critical factor
in maintaining public confidence in the banking system during these
troubled times. H.R. 522, though technical in nature, seeks to apply
the experience of the last decade to today's banking marketplace. It is
the 21st century legislation for a 21st century banking industry, and
this is it. And 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. Chairman, there is broad consensus in this body, the Bush
administration, the Federal banking and thrift regulators, and business
and consumer groups in favor of improving and strengthening the deposit
insurance system and making it more responsive to the cyclical nature
of banking activities and the post-Gramm-Leach-Bliley financial and
economic environment. This legislation fulfills our commitment to the
American public. Indeed, H.R. 522 was reported out of committee on a
voice vote, a testimony to its responsiveness and timeliness.
Substantially similar legislation passed this body just last year with
over 400 votes.
This legislation is based on the recognition 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 times. The bill provides the FDIC
with the necessary supervisory tools to manage the deposit insurance
fund in a way that balances all affected interests and allocates the
benefits and costs of the system evenly and fairly.
I want to thank the chairman of the Subcommittee on Financial
Institutions and Consumer Credit, the gentleman from Alabama (Mr.
Bachus) for taking on this challenging, highly technical legislative
process and for engaging all the major stakeholders in developing a
bipartisan piece of well-balanced, highly effective legislation.
I also want to thank all of the bipartisan co-sponsors of this
important legislation, particularly our distinguished ranking member,
the gentleman from Massachusetts (Mr. Frank), for their good work in
this effort. I strongly urge all of my colleagues to support this
legislation, and 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. Chairman, in scoring last year's deposit insurance reform
legislation, the CBO concluded that the bill would decrease net Federal
spending by $700 million. This year, presented with a substantially
similar piece of legislation reforming the deposit insurance system,
the CBO applied a different set of assumptions in performing its
analysis of H.R. 522, and concluded that this year's bill would
increase net Federal spending by some $1.9 billion.
This large swing between last year's estimate and this year's is
attributable in large measure to a change in CBO's calculation of how
much premiums the FDIC will be able to collect from insured depository
institutions under the two bills. In making this calculation, CBO
acknowledged the speculative nature of its analysis, stating that ``it
is possible that the FDIC could use its broad discretion [under the
legislation] differently than we have assumed and that could result in
either fewer or greater premium collections than CBO has estimated.''
The CBO's analysis is grounded in an arbitrary assumption that the
FDIC Board will choose not to exercise its authority in a revenue
neutral way. This assumption is directly contrary to the consistent
congressional testimony of the FDIC that a central goal of deposit
insurance reform is revenue neutrality.
In fact, in a letter that the Committee received on March 31, 2003,
from the Chairman of the FDIC, the Honorable Don Powell, Chairman
Powell stated the FDIC's position that H.R. 522 gives the agency
``appropriate tools and incentives to manage the deposit insurance
system such that it will not result in increased net government
spending.''
Chairman Powell's letter, which conclusively rebuts the notion that
H.R. 522 will have an adverse affect on Federal spending, goes on to
state:

H.R. 522 provides the FDIC with the tools to achieve
revenue neutrality in the management of the deposit insurance
system. Because any analysis that determines H.R. 522 will
result in an increase in net government spending must
necessarily rely on assumptions regarding how the FDIC Board
will exercise the discretion provided in the legislation, I
can assure Congress that the leadership of the FDIC has no
intention of managing the deposit insurance system in a way
that increases the costs to the government or increases the
burden on insured institutions. The costs of the deposit
insurance system will continue to be borne by the banking
industry, but in a manner that establishes a strong risk-
based premium system and avoids the procyclical risks
inherent in current law.

The Committee shares the view of the FDIC, the agency that has had
responsibility for administering the deposit insurance program since
its inception more than 70 years ago, and believes that the CBO
analysis of the potential budgetary impact of H.R. 522 is fundamentally
flawed.
For the Record, I am including a copy of the CBO estimate and the
FDIC's response.

U.S. Congress,

Congressional Budget Office,

Washington, DC, March 28, 2003.
Hon. Michael G. Oxley,
Chairman Committee on Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 522, the Federal
Deposit Insurance Reform Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Hadley and Ken Johnson (for federal costs), and Judith Ruud
(for the private-sector impact).
Sincerely,
Barry B. Anderson
for Douglas Holtz-Eakin, Director.
Enclosure.
H.R. 522--Federal Deposit Insurance Reform Act of 2003
Summary: H.R. 522 would amend provisions of banking and
credit union law to reform the deposit insurance system.
Specifically, the bill would increase insurance coverage for
insured accounts from $100,000 per account to $130,000 for
most accounts (with higher levels of coverage for retirement
accounts and municipal deposits). Over time, the coverage
limit for insured deposits would increase to account for
inflation. Those provisions of the bill would affect deposits
held by banks and thrifts, which are insured by the Federal
Deposit Insurance Corporation (FDIC), as well as those held
by credit unions, which are insured by the National Credit
Union Administration (NCUA). In addition, the bill would
merge the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF) to create a new Deposit
Insurance Fund (DIF) to pay the claims of depositors of
failed banks and thrifts. Finally, H.R. 522 would amend the
conditions under which banks and thrifts would pay insurance
premiums to the FDIC, which administers the funds.
CBO estimates that H.R. 522 would increase the net cost of
resolving failed financial institutions by $2.1 billion over
the next 10 years. Under the bill, the FDIC and NCUA would
offset some of that cost through increased insurance premiums
paid by financial institutions. Because H.R. 522 would allow
institutions to pay FDIC premiums with credits in lieu of
cash, the additional cost of resolving failed financial
institutions under the bill would exceed the cash receipts
from additional premiums. Consequently, we estimate that the
FDIC would bear nearly all of the increased costs of
resolving failed institutions during the next five years,
when most of the credits would be used. As a result, CBO
estimates that a would increase net direct spending by $1.9
billion over the 2004-2013 period.
H.R. 522 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA). CBO estimates
that the mandate would impose no costs on state, local, or
tribal governments and, therefore, that it costs would not
exceed the threshold established in UMRA ($59 million 2003,
adjusted annually for inflation).
The bill contains private-sector mandates as defined by
UMRA, primarily because it would necessitate the payment of
increased deposit insurance premiums. CBO estimates that the
direct cost of those mandates would be below the annual
threshold specified in UMRA ($117 million in 2003, adjusted
annually for inflation) during the first five years after
enactment because the bill would provide credits to certain
institutions that would largely offset their insurance
premium assessments over the 2004-2008 period. We do not have
sufficient information to provide a precise estimate of the
aggregate cost of all the mandates in the bill.

[[Page H2607]]

Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 522 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-------------------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
DIRECT SPENDING

FDIC and NCUA Spending Under Current Law:
Estimated Budget Authority............ * * * * * * * * * *
Estimated Outlays..................... 1.1 1.5 0.9 0.7 0.7 0.8 0.6 0.3 0.1 0.3
Changes in Costs to Resolve Failed
Institutions Insured by FDIC and
NCUA:
Estimated Budget Authority........ 0 0 0 0 0 0 0 0 0 0
Estimated Outlays................. 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.2 0.2 0.2
Changes to FDIC and NCUA Premium
Collections:
Estimated Budget Authority........ 0 0 0 0 0 0 0 0 0 0
Estimated Outlays................. 0.5 0.4 1.1 0.4 * -0.3 -0.4 -0.5 -0.6 -0.9
-------------------------------------------------------------------------------------------------------------
Total Changes Under H.R. 522:...
Estimated Budget Authority.. 0 0 0 0 0 0 0 0 0 0
Estimated Outlays........... 0.7 0.6 1.3 0.6 0.2 * -0.1 -0.3 -0.4 -0.7
FDIC and NCUA Spending Under H.R. 522:
Estimated Budget Authority............ * * * * * * * * * *
Estimated Outlays..................... 1.8 2.1 2.2 1.3 0.9 0.8 0.5 * -0.3 -0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--*=Between 0 and -$50 million.

Basis of estimate: Two federal agencies are primarily
responsible for the deposit insurance system. The FDIC
insures the deposits in banks with the BIF and the deposits
of thrifts with the SAIF. The NCUA insures the deposits in
credit unions (referred to as shares) with the Share
Insurance Fund. When a financial institution fails, the FDIC
or NCUA use the insurance funds to reimburse the insured
depositors of the failed institution. These agencies then
sell the assets of the failed institution and deposit any
money recovered into the insurance funds.
CBO estimates that H.R 522 would increase both the cost of
resolving failed financial institutions and the premiums paid
by financial institutions. Over the 2004-2013 period, we
estimate that the cost of resolving failed institutions would
increase by $2.1 billion and premiums paid by financial
institutions would increase by $200 million. Thus, we
estimate that enacting H.R. 522 would result in a net
increase in direct spending of $1.9 billion over the 2004-
2013 period. The major components of this estimate are
explained below.
Increase in the Cost of Resolving Failed Financial
Institutions
H.R. 522 would increase deposit insurance coverage from
$100,000 to $130,000 for most accounts, with higher coverage
levels for employee benefit plans and in-state municipal
deposits. Such increases would apply to deposits held by
credit unions as well as banks and thrifts. In addition, the
bill would require the FDIC and NCUA to adjust deposit
insurance coverage every five years beginning January 1,
2006, to account for inflation. because H.R. 522 would
require that coverage levels be rounded to the nearest
$10,000, CBO estimates that coverage would remain at $130,000
in 2006 and would increase to $150,000 in 2011.
By 2004, we expect that insured deposits will total more
than $3.5 trillion under current law. Based on information
from the FDIC and the experience of past increases in deposit
insurance coverage, CBO estimates that the increased
insurance coverage under H.R. 522 would increase the deposits
insured by the FDIC by about $300 billion--or around 8
percent.
By insuring current deposits that are now uninsured, the
bill would increase the liability of the FDIC and NCUA when
institutions fail without significantly increasing the assets
of those institutions. Under current law, we expect the
FDIC's net losses on failed institutions to total about $12.2
billion over the 2004-2013 period. (We project that gross
losses of $56.3 billion would be offset, in part, by
recoveries of $44.1 billion from selling the assets of the
failed institutions.) CBO estimates that the bill would lead
to an increase in net losses of $1 billion over the next 10
years. Outlays for resolving failed institutions would
increase by a larger amount over the next 10 years, however,
because selling the assets of failed banks often takes many
years. As a result, CBO estimates H.R. 522 would increase
the FDIC's net outlays to resolve failed banks and thrifts
by about $2.1 billion over the 2004-2013 period.
Similarly, we estimate that enacting H.R. 552 would
increase NCUA's net outlays to resolve failed credit
unions by about $10 million over the 2004-2013 period.
By increasing deposit insurance coverage, H.R. 522 could
reduce incentives of depositors to monitor the behavior of
financial institutions. Over the long term, this could lead
to increased risk-taking by those institutions and ultimately
to higher losses. On the other hand, if the DIF incurs larger
losses to resolve failed banks and thrifts, H.R. 522 would
give the FDIC the flexibility to set premiums to restore the
balances in the fund over several years, thus allowing the
agency to recover from large losses without imperiling other
institutions. This new authority could reduce future losses.
CBO has no basis for estimating the magnitude of either of
these effects. We expect, however, that any changes in the
costs of resolving failed institutions would eventually be
borne by banks and thrifts through premiums.
Effects on Premiums Paid to the FDIC By Financial
Institutions
Three general provisions of H.R. 522 would affect the total
amount of premiums collected by the FDIC. The bill would
provide the FDIC with increase discretion to set premiums.
Financial institutions would be given credits that could be
used to pay the FDIC assessments in lieu of cash. Finally,
the bill would require the FDIC to merge the BIF and SAIF.
The amount of premiums that banks and thrifts would pay
through the combined effects of the three major provisions of
H.R. 522 would depend on the DIF's balance in each year,
which in turn would depend on the costs of resolving failed
institutions. To estimate the effects of the bill's
provisions on premium collections, CBO considered several
thousand scenarios of the magnitude and timing of possible
losses to the FDIC and the subsequent impact on premiums that
would be collected under the bill. Because the fund balance
in any given year depends on the losses in all prior years,
each scenario included an estimate of losses over the entire
2004-2013 period. Applying a probability distribution to
those loss scenarios, CBO estimated premium income to the
government under H.R. 522, reflecting the wide range of
uncertainty about future costs of resolving failed financial
institutions.
Overall, CBO estimates that the net effect of these
provisions on deposit insurance premiums would be an increase
in collections of about $100 million over the next 10 years,
considerably less than our projected increase in the FDIC's
costs to resolve failed financial institutions ($2.1
billion). Each of the bill's three major provisions that
would affect premium assessments is described below.
Increased FDIC Discretion Over Premiums. Under current law,
the FDIC is required to assess premiums so as to maintain
reserves equal to 1.25 percent of insured deposits in the BIF
and SAIF. H.R. 522 would give the FDIC broad discretion to
set premiums paid by insured financial institutions. As a
result, the total amount collected would depend on how the
FDIC chooses to exercise that discretion. Specifically, the
bill would charge the FDIC with assessing premiums based on
the degree of risk for each institution, it would authorize
the FDIC to assess other premiums if it considers the DIF's
reserves to be inappropriately low, and it would require the
FDIC to implement a 10-year restoration plan if the DIF
reserve ratio falls below 1.15 percent. It is possible that
the FDIC could use its broad discretion differently than we
have assumed and that could result in either fewer or greater
premium collections than CBO has estimated. The following
sections describe how CBO expects that the FDIC would
exercise its discretion under the bill.
Premiums Based on the Risk of Each Institution. For this
estimate CBO assumes that when setting premiums, the FDIC
will consider all of the bill's criteria. Specifically, H.R.
522 would authorize that the FDIC charge premiums based on
each institution's risk of failure. CBO expects that the FDIC
would choose to charge all institutions some premiums all of
the time because even the strongest institutions pose some
risk. (Under current law, the vast majority of institutions
do no pay any premiums if the BIF or the SAIF are above 1.25
percent of insured deposits.) The bill, however, would limit
the amount of premiums the strongest institutions could pay
to 0.01 percent of their deposits. Based on information from
the FDIC, CBO expects that the risk posed by the strongest
institutions will not be much less than that of the next
strongest institutions. Therefore, we do not expect that the
FDIC would charge those groups vastly different premiums.
Authority To Set Other Premiums. Based on information from
the FDIC, CBO expects that the FDIC would increase premiums
above the amount required by risk only when the FDIC
determines that the DIF's reserves are inappropriately low.
For this estimate, CBO assumes the FDIC would charge
additional premiums if the DIF's reserves

[[Page H2608]]

are between 1.15 percent and 1.20 percent of insured
deposits. However, there may be limits on the amount by which
the FDIC could increase premiums as the DIF nears 1.15
percent. For instance, the increased premiums would not apply
to the least risky group of institutions because of the
bill's limitation on assessments. Furthermore, we expect that
the FDIC would attempt to charge similar premiums to banks
with similar risks. Even if the fund were smaller than the
FDIC would prefer, we expect that the FDIC would not
significantly raise premiums charged to more risky
institutions. Finally, CBO expects that the FDIC would
attempt to limit volatility in premiums charged and avoid
increases in premiums for temporary reductions in the fund.
For these reasons, CBO assumes that, when the DIF reserve
ratio is between 1.15 percent and 1.2 percent, the FDIC would
charge all institutions other than the least risky group only
an extra two basis points in premiums.
Ten-Year Restoration Plans. If the DIF's reserves fall
below 1.15 percent of insured deposits, then H.R. 522 would
require the FDIC to devise and implement a restoration plan
to bring the reserve ratio back to 1.15 percent within 10
years. This flexibility to set restoration plans could reduce
assessment income of the FDIC because it could spread the
necessary premiums over 10 years. On the other hand, this
provision of H.R. 522 might provide the FDIC the discretion
necessary to recover from a large loss in the fund without
imperiling other institutions. For this estimate, CBO assumes
that the FDIC would charge all institutions premiums at least
two basis points above their risk premiums and, under some
conditions, would attempt to return the fund's reserve ratio
to 1.15 percent in fewer than 10 years.
Credits for Future Assessments. H.R. 522 would require the
FDIC to provide certain banks and thrifts with one-time
credits against future assessments, based on their payments
to the BIF or SAIF prior to 1997. FDIC's income from premiums
would decline to the extent such credits are used. CBO
estimates that financial institutions would use credits worth
nearly $5.4 billion during the 2004-2013 period. Therefore,
FDIC's collections would fall by an equivalent amount over
the next 10 years. CBO expects most of the credits would be
used over the 2004-2008 period.
The credits would equal 12 basis points (0.12 percent) of
the combined assessment base of the BIF and SAIF as of
December 31, 2001. Based on information from the FDIC, CBO
estimates that the credits would total nearly $5.4 billion.
They would be allocated to each institution based on their
market share as of December 31, 1996. Institutions
established after that date would be ineligible for these
one-time credits against their future assessments.
H.R. 522 would limit the use of credits by institutions
that are not well capitalized or that exhibit financial,
operational, or compliance weaknesses that range from
moderately severe to unsatisfactory. Under the bill, such
institutions could only use credits worth no more than the
average assessment on all depository institutions for that
period. In addition, if the DIF's reserves fall below 1.15
percent of insured deposits, institutions would be prohibited
from using more than three basis points worth of credits in
that year. Even with those limitations, CBO expects that all
of the credits awarded would be used during the 2004-2013
period.
H.R. 522 also would give the FDIC broad authority to award
additional credits on an ongoing basis. For the purposes of
this estimate, CBO assumes that the FDIC would award those
ongoing credits only when DIF reserve ratio approaches 1.35
percent. Based on the growth of insured deposits, increased
losses, and the impact that one-time credits would have on
premium income, CBO estimates that it is very unlikely the
fund balance would approach 1.35 percent of insured deposits.
Merging BIF and SAIF. H.R. 522 would require the FDIC to
merge the Bank Insurance Fund and the Savings Association
Insurance Fund and create a new Deposit Insurance Fund. By
2004, CBO expects the net worth of the combined fund would be
about $45 billion. Considered separately from the other
reforms in the bill, merging the funds would delay the
collection of premiums on institutions now insured by the BIF
for a few years and would have a minor impact on net outlays
from the fund over the 2004-2013 period.
Increase in Premiums Paid to NCUA By Financial Institutions
Under current law, credit unions must pay NCUA 1 percent of
the net change in deposits each year. NCUA provides rebates
to credit unions if the balance in the share insurance fund
exceeds 1.3 percent of insured deposits. Under current law,
CBO estimates that NCUA will collect net premiums of about
$3.3 billion from its members over the 2004-2013 period.
Based on information from NCUA, CBO expects that H.R. 522
would extend insurance coverage to about $6 billion in
currently uninsured deposits in 2004 and that the higher
insurance levels would attract about $50 million in new
deposits that year. CBO estimates that, under the bill, the
net premiums collected by NCUA would increase by $100 million
over the 2004-2013 period. About $60 million of that amount
would be realized in 2004. The premiums collected for the
expanded insurance coverage would more than offset the
estimated additional costs to NCUA of $10 million over the
next 10 years.
Estimated impact on state, local, and tribal governments:
H.R. 522 contains an intergovernmental mandate as defined in
UMRA. A provision in section 3 would preempt New York state
laws that bar savings banks and savings and loan associations
from accepting municipal deposits. Enacting this provision
would impose no costs on state, local, or tribal governments
and, therefore, the costs of the mandate would not exceed the
threshold established in UMRA ($59 million in 2003 adjusted
annually for inflation). Enacting the bill could benefit
municipalities in New York to the extent that more depository
institutions may compete for their deposits and offer more
favorable terms as part of that competition.
Estimated impact on the private sector: The bill contains
private-sector mandates as defined by UMRA, primarily because
it would necessitate the payment of increased deposit
insurance premiums. CBO estimates that the direct cost of
those mandates would be below the annual threshold specified
in UMRA ($117 million in 2003, adjusted annually for
inflation) during the first five years after enactment
because the bill would provide credits to certain
institutions that would largely offset their insurance
premium assessments over the 2004-2008 period. We do not
have sufficient information to provide a precise estimate
of the aggregate cost of all mandates in the bill.
Banks and Savings Associations
Commercial banks and savings associations must have federal
deposit insurance. CBO, therefore, considers changes in the
federal deposit insurance system that increase requirements
on those institutions to be private-sector mandates under
UMRA. Specifically, the bill would increase federal insurance
coverage for insured depository accounts. Because premiums
are based in part on the amount of insured deposits, that
increase in coverage would require banks and savings
associations to pay more in deposit insurance premiums.
Three provisions of H.R. 522 would affect the total amount
of premiums collected by the FDIC. The bill would require the
FDIC to merge the BIF and the SAIF. The bill would provide
the FDIC with greater discretion to set premiums. The FDIC
would grant credits to some financial institutions that could
be used to pay deposit insurance premiums in lieu of cash.
CBO estimates that as a result of the merger of the deposit
insurance funds, increase deposit insurance coverage, and the
greater discretion given to the FDIC to set premiums for
banks and savings associations, banks and savings
associations would be assessed about $200 million less in
premiums in fiscal year 2004 (largely because of the savings
provided by the merger of the BIF and the SAIF) but would be
assessed about $1 billion more in 2005 when compared with
current law. The additional assessments would total about
$2.4 billion over the five-year period from 2004 to 2008.
However, H.R. 522 would require the FDIC to award credits
to certain banks and savings associations that may be used to
offset future deposit insurance premium assessments. The
credits would amount to about $5.4 billion. Only banks and
savings associations that paid deposit insurance premiums
prior to 1997 would be eligible to receive credits. CBO
expects that institutions that are awarded credits would use
them as soon as they are available. For example, CBO
estimates that in 2005, the industry would use about $1.5
billion of these credits towards the $1.7 billion of deposit
insurance assessments. Although some institutions would have
to pay more in premiums, the industry as a whole would pay
about $400 million less in 2005 than it would have to pay
under current law because of the use of the credits.
Over the 2004-2007 period, CBO expects that the industry
would pay less in premiums than it would under current law
due to the credits. However, as the industry exhausts its
credits, it would have to pay more in premiums than under
current law. By 2008, CBO expects that the industry would
have to pay premiums of about $50 million more. In 2009, the
industry would pay additional premiums of about $300 million,
and the amount of additional premiums paid would increase in
subsequent years.
Credit Unions
Because the bill would increase the coverage of insured
accounts for federally insured credit unions, those credit
unions would have to contribute more to the National Credit
Unions Insurance Fund. CBO estimates that those institutions
would contribute an additional $60 million in fiscal year
2004. The additional contributions would total about $100
million over the 2004-2008 period.
Employee Benefit Plan Deposits
The bill would also prohibit banks, savings associations,
and credit unions that are not well capitalized or adequately
capitalized from accepting employee benefit plan deposits.
CBO does not have sufficient information to assess the cost
of this mandate.
Estimate prepared by: Federal Costs: Mark Hadley (226-
2860), Ken Johnson (226-2860), and Judith Ruud (226-2940).
Impact on State, Local, and Tribal Governments: Victoria Heid
Hall (225-3220). Impact on the Private Sector: Judith Ruud
(226-2940).
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis

[[Page H2609]]

____
Federal Deposit

Insurance Corporation,

Washington, DC, March 31, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: I am writing to address recent concerns
raised by the Congressional Budget Office that H.R. 522, the
Federal Deposit Insurance Reform Act of 2003, would increase
net government spending. H.R. 522 provides the Federal
Deposit Insurance Corporation with a number of new
discretionary tools that permit an effective risk-based
deposit insurance system and avoid the procyclical impact of
current law. Because any analysis of the impact of this
legislation is highly dependent on unpredictable variables,
the FDIC would like to provide Congress with the assurance
that H.R. 522 includes appropriate tools and incentives to
manage the deposit insurance system such that it will not
result in increased net government spending.

Revenue Neutrality

From the very beginning of the debate on deposit insurance
reforms, the FDIC has stated that the point of the reforms is
neither to increase assessment revenues from the industry nor
to relieve the industry of its obligation to fund the deposit
insurance system. Rather, the goal of deposit insurance
reform is to distribute the assessment burden more evenly
over time and more fairly across insured institutions. H.R.
522 provides the FDIC with the tools to achieve revenue
neutrality in the management of the deposit insurance system.
Because any analysis that determines H.R. 522 will result in
an increase in net government spending must necessarily rely
on assumptions regarding how the FDIC Board will exercise the
discretion provided in the legislation, I can assure Congress
that the leadership of the FDIC has no intention of managing
the deposit insurance system in a way that increases the
costs to the government or increases the burden on insured
institutions. The cost of the deposit insurance system will
continue to be borne by the banking industry, but in a manner
that establishes a strong risk-based premium system and
avoids the procyclical risks inherent in current law.

Difficulty of Analyzing Discretionary Actions

Analyzing the budgetary impact of H.R. 522 is undeniably a
difficult exercise that depends critically on two types of
assumptions--external factors and internal factors. External
factors include a number of complex variables, such as the
likelihood of future failures, the condition of the economy,
the cost of failures, and deposit growth. A change in any
one or more of these variables has a significant impact on
the analysis.
The internal factors involve the behavior and decisions of
the FDIC Board of Directors in setting deposit insurance
premiums. In the case of H.R. 522, the analysis is difficult
because the discretion granted to the FDIC to manage the
deposit insurance funds requires analysts to model the future
decisions of the FDIC Board. The CBO analysis makes a number
of assumptions about when the FDIC Board will exercise its
discretion to increase deposit insurance premiums and how
much it will charge. Based on these assumptions, the CBO
reaches a conclusion that the FDIC Board acts in a manner
that results in a $1.9 billion net increase in government
spending over ten years. Yet, nothing in the legislation
prevents the FDIC Board from making slightly different
decisions. The CBO estimate represents an annual ``cost'' of
less then one half a basis point against the FDIC's
assessment base. There is no reason to assume that the FDIC
Board would not make the minor adjustments in its decisions
to achieve its stated goal of revenue neutrality.

benefits of h.r. 522

No analysis of the ``costs'' of legislation is complete
without a full consideration of the benefits provided by the
bill. The FDIC believes that H.R. 522 provides significant
benefits over the current deposit insurance system. The
current system is procyclical and will require the banking
industry to pay its highest premiums at the worst possible
time--during economic downturns--so that banks will have less
money available to lend when their communities need it most.
In addition, H.R. 522 will permit the FDIC to implement an
effective risk-based premium system. Under the current
system, 91 percent of financial institutions do not pay
deposit insurance premiums even though there are clear
differences in their risk profiles. Safer institutions
subsidize their riskier competitors and many institutions
have never paid a premium for their insurance coverage. An
effective deposit insurance system that charges institutions
based on the risk they present to the insurance fund would be
fairer and provide greater protection against risky practices
that can lead to bank failures and deposit insurance losses.
If H.R. 522 or similar legislation is enacted into law, the
FDIC believes it will represent an important improvement over
the current deposit insurance system. I can assure you that
it is the intention of the FDIC to implement H.R. 522 to
achieve our stated goal of revenue neutrality. I hope that
the House of Representatives will take a major step toward a
safer and sounder deposit insurance system by passing H.R.
522.
Sincerely,
Donald E. Powell.

Mr. FRANK of Massachusetts. Mr. Chairman, I reserve the balance of my
time.
Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from
Texas (Mr. Burgess).
(Mr. BURGESS asked and was given permission to revise and extend his
remarks.)
Mr. BURGESS. Mr. Chairman, I thank the gentleman for yielding me
time.
I rise today in support of H.R. 522, the Federal Deposit Insurance
Reform Act of 2003. This legislation would accomplish a much-needed
modernization of our Federal deposit insurance system. It would help
millions of typical Americans get important protection for their
savings that they deserve.
H.R. 522 would help modernize the system by increasing the deposit
coverage levels for our Nation's savers from $100,000 to $130,000. I
have no doubt that H.R. 522 would help many Americans get the important
protection that they deserve for their savings, for their nest eggs.
H.R. 522 strengthens the Nation's insured depository institutions,
especially small banks, thrifts, and credit unions. It also ensures
that the Federal deposit insurance system does not harm the ability of
the insured depository institutions to meet the Nation's credit needs
at all stages of the economic cycle. And who can argue against a bill
which advances the national priority of enhancing retirement security
for all Americans?
Coverage levels are increased for, IRAs and 401(k) plans. This is
essential to our economy as our population ages and retirees are
realizing the sums of money that it will take today to maintain an
adequate standard of living. This is why the American Association of
Retired Persons supports this bill.
We must pass this bill in order to encourage retirees in smaller
towns to keep their savings in local community banks instead of
transferring monies to larger banks headquartered in some distant city.
Transactions to larger banks hurt the local community's economy because
the savers' monies are not recycled back into the community. It also
directly hurts the local community's residents because there are less
funds available; thus access to credit become more difficult and the
costs of raising funds to lend becomes higher.
This evolution of bank transactions ultimately hurts the local
economy, threatening the job base and the economic vitality of the
local community. I know this bill has widespread support in this
Chamber. During the last Congress, the 107th Congress, the House passed
similar legislation with an overwhelming bipartisan vote. Last year's
solid vote of support indicates to me the importance of this measure
and the grassroots support behind it. I urge my colleagues to pass H.R.
522 with similar resolve.
Today more than ever, American savers and investors need reassurance,
reassurance that their elected representatives are helping to ensure
that their hard-earned savings are safe with a modern deposit insurance
system.
Let us promote confidence for today's disheartened saver and investor
and promote confidence for the system for our children. I urge passage
of H.R. 522.
Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from
Alabama (Mr. Aderholt).
Mr. ADERHOLT. Mr. Chairman, I rise today in support of H.R. 522 which
merges the Bank Insurance Fund and the Savings Association Insurance
Fund, and which updates a successful program by increasing the standard
maximum deposit insurance limit to $130,000 and indexing it every 5
years for inflation, doubling the new coverage level for certain
retirement accounts and increasing the coverage amount for in-State
municipal deposits.
The FDIC deposit insurance system has served a critical role in the
stability of our Nation's financial system. The reform to increase
deposit insurance coverage from $100,000 to $130,000 will provide
American savers the ability to better secure their nest egg while
ensuring ongoing consumer confidence and the stability of the banking
system. At an earlier time in history, a person may have felt it better
to put their money in a metal box underneath a loose floor board in the
house. At the other end of the spectrum would be the

[[Page H2610]]

venture capitalists. They take risks, but that is their choice.
The FDIC deposit insurance system creates some stability for the
average person looking to secure some of their savings, not only for
their retirement but for education and family needs as well. The
increase in protection for retirement funds is significant not only for
the overall picture, but also it is important that we pass this as
reported out by committee.
The image of a metal box brings up another point. If that money is in
a bank as opposed to underneath a house, it obviously becomes part of
the Nation's overall cash flow and investment system. This bill
updates, at even less than the rate of inflation, the deposit insurance
amount. That allows depositors who wish to put their funds in local
independent banks to do so with confidence. In turn, those banks are
able to approve loans related to local projects.
I think even opponents of this bill in its current form would agree
that competition is indeed good. For Congress to keep this amount of
$100,000 is a not a harmless action. Not increasing the insurance
amount in the face of 21 years of inflation in effect makes Congress a
partner in the erosion of the ability of local communities to compete
fairly with larger banks.

{time} 1115

References to the savings and loan crisis have to be weighed in the
context of the actions taken after that situation by both government
and industry.
This bill passed last year by a vote of 408 to 18. I urge support
today for this bill as reported out of committee and a ``yes'' vote on
final passage.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield back the balance of
my time.
Mr. BACHUS. Mr. Chairman, I yield myself such time as remains.
Mr. Chairman, there are opponents to this legislation. Those
opponents give several reasons, and we may hear those during the
amendments; but I think the most honest opponent of this legislation is
the gentleman from California (Mr. Rohrabacher), who will offer an
amendment or who may not offer an amendment but who has filed an
amendment to strike the increases in coverage.
The gentleman from California (Mr. Rohrabacher) said in the American
Banker, and I quote him, in today's edition, ``I don't believe in
Federal deposit insurance.'' I think that pretty much sums up the
opposition because if a person does not believe in it, then a person
does not want it to increase to allow for inflation or for increase in
per capita income. If a person does believe in it, then they want it to
remain current. They want it to remain current with per capita income
and inflation.
As I said, we last increased the levels in 1980. If we adjusted them
for per capita income, they would actually go to $300,000. If we
increased them for inflation, they would go to $200,000. We, to build a
consensus, only increased them to $130,000; but we did increase
retirement funds to $260,000, but we felt that there were people other
than retirees who deserve the protection to keep up with per capita
income and inflation.
So we increased everyone's coverage to 130, including small
businesses and depositors, many of whom we found in testimony sell
their house, deposit the entire proceeds in a financial institution and
assume, sometimes tragically, that there is sufficient coverage.
There are additional reasons why people are opposing this
legislation. There is a question of cost. The CBO scored the same bill
last year as a savings of $750 million. This year they say it has a
cost of $1 billion.
Chairman Powell of the FDIC responded to the CBO estimate and said
this, because it conclusively rebuts any CBO estimate that this will
cost the taxpayers and any argument that may be made on the floor today
about the budgetary impact of the legislation, and he says, ``H.R. 522
provides the FDIC with the tools to achieve revenue neutrality in the
management of the deposit insurance system. Because any analysis that
determines 522 will result in an increase in net government spending
must necessarily rely on assumptions regarding how the FDIC Board will
exercise the discretion provided in the legislation.'' And here is the
most pertinent part: ``I can assure Congress that the leadership of the
FDIC has no intention of managing the deposit insurance system in a way
that increases the cost to the government or increases the burden on
insured institutions. The costs of the deposit insurance system will
continue to be borne by the banking industry, but in a manner that
establishes a strong risk-based premium system and avoids the
procyclical risks inherent in current law.'' I do stress there are
risks in the current law if we do not amend it.
He also in a letter to this body on March 31 says, ``No analysis of
the `costs' of legislation is complete without a full consideration of
the benefits provided by the bill,'' and he goes on to list many
benefits to the economy, to savers and to strengthening our banking
institution.
Another rabbit that has been turned loose by opponents of this bill
is that the increase in coverage, the last increase was what
precipitated the savings and loan crisis. That is simply not a fact.
There were many causes. In fact, let me read from a report from this
own body as to the reason for the savings and loan crisis. The causes
of the thrift crisis can be traced to a number of factors: poorly timed
deregulation, the dismal performance of some thrift management,
inadequate oversight supervision and regulation.
Mr. TIAHRT. Mr. Chairman, I rise today in support of the Federal
Deposit Insurance Reform Act of 2003. This much needed, bipartisan
legislation will help rural communities in my district, as well as
thousands of other small towns across this country. H.R. 522
strengthens the deposit insurance fund and helps address a major
funding need for community banks.
I have heard from many farm banks in Kansas that continue to have
problems increasing their core deposits. These banks are forced to turn
to noncore funds to support their asset growth. I am told noncore funds
can often be more expensive and volatile than core deposits. This is
not good for either the bankers or the customers who are investing
their money.
The FDIC's Kansas City office noted in their Spring 2003 Regional
Outlook report that ``core funding takes on added importance for
community banks with a significant presence in rural communities facing
long-term negative growth . . .''. This report goes on to say that core
funds are the staple of rural banks, but they are increasingly becoming
more difficult to attract or even retain.
Because of the artificially low deposit insurance cap, rural
residents are being forced to send deposits that are not insured with
the current $100,000 limit to institutions outside their local
communities.
I see no good reason to allow this loss of capital from rural areas.
It is capital that could be used for loans to diversify our rural
communities and create or expand small businesses. At a time when our
small towns are really suffering economically, we need all the local
investment available. Local investment encourages entrepreneurship and
ultimately creates local jobs. H.R. 522 will help ensure that objective
is not eroded over time as it has done for more than two decades.
A declining rural population leads to a declining deposit base. An
increasing rural population tends to create more demand for loans.
Either way, this situation indicates we need to increase deposit
insurance levels. Local dollars should stay invested in our local
communities.
The bill today increases the basic coverage level from $100,000 to
$130,000. This modest increase is long overdue, especially in context
of other changes made to the system in recent years. Higher coverage
levels will strengthen depositor confidence in the entire financial
services system.
H.R. 522 also gives the FDIC flexibility. Right now, the FDIC is
mandated to have the ratio of reserves to estimated insured deposits at
a hard target of 1.25 percent. This bill we are considering today would
allow that ratio to be within a range of 1.15 to 1.4 percent.
Finally, H.R. 522 directs the FDIC to study its administrative and
managerial processes and alternative means for administering the
deposit insurance system. These studies will ensure the deposit
insurance fund and the overall insurance system are managed and
operated as efficiently and effectively as possible.
I encourage my colleagues to join me in supporting the Federal
Deposit Insurance Reform Act of 2003. It is good common-sense
legislation that will help people in our rural communities.
Mr. CRAMER. Mr. Chairman, I rise today in support of H.R. 522, the
Federal Deposit Insurance Reform Act of 2003. With the banking industry
currently in good health, now is the time for Congress to act on needed
reforms to the insured deposit system that has protected the American
financial system and consumers

[[Page H2611]]

so well since the program began in the dark days of the Depression.
Among its other provisions, this legislation will enhance the safety
and soundness of the financial services industry by maintaining the
value of deposit insurance coverage in the years to come, as well as
providing additional coverage of certain retirement products, which
will greatly aid in boosting retirement savings.
H.R. 522 will increase general deposit insurance coverage from
$100,000 to $130,000 per account, and index this coverage to inflation
going forward, so that the real value of that coverage does not erode
over time. The existing $100,000 limit was set in 1980, but the real
value of that coverage has decreased to around $45,000 due to inflation
over the last 23 years.
For certain IRS-approved retirement products, this legislation will
double general coverage to $260,000. Increasing coverage of these
retirement products will provide citizens, particularly senior
citizens, with added assurance that their hard-earned savings are safe
and secure and will continue to grow in value. These provisions are an
excellent step in the right direction to increase the consumer savings
rate. The bill will also provide additional coverage of municipal
deposits, thereby keeping public funds in the communities in which they
are generated.
As I noted earlier, federal deposit insurance has served this country
extremely well for some 70 years. One of the best examples of the
critical importance of deposit insurance was its role in ensuring
public confidence in the banking system during the thrift crisis of the
late 1980s. Now H.R. 522 will provide further revisions to the deposit
insurance system that will help make certain that the program remains
as effective as it has historically been in protecting both the U.S.
banking system and its customers in the decades to come. Please join me
in support of this important legislation.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise in support of H.R.
522, The Federal Deposit Insurance Reform Act of 2003.
H.R. 522 is a bi-partisan bill that benefits our senior citizens,
small businesses, and local banks by updating and preserving the value
of our insured deposit system. H.R. 522 helps our Nation's senior
citizens by increasing the coverage limits for retirement accounts at
insured depository institutions to more than double the current federal
coverage level. H.R. 522 helps small businesses and local banks by
encouraging small business owners to consolidate their funds into
smaller, local banks.
Furthermore, H.R. 522 benefits all of our communities by helping to
keep local deposits in the local communities they should be serving.
H.R. 522 encourages local government entities to keep their funds in
local banks, also fostering local economic development. H.R. 522
includes provisions that increase coverage for municipal deposits as
well. The increased coverage helps keep local monies at home and
improves the local economy by enabling institutions to offer more car,
home, and education loans in their communities.
Last year a bill virtually identical to H.R. 522 cleared the House by
a 408-18 vote. This bipartisan support is echoed by organizations such
as the American Association of Retired Persons, and the Independent
Community Bankers Association who also support H.R. 522.
I support H.R. 522 as well, Mr. Chairman, because I support our local
communities.
Mr. BEREUTER. Mr. Chairman, this Member rises today to express his
support for H.R. 522, the Federal Deposit Insurance Reform Act. This
bill, of which this Member is an original cosponsor, will encourage
private savings which is a crucial factor in promoting economic
stability.
First, this Member would like to thank the distinguished gentleman
from Alabama, the Chairman of the House Financial Services Subcommittee
on Financial Institutions and Consumer Credit (Mr. Bachus) for
introducing this legislation. This Member would also like to thank both
the distinguished gentleman from Ohio, the Chairman of the House
Financial Services Committee (Mr. Oxley), and the distinguished
gentleman from Massachusetts, the Ranking Member of this Committee (Mr.
Frank), for their efforts in bringing this measure to the House Floor.
This bill, H.R. 522, passed the House Financial Services Committee,
by a voice vote, on March 13, 2003. This legislation is virtually
identical to a bill that passed the House last year, by a vote of 408-
18. Unfortunately, the Senate chose not to act on Federal Deposit
Insurance Corporation, FDIC, reform in the 107th Congress.
As a matter of background, Congress in 1934 initially set the deposit
insurance coverage limit at $5,000. The last increase was in 1980, when
Congress raised the value of coverage to $100,000, per person, per
institution. According to the FDIC, due to inflation, the real value of
this $100,000 coverage limit has decreased by about half.
This Member would like to focus on the following four provisions in
this important legislation which will:
1. Increase the FDIC coverage level to $130,000 and index this level
for inflation every five years thereafter;
2. Increase the FDIC coverage level for retirement accounts to
$260,000;
3. Increase the FDIC coverage level for in-state municipal deposits
to the lower of $2 million or the sum of the new coverage level plus 80
percent of the deposits in excess of the new standard; and
4. Ensure the financial institutions receive their equitable share of
dividends and credits from the deposit insurance fund.
First, this legislation would increase the $100,000 FDIC insurance
limit to a new limit of $130,000. The deposit insurance limit would
then be indexed every five years to a cost of living adjustment and
rounded to the nearest $10,000. This Member believes this increase in
the FDIC limit is warranted and justified.
This Member has met with many Nebraska community bankers who have
emphasized the importance of increasing the deposit insurance coverage
limit in order for community banks to attract and maintain core
deposits. Currently, community banks are losing deposits to more
distant brokerage and mutual fund companies. If community banks do not
have the core deposits to make loans, the economic development of
communities suffer. Local money needs to stay in a community where it
can build infrastructure and create jobs.
Second, this bill would increase the coverage level for retirement
accounts from the current $100,000 to a level of $260,000, which will
encourage greater retirement savings. It is important to take this
action, since the current rate of savings by Americans is quite low.
Moreover, this change is particularly important to older Americans to
ensure that they have secure banking services nearby. In many rural
areas, the alternative to this coverage level increase is for consumers
to bank at more distant institutions.
Third, this legislation would also importantly increase coverage for
in-state municipal deposits to the lower of $2 million or the sum of
the new coverage level plus 80 percent of the deposits in excess of the
new standard. Community bankers have stressed to this Member their
support for greater coverage of municipal deposits as they now only
receive $100,000 of FDIC protection. Municipal deposits are taxpayer
funds from state and local governments, and schools deposited in local
banks. This change is very important in Nebraska since there are so
many different public entities collecting revenue and in turn making
deposits in local banks.
Lastly, this Member supports the provisions in H.R. 522 which were
authored by the distinguished gentlelady from New York (Ms. Maloney)
and this Member. These three provisions were included in the Manager's
Amendment which passed by voice vote during the Committee's
consideration of the virtually identical bill in the 107th Congress. We
offered the following changes to help ensure that financial
institutions receive their equitable share of dividends and credits
from the deposit insurance fund.
This bill establishes a 1 basis point cap on the premiums that the
FDIC can charge those institutions that qualify for the lowest-risk
category under the risk-based premium system, when the actual level of
the reserve ratio is above 1.15 per $100 of insured deposits.
Furthermore, H.R. 522 provides that when the reserve ratio of the
deposit insurance fund is between 1.35 and 1.4 per $100 of insured
deposits, the FDIC must pay dividends equal to 50 percent of the amount
in excess of 1.35. This bill also includes language which establishes
an ongoing credit pool that could be used by institutions against their
premium assessments based on the historical contributions of the
institution to the deposit insurance fund. This provision will reward
those institutions who helped fully recapitalize the bank insurance
fund in 1996.
In conclusion, for the reasons mentioned and many others, this Member
urges his colleagues to support H.R. 522.
Mr. OSBORNE. Mr Chairman, banks that primarily serve agricultural
customer remain concerned with the possibility of having to rely more
and more on nontraditional funding sources to support their asset
growth and continued ability to provide the necessary financing for
their customers--farmers, ranchers, consumers and rural businesses.
Today, more than 1,820 of our nation's banks hold more than 25
percent of their loans. According to the Federal Deposit Insurance
Corporation, FDIC, office in Kansas City, in Nebraska, there are 210
farm banks that are FDIC insured institutions with at least 25 percent
of total loans comprised of agriculture loans. A majority of these
banks are located in rural areas and are the economic engines that help
support the local community.
The legislation we are considering today, H.R. 522, the Federal
Deposit Insurance Reform Act of 2003, includes modest reforms to the
deposit insurance system that will substantially benefit local banks in
my community and

[[Page H2612]]

our nation's agricultural economy. During the 1990s many farm banks
experienced a decline in core deposits and would likely see that trend
reversed with increased deposit insurance coverage levels. A key
component of this legislation includes a provision that provides for a
modest increase of general coverage levels to $130,000 and then indexes
it for inflation. Deposit insurance coverage levels have not been
increased in twenty-three years, the longest period in FDIC history
without an increase. Deposit protection has eroded by one-half due to
inflation since 1980.
Higher coverage levels would provide rural residents such as farmers
and ranchers with the additional security to deposit their funds in the
local bank. These funds would be reinvested in the local communities to
support projects such as the building of new ethanol plants and other
value-added processing activities that will benefit local agricultural
producers and provide employment for rural residents. Additional
economic development in rural areas would create new opportunities for
recent college and high school graduates and would help stop the rural
depopulation that has been occurring over the past 20 years in many of
our agriculturally dependent areas.
I urge my colleagues to support our nation's local banks and rural
communities by voting ``yea'' on H.R. 522.
Mr. Chairman, H.R. 522, 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. 522 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 that experience difficulties meeting their commitments to their
depositors. Thus, the deposit insurance system transfers liability for
poor management decisions form 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 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 Institute,
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 protection individual
depositors: regulators have incentives to downplay or even cover-up
problems in the financial system such as banking failures. 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 worse) 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 colleague that the federal deposit
insurance programs 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. Chairman, H.R. 522 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 the 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.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the order of the House of Tuesday, April 1, 2003, the
committee amendment in the nature of a substitute printed in the bill
shall be considered as an original bill for the purpose of amendment
under the 5-minute rule and shall be considered read.
The text of the committee amendment in the nature of a substitute is
as follows:

H.R. 522

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 2003''.
(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. Bi-annual FDIC survey and report on increasing the deposit
base by encouraging use of depository institutions by the
unbanked.
Sec. 12. Technical and conforming amendments to the Federal Deposit
Insurance Act relating to the merger of the BIF and SAIF.
Sec. 13. 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 2003, $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

[[Page H2613]]

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 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.--
``(A) In general.--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.
``(B) Statement to be included.--Each sign required under
subparagraph (A) shall include a statement that insured
deposits are backed by the full faith and credit of the
United States Government.
``(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

[[Page H2614]]

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 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 2003, $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). No insured
depository institution shall be barred from the lowest-risk
category solely because of size.
``(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 8(p) of the Federal Deposit Insurance Act (12
U.S.C. 1818(p)) is amended by striking ``semiannual''.
(7) 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''.
(8) 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''.

[[Page H2615]]

(9) 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.--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 2003, 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 in excess of 1.4 percent of estimated
insured deposits.--Whenever the reserve ratio of the Deposit
Insurance Fund 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 1.4 percent of estimated insured deposits, 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 not more 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 not more 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 Corporation
shall prescribe by regulation, after notice and opportunity
for comment, the method for the calculation, declaration, and
payment of dividends under this paragraph.
``(3) Credit pool.--
``(A) One-time credit based on total assessment base at
year-end 1996.--
``(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 2003, 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).

[[Page H2616]]

``(iv) Application of credits.--

``(I) In general.--The amount of a credit to any eligible
insured depository institution under this paragraph shall be
applied by the Corporation, subject to subsection (b)(3)(e),
to 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) 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.
``(vi) 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 (v) 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 awarded 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 reserve ratio of the Fund is less than 1.25
percent of the amount of estimated insured deposits.

``(iii) Criteria for determination.--In determining the
amounts of any assessment credits under this subparagraph,
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).
``(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. 1817(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, within 6 months of such
determination, fall below the minimum amount specified in
subparagraph (B)(ii) for the designated reserve ratio; or
``(II) the reserve ratio of the Deposit Insurance Fund
actually falls below the minimum amount specified in
subparagraph (B)(ii) for 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 90 days that meets the
requirements of clause (ii) and such other conditions as the
Corporation determines to be appropriate.
``(ii) Requirements of restoration plan.--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 minimum amount specified in
subparagraph (B)(ii) for the designated reserve ratio before
the end of the 10-year period beginning upon the
implementation of the plan.
``(iii) Restriction on assessment credits.--As part of any
restoration plan under this subparagraph, the Corporation may
elect to restrict the application of assessment credits
provided under subsection (e)(3) for any period that the plan
is in effect.
``(iv) Limitation on restriction.--Notwithstanding clause
(iii), while any restoration plan under this subparagraph is
in effect, the Corporation shall apply credits provided to an
insured depository institution under subsection (e)(3)
against any assessment imposed on the institution for any
assessment period in an amount equal to the lesser of--

``(I) the amount of the assessment; or
``(II) the amount equal to 3 basis points of the
institution's assessment base.

``(v) Transparency.--Not more than 30 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
regulations 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 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.--

[[Page H2617]]

(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 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 the end of the 6-month period beginning on
the date of the enactment of this Act, 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. BI-ANNUAL FDIC SURVEY AND REPORT ON INCREASING THE
DEPOSIT BASE BY ENCOURAGING USE OF DEPOSITORY
INSTITUTIONS BY THE UNBANKED.

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by adding at the end the following new section:

``SEC. 49. BI-ANNUAL FDIC SURVEY AND REPORT ON ENCOURAGING
USE OF DEPOSITORY INSTITUTIONS BY THE UNBANKED.

``(a) Survey Required.--
``(1) In general.--The Corporation shall conduct a bi-
annual survey on efforts by insured depository institutions
to bring those individuals and families who have rarely, if
ever, held a checking account, a savings account or other
type of transaction or check cashing account at an insured
depository institution (hereafter in this section referred to
as the `unbanked') into the conventional finance system.
``(2) Factors and questions to consider.--In conducting the
survey, the Corporation shall take the following factors and
questions into account:
``(A) To what extent do insured depository institutions
promote financial education and financial literacy outreach?
``(B) Which financial education efforts appear to be the
most effective in bringing `unbanked' individuals and
families into the conventional finance system?
``(C) What efforts are insured institutions making at
converting `unbanked' money order, wire transfer, and
international remittance customers into conventional account
holders?
``(D) What cultural, language and identification issues as
well as transaction costs appear to most prevent `unbanked'
individuals from establishing conventional accounts?
``(E) What is a fair estimate of the size and worth of the
`unbanked' market in the United States?
``(b) Reports.--The Chairperson of the Board of Directors
shall submit a bi-annual report to the Committee on Financial
Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate containing
the Corporation's findings and conclusions with respect to
the survey conducted pursuant to subsection (a), together
with such recommendations for legislative or administrative
action as the Chairperson may determine to be appropriate.''.

SEC. 12. 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) (and any funds resulting from the
application of such paragraph (2) prior to its repeal shall
be deposited into the general fund of the Deposit Insurance
Fund);
(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
``(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

[[Page H2618]]

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

SEC. 13. 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--

[[Page H2619]]

(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 CHAIRMAN. No amendment to the committee amendment in the nature
of a substitute is in order except the following amendments printed in
the Congressional Record: amendment No. 1 by the gentleman from
California (Mr. Ose); and amendment No. 2 by the gentleman from
California (Mr. Rohrabacher). Each amendment may be offered only in the
order specified, by the Member designated or his designee, shall be
considered read, shall be debatable for 20 minutes, equally divided and
controlled by the proponent and an opponent, shall not be subject to
amendment, and shall not be subject to a demand for division of the
question.
It is now in order to consider amendment No. 1 printed in the
Congressional Record by the gentleman from California (Mr. Ose).

Amendment No. 1 Offered by Mr. Ose

Mr. OSE. Mr. Chairman, I offer an amendment.
The CHAIRMAN: The Clerk will designate the amendment.
The Clerk designated the amendment as follows:

Amendment No. 1 offered by Mr. Ose:

Page 4, beginning on line 10, strike ``means--'' and all
that follows through page 7, line 2, and insert ``means
$100,000.'.'' (and conform any cross references
appropriately).
Page 19, strike line 20 and all that follows through page
20, line 4, and insert ``means $100,000.'.''.

The CHAIRMAN. Pursuant to the order of the House of Tuesday, April 1,
the gentleman from California (Mr. Ose) and a Member opposed each will
control 10 minutes.
The Chair recognizes the gentleman from California (Mr. Ose).
Mr. FRANK of Massachusetts. Mr. Chairman, did any Member claim the
opposing time?
The CHAIRMAN. Does any Member claim the time in opposition?
Mr. BACHUS. Mr. Chairman, I was standing to claim the time in
opposition.
The CHAIRMAN. The gentleman from Alabama (Mr. Bachus) will be
recognized in opposition.
The gentleman from California (Mr. Ose) is recognized.
Mr. OSE. Mr. Chairman, I yield myself 5 minutes.
Mr. Chairman, I fully support many of the reforms in H.R. 522 but
must, once again, raise some concern with one particular section that
would not only cause harm but could ensure that the other reforms are
once again delayed by the other body or by the administration. That
issue is the increase in coverage amounts.
I am pleased to see my friend, the gentlewoman from New York (Mrs.
Maloney), a fellow member of Committee on Financial Services, here on
the floor today who is joining me in offering this amendment.
This simple amendment returns the base coverage level for insurance
on deposits to the current $100,000 level. It removes provisions
increasing coverage to $130,000, as well as provisions to automatically
increase coverage through inflation adjustments. This is the only
change it makes.
Mr. Chairman, I reserve the balance of my time.
Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
I speak in opposition to this amendment. One of the statements by the
proponent of this amendment has been that the former increase in
coverage was the primary reason for the savings and loan crisis, and
let me say in that regard that the cause of the savings and loan
collapse, crisis in this country, has been well examined and well
documented. The FDIC, in fact, issued a report called ``History of the
Eighties, Lessons for the Future and Examination of the Banking Crisis
of the 1980s.''

[[Page H2620]]

Here is their reasoning. The rise in the number of bank failures in
the 1980s had no single cause or short list of causes. Rather, it
resulted from a concurrence of various forces working together to
produce a decade of banking crises.
First, broad national forces, economic, financial, legislative and
regulatory established the preconditions for the increased number of
bank failures. Second, a series of severe regional and sectional
recessions hit banks in a number of banking markets and led to the
majority of the failures. Third, some of the banks in these markets
assumed excessive risk and were insufficiently restrained by
supervisory authorities with the result that they failed in
disproportionate numbers.
As a result of that, Mr. Chairman, we have made several changes in
the law in this body in an attempt, and I think a successful attempt
thus far, to make these institutions subject to more oversight and to
stronger capital requirements.
One Member of our body's father served as the FBI director during the
savings and loan crisis. He was asked in a congressional hearing for
his comment on the savings and loan crisis, and he said that criminal
activity, fraud and looting were the primary causes of the crisis. In
fact, the committee staff has made a fairly exhaustive study of the
various articles written concerning the collapse of the savings and
loans, and these were the reasons given at the time.
My colleagues can see we have a basic laundry list of reasons, but
there is actually evidence that the increase in coverage at the time
gave savers some degree of security and actually prevented a panic at
many institutions, and some of that body of evidence supports that it
actually helped in a contagion of that crisis.
Mr. Chairman, the final argument is a moral-hazard argument. The
offerer of this amendment has argued that increasing coverage will
create a greater moral hazard in the system; but then, surprisingly,
his amendment does not raise the level from $100,000 to $130,000. It
does away with that, but then he raises retirement accounts to
$260,000, and he raises municipal deposits; and by doing that, they
have managed in the subcommittee to basically arouse everyone's
opposition to the amendment because if we raise the coverage for
retirements in municipal deposits, then one is, in fact, arguing
against the reason for offering his own amendment.
I will close simply by saying that this moral-hazard argument has
been looked at by the FDIC. They asked two respected economists to make
a report, and they were Federal Reserve Governor Alan Blinder, and this
is what he said. The point is made that if the FDIC is given the
authority to charge risk-based premiums, and that is what H.R. 522
does, then ``most objections based on moral hazard should evaporate.''
He goes on to state, ``In a world of properly priced deposit insurance,
it seems more appropriate to ask the opposite question: Why have any
coverage limits at all?''
In fact, I think that ought to be the question we are debating: Why
have any coverage limits at all? Even the CBO says that this bill will
result in an increase of insured deposits in our institutions. Is that
not something that we have all argued for? Do we not want an increase
in the deposits in our financial institutions? Does that not strengthen
our economy? Is that not good for America? They say that some
institutions will fail and some people in that institution will lose
200 or $220,000 worth of retirement funds. Do we not want them to have
federally insured coverage? Do we want them to lose this money? I do
not think so.
Finally, do we believe in insurance? I think that is the essence of
this whole argument. I mean, do we believe in insurance? Do we believe
in insuring for losses? If we do, and I for one think that insurance is
a good thing, I believe that insurance is a prudent thing, and I
believe that in order for our Federal deposit insurance system to
survive and have any relevance then that insurance protection, which I
believe in, I believe in insuring against risk, I believe it is a
prudent thing to do, then why would we want the Federal deposit
insurance system to wither on the vine?

{time} 1130

Why would we not want it to stay current with inflationary rates and
per capita income? And the only way to do that is to vote ``yes'' on
this bill. A vote against this bill basically would be like going back
to 1980 and reducing the coverage from $100,000 to $30,000 if you went
on per capita income, or $47,000 if you went on inflation.
How many in our body would do that? How many in our body would vote
today to take those levels back to the 1980 level? I do not think any
of us would. A few of us would because, as the gentleman from
California (Mr. Rohrabacher) says, I do not believe in Federal deposit
insurance. I do not believe in the Federal Government supplying
insurance. Well, it is the depositors, for one thing. The Federal
Government does not. If he would look, he would see it is the banks
through their premiums.
Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
Mr. BACHUS. I yield to the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. Mr. Chairman, I thank the gentleman for
yielding to me. I did not want time to expire while discussing the
absent gentleman from California, and I did want to make sure I had a
chance to express my opposition to this amendment.
I think the committee product is a reasonable approach and so I hope
the amendment is defeated. And, once again, I thank the gentleman for
yielding to me
Mr. BACHUS. Mr. Chairman, I reserve the balance of my time.
Mr. OSE. Mr. Chairman, could you tell me how much time remains on
each side?
The CHAIRMAN. The gentleman from California (Mr. Ose) has 9 minutes
remaining.
Mr. OSE. Mr. Chairman, I want to make sure we are talking about the
right amendment. It is amendment No. 1, which only deals with the level
of insurance and the question of indexing. It does not deal with
retirement accounts or municipal deposits. Am I correct in that, Mr.
Chairman?
The CHAIRMAN. The Chair cannot interpret the amendment. The gentleman
may proceed.
Mr. OSE. Mr. Chairman, I yield 5 minutes to the gentlewoman from New
York (Mrs. Maloney).
Mrs. MALONEY. Mr. Chairman, I thank the gentleman for yielding me
this time and for his leadership, and I rise in support of the Ose-
Maloney amendment, a compromise approach to deposit insurance coverage
that holds standard account coverage at $100,000 while offering
increased protection for retirees.
Mr. Chairman, as a whole, this is an outstanding bill. As an original
cosponsor of H.R. 522, I am supportive of the overwhelming majority of
provisions in the legislation. It is long past time to merge the BIF
and SAIF insurance funds. Additionally, eliminating the 23 basis point
cliff and providing a new premium system that takes into account the
past contributions of institutions are major steps forward.
The bill includes a mechanism for determining credit for past
contributions to the insurance funds that is based on an amendment I
cosponsored along with the gentleman from Nebraska (Mr. Bereuter) last
session. This is a critically important provision as a matter of
fairness to institutions that recapitalized the funds, and I thank the
gentleman from Alabama (Mr. Bachus) for including this balanced
amendment in the legislation.
Despite these many positives, I believe the immediate 30 percent
increase in insurance coverage in the bill is a serious mistake. This
coverage increase to $130,000 is opposed by all the Federal financial
service regulators, including Alan Greenspan, Treasury Secretary Peter
Fischer, OCC Comptroller John Hawke and OTS Director James Gilleran.
Proponents of increased coverage argue that it poses no new risk to
the insurance system, but the regulators who oppose this increase are
the very officials whose job it is to protect the safety and soundness
of the financial system. The unanimity of regulator opposition to
increased coverage is an extremely powerful message.
Another argument put forth by proponents of coverage increases is
that inflation has eroded deposit insurance. I do not believe this
argument matches the actual situation of the banking industry. The fact
is that only 2 percent

[[Page H2621]]

of insured accounts have more than $100,000 according to a study by the
Federal Reserve. The same Fed study put the average account balance at
merely $6,000. Any way you look at it the increase in coverage will
benefit very, very few depositors.
Proponents of increasing coverage also contend that because insurance
premiums are paid by banks, increasing coverage does not cost
taxpayers. While I concede this point, I think we have to remember that
behind the deposit insurance funds is the full faith and credit of the
United States Government.
Since I joined the Committee on Financial Services at the close of
the savings and loan crisis, I have been committed to protecting the
safety and soundness of the financial service system. While the causes
of the S&L failures were many, as my friend from Alabama pointed out,
the fact is that standing behind the insurance system are our
constituent taxpayer dollars. No matter what the reasons are for a
future bank failure or string of failures, by raising insurance
coverage we increase the potential liability of the government.
Additionally, raising coverage may encourage the concept of moral
hazard. Institutions will be encouraged to engage in riskier behavior
to boost earnings if they know that failure is insured by the Federal
Government.
Finally, I urge support for this amendment because it strikes a
compromise. It holds the line on coverage for standard accounts while
offering retirees additional insurance. I believe that there are many
valid policy arguments for offering additional coverage and additional
insurance for this special class of banking account. At its core this
amendment represents a compromise. It allows Members the opportunity to
support the concerns of the regulatory community on standard accounts
while offering increased insurance on retirement accounts.
This is a good bill and I will support its passage. I simply think it
would be much improved with the adoption of this amendment, and I thank
the gentleman from California (Mr. Ose) for his leadership and I thank
also the gentleman from Alabama (Mr. Bachus) for crafting a fine
underlying bill, along with the chairman, the gentleman from Ohio (Mr.
Oxley), and the Democratic leader, the gentleman from Massachusetts
(Mr. Frank).
Mr. Chairman, I include for the Record the following testimony from
our committee hearing:

Prepared Testimony of the Honorable Peter R. Fischer, Undersecretary
for Domestic Finance, Department of the Treasury, 9:30 a.m., Wednesday,
February 26, 2003--Dirksen 538

Mr. Chairman, Senator Sarbanes, and Members of the
Committee, I appreciate the opportunity to provide the
Administration's views on deposit insurance reform. I also
want to commend Chairman Powell and the FDIC staff for their
valuable contributions to the discussion of this important
issue.
The Administration strongly supports reforms to our deposit
insurance system that would, first, merge the bank and thrift
insurance funds, second, allow more flexibility in the
management of fund reserves while maintaining adequate
reserve levels and, third, ensure that all participating
institutions fairly share in the maintenance of FDIC
resources in accordance with the insurance fund's loss
exposure from each institution. The Administration strongly
opposes any increases in deposit insurance coverage limits.
Our current deposit insurance system managed by the Federal
Deposit Insurance Corporation (FDIC) serves to protect
insured depositors from exposure to bank losses and, as a
result, helps to promote public confidence in the U.S.
banking system. I am concerned today that our deposit
insurance system has structural weaknesses that, in the
absence of reform, could deepen over time. I want to
emphasize that there is no crisis in the FDIC; both of its
funds are strong, well managed, with adequate reserves. This
is the right time to act--when we do not face a crisis--and
the Administration supports legislation focused on the repair
of these structural weaknesses.
Increases in FDIC benefits, however, including any increase
in the level of insurance coverage, are not part of the
solution to these problems and should be avoided. When I
testified before this Committee last April, I argued that an
increase in deposit insurance coverage limits would serve no
sound public policy purpose. Nothing has occurred since then
to change that view. The Administration continues to oppose
higher coverage limit in any form. Indeed, we feel that the
entire issue of coverage limits regrettably diverts attention
from the important reforms that are needed.

merging the bank and thrift insurance funds

We support a merger of the Bank Insurance Fund (BIF) and
Savings Association Insurance Fund (SAIF) as soon as
practicable. A larger, combined insurance fund would be
better able to diversify risks, and thus withstand losses,
than would either fund separately. Merging the funds while
the industry is strong and both funds are adequately
capitalized would not burden either BIF or SAIF members. A
merged fund would also end the possibility that similar
institutions could pay significantly different premiums for
the same product, as was the case in the recent past and
could occur again in the near future without this change. A
merger would also recognize changes in the industry. As a
result of mergers and consolidations, each fund now insures
deposits of both commercial banks and thrifts. Indeed,
commercial banks now account for 45 percent of all SAIF-
insured deposits.

Flexibility in the Management of FDIC Reserves

Current law generally requires each insurance fund to
maintain reserves equal to 1.25 percent of estimated insured
deposits, the ``designated reserve ratio.'' When the reserve
ratio falls below this threshold, the FDIC must charge either
a premium sufficient to restore the reserve ratio to 1.25
percent within one year, or a minimum of 23 basis points if
the reserve ratio would remain below 1.25 percent for a
longer period. Since the latter would be expected when the
banking system, and probably the economy as well, were under
stress, such a sharp increase in industry assessments could
have an undesirable pro-cyclical effect, further reducing
liquidity precisely when liquidity is needed. Were FDIC fund
contributions to come from resources that otherwise might be
part of capital, every dollar paid would mean a potential
reduction of 10 or 12 dollars in lending, or as much as $12
billion in reduced lending for a $1 billion FDIC
replenishment.
Reserves should be allowed to grow when conditions are
good. This would enable the fund to better absorb losses
under adverse conditions without sharp increases in premiums.
In order to achieve this objective and also to account for
changing risks to the insurance fund over time, we support
greater latitude for the FDIC to alter the designated reserve
ratio within statutorily prescribed upper and lower bounds.
Within these bounds, the FDIC should provide for public
notice and comment concerning any proposed change to the
designated reserve ratio. The FDIC should also have
discretion in determining how quickly the fund meets the
designated reserve ratio as long as the actual reserve ratio
is within these bounds. If the reserve ratio were to fall
below the lower bound, the FDIC should restore it to within
the statutory range promptly, over a reasonable but limited
timeframe. We would also support some reduction in the
prescribed minimum premium rate--currently 23 basis points--
that would be in effect if more than one year were required
to restore the fund's reserves.
Nevertheless, as we learned from the deposit insurance
experience of the 1980s, flexibility must be tempered by a
clear requirement for prudent and timely fund replenishment.
The statutory range for the designated reserve ratio should
strike an appropriate balance between the burden of pre-
funding future loses and the pro-cyclical costs of
replenishing the insurance fund in a downturn. A key benefit
to giving the FDIC greater flexibility in managing the
reserve ratio within statutorily prescribed bounds is the
ability to achieve low, stable premiums over time, adequate
to meet FDIC needs in bad times, with the least burden on
financial institutions and on the economy. We also believe
that with this reform, the possibility of recourse to
taxpayer resources is even further removed.

Full Risk-Based Shared Funding

Every day that they operate, banks and thrifts benefit from
their access to federal deposit insurance. For several years,
however, the FDIC has been allowed to obtain premiums for
deposit insurance from only a few insured institutions.
Currently, over 90 percent of banks and thrifts pay nothing
to the FDIC. This is an untenable formula for the long-term
stability of the FDIC.
Moreover, current law frustrates one of the most important
reforms enacted in the wake of the collapse of the Federal
Savings and Loan Insurance Corporation (FSLIC) and the
depletion of FDIC reserves: the requirement for risk-based
premiums. When 90 percent of the industry pays no premiums,
there is little opportunity to do what any prudent insurer
would do: adjust premiums for risk. Nearly all banks are
treated the same, and lately they have been treated to free
service.
For example, today a bank can rapidly increase its insured
deposits without paying anything into the insurance fund. As
is now well known, some large financial companies have
greatly augmented their insured deposits in the past few
years by sweeping uninsured funds into their affiliated
depository institutions--without compensating the FDIC at
all. Other major financial companies might be expected to do
the same in the future. In addition, most of the over 1,100
banks and thrifts chartered after 1996 have never paid a
penny in deposit insurance premiums. Yet if insured deposit
growth by a relatively few institutions were to cause the
reserve ratio to decline below the designated reserve ratio,
all banks would be required to pay premiums to raise
reserves.

[[Page H2622]]

To rectify this ``free rider'' problem and ensure that
institutions appropriately compensate the FDIC commensurate
with their risk, Congress should remove the current
restrictions on FDIC premium-setting. In order to recognize
past payments to build up current reserves, we support the
proposal to apply temporary transition credits against future
premiums that would be distributed based on a measure of each
institution's contribution to the build-up of insurance fund
reserves in the early-to-mid 1990s. In addition to transition
credits, allowing the FDIC to provide assessment credits on
an on-going basis would permit the FDIC to collect payments
from institutions more closely in relation to their deposit
growth.
We strongly oppose rebates, which would drain the insurance
fund of cash. Over much of its history, the FDIC insurance
fund reserve ratio remained well above the current target,
only to drop into deficit conditions by the beginning of the
1990s. Therefore, it is vital that funds collected in good
times, and the earnings on those collections, be available
for times when they will be needed.
There are other important structural issues that need to be
addressed sooner than later. It would be appropriate to
evaluate whether there are changes to the National Credit
Union Share Insurance Fund (NCUSIF) that would be suitable in
light of the proposed reforms made of FDIC insurance so as to
avoid unintended disparities between the two programs.
Perhaps even more important is the need to address the long-
term funding of supervision by the National Credit Union
Administration, particularly in view of recent trends toward
conversions from federal to state charters and growing
consolidation of credit unions. Similarly, there are
structural problems in the funding of the Office of the
Comptroller of the Currency and the Office of Thrift
Supervision, the resolution of which should not be delayed.

Deposit Insurance Coverage Limits

The improvements to the deposit insurance system that I
have just outlined are vital to the system's long-term
health. Other proposals, however, would not contribute to the
strength of the taxpayer-backed deposit insurance system and
may actually weaken it.
Increasing the general coverage limit up front or through
indexation, or raising coverage limits for particular
categories of deposits, is unnecessary. Savers do not need an
increase in coverage limits and would receive no real
financial benefit. Unlike other government benefit programs,
there is no need for indexation of deposit insurance coverage
because savers can now obtain all the coverage that they
desire by using multiple banks and through other means.
Higher coverage limits would not predictably advantage any
particular size of banks, would increase all banks' insurance
premium costs, and would mean greater taxpayer exposure by
adding to the contingent liabilities of the government and
weakening market discipline. An increase in coverage limits
would reduce--not enhance--competition among banks in general
as the efficient and inefficient offer the same investment
risk to depositors; in fact, perversely, investors would be
drawn at no risk to the worst banks, which usually offer the
highest interest rates.

Higher Coverage Limits Not Sought by Savers

First of all, the clamor for raising coverage limits does
not come from savers. The evidence that current coverage
limits constitute a burden to savers is scant; there has been
little demand from depositors for higher maximum levels. The
recent consumer finance survey data released by the Federal
Reserve confirm what we found in the previous survey, namely
that raising the coverage limit would do little, if anything,
for most savers. Median family deposit balances are only
$4,000 for transaction account deposits and $15,000 for
certificates of deposit, far below the current $100,000
ceiling. The same holds true even when considering only older
Americans, a segment of the population with higher bank
account usage: median transaction account balances and
certificates of deposit total $8,000 and $20,000,
respectively, for those households headed by individuals
between the ages of 65 and 74.
Examining the Federal Reserve data for retirement accounts
shows present maximum deposit insurance coverage to be more
than adequate. The median balance across age groups held in
IRA/Keogh accounts at insured depository institutions is only
$15,000. For the 65 to 69 age group, median household IRA/
Keogh deposits total $30,000.
A small group of relatively affluent savers might find
greater convenience from increased maximum coverage levels.
But it is a tiny group. Only 3.4 percent of households with
bank accounts held any uninsured deposits, and the median
income of these households was more than double the median
income of all depositors in the survey.
Under current rules, these savers have plenty of options,
with the market place presenting new options for unlimited
deposit insurance coverage without changing federal coverage
limits. At little inconvenience, savers with substantial bank
deposits--including retirees and those with large bank
savings for retirement--may place deposits at any number of
banks to obtain as much FDIC coverage as desired. They may
also establish accounts within the same bank under different
legal capacities, qualifying for several multiples of current
maximum coverage limits. Firms are now developing programs
for exchanging depositor accounts that could offer seamless
means of providing unlimited coverage for depositors without
any change in current limits.
One of the fundamental rules of prudent retirement planning
is to diversify investment vehicles. Many individuals,
including those who are retired or planning for retirement,
feel comfortable putting substantial amounts into uninsured
mutual funds, money market accounts, and a variety of other
investment instruments. Just 21 percent of all IRA/Keogh
funds are in insured depository institutions. There is simply
no widespread consumer concern about existing coverage limits
that would justify extending taxpayer exposure by creating a
new government-insured retirement program under the FDIC.

Coverage Limits and Bank Competition

Banks, regardless of size, continue to have little trouble
attracting deposits under the existing coverage limits.
Federal Reserve data have shown that smaller banks have grown
more rapidly and experienced higher rates of growth in both
insured and uninsured deposits than have larger banks over
the past several years. After adjusting for the effects of
mergers, domestic assets of the largest 1,000 commercial
banks grew 5.5 percent per year on average from 1994 to 2002;
all other banks grew 13.8 percent per year on average. Nor
are smaller banks losing the competition for uninsured
deposits. Uninsured deposits of the top 1,000 banks grew 9.9
percent annually on average over this period, while such
deposits at smaller banks grew on average by 21.4 percent
annually.

Higher Coverage Limits for Municipal Funds Erode Discipline

Proposals for substantially higher levels of protection of
municipal deposits than of other classes of deposits would
exacerbate the inherent moral hazard problems of deposit
insurance. Rather than keep funds in local institutions,
state and municipal treasurers would have powerful incentives
to seek out not the safest institutions in which to place
taxpayer funds but rather those offering the highest interest
rates. Since these are usually riskier institutions, state
and municipal treasurers would be drawn into funding the more
trouble banks. Local, well run, healthy banks might have to
pay a premium in increased deposit rates to retain municipal
business. Today there are incentives for state and local
government treasurers to monitor risks taken with large
volumes of public sector deposits. Should the FDIC largely
protect these funds, an important source of credit judgment
on the lending and investment decisions of local banks would
be lost.

conclusion

In conclusion, I reaffirm the Administration's support for
the three-part general framework that I have outlined to
correct the structural flaws in the deposit insurance system.
I encourage Congress to pursue these improvements with a
steady focus on the important work that needs to be done. The
Administration does not support legislation that raises
deposit insurance coverage limits in any form, and we urge
that Congress avoid such an unneeded and counterproductive
diversion from real and necessary reform.

Mr. BACHUS. Mr. Chairman, I reserve the balance of my time.
Mr. OSE. Mr. Chairman, I yield myself such time as I may consume, and
I want to echo the comments of the gentlewoman from New York (Mrs.
Maloney).
Mr. Chairman, one of the things I have is an experience of having had
to survive the savings and loan crisis of the 1980s when I was in the
real estate business. This was not a pretty time for those of us who
were confronted with that situation, and I would advise those who did
not have that pleasure that they do not want to have the opportunity to
enjoy that in their future business careers.
I will say that in the context of whether or not to raise from
$100,000 to $130,000, or some other level, the plain fact of the matter
is that 98 percent of all accounts have balances less than $100,000,
and the law allows each of those who might otherwise exceed $100,000,
if they wish, to open another insured account up to another $100,000;
to drive down the street and open an account in another bank; to
diversify their deposits in their community. It is not necessarily a
fact that there is only one place at which an individual can receive
insurance on their accounts. If you have more than $100,000 in an
account, you can reduce the balance in that account and take that money
to another bank and receive another layer of protection for that
balance.
Mr. Chairman, that is the beauty of this system. That is the strength
of the system. And, in fact, it is the strongest argument that we do
not need to increase limits. This proposal to increase to $130,000 is a
solution in search of a problem.
I urge this body to make an ``aye'' vote on my amendment. And, Mr.
Chairman, I want to submit for the

[[Page H2623]]

Record the statements of Under Secretary of the Treasury Peter Fischer,
Federal Reserve Board Chairman Alan Greenspan, Comptroller of the
Currency John D. Hawke, Jr., and Director of the Office of Thrift
Supervision James Gilleran.

H.R. 3717--Federal Deposit Insurance Reform Act of 2002, Rep. Bachus
(R) Alabama and 63 Cosponsors

The Administration supports those provisions of H.R. 3717
that would improve the deposit insurance system's operation
and fairness. Specifically, the Administration supports
provisions that would: (1) allow the insurance fund reserve
ratio to vary within a range and eliminate triggers that
could cause sharp changes in premiums; (2) merge the bank and
thrift insurance fund; and (3) ensure that institutions
appropriately compensate the FDIC for insured deposit growth
while also taking into account the past contributions of many
institutions to build fund reserves.
The Administration, however, strongly opposes those
provisions of H.R. 3717 that would raise deposit insurance
coverage limits. The interests of depositors will not be
served by an increase in deposit insurance coverage limits.
The average saver would derive no financial benefit from
increased coverage limits. The small fraction of savers with
substantial deposits may obtain as much coverage as desired
at minimal inconvenience by placing deposits at multiple
institutions. An increase in coverage limits would neither
enhance competition among depository institutions in general
nor make the nation's community banks more competitive in
raising funds.
Increased coverage limits would also expose taxpayers to
additional risk while providing no benefit to the
overwhelming majority of Americans. Higher coverage limits
would mean greater off-balance sheet contingent liabilities
of the Government and weaker market discipline, exposing the
insurance fund and taxpayers to increased risk of loss.
To avoid dilution of FDIC and NCUA reserves resulting from
the higher coverage limits provided in H.R. 3717, banks,
thrifts, and credit unions will need to pay at least $3.5
billion in higher insurance assessments according to CBO and
OMB estimates. A substantial amount of the higher industry
costs will occur in the first year.
The Administration notes the submission to Congress by the
FDIC of recommendations for legislative or administration
action is subject to the President's authority under the
Recommendations Clause of the Constitution.

Pay-As-You-Go-Scoring

Any law that would reduce receipts or increase direct
spending is subject to the PAYGO requirements of the Balanced
Budget and Emergency Deficit Control Act (BEA) and could
cause a sequester of mandatory programs in any fiscal year
through 2006. The requirement to score PAYGO costs expires on
September 30, 2002, and there are no discretionary caps
beyond 2002. The Administration will work with Congress to
ensure fiscal discipline consistent with the President's
budget and a quick return to a balanced budget. The
Administration will also work with Congress to ensure that
any unintended sequester of spending does not occur.
____

Testimony of Chairman Alan Greenspan, Deposit Insurance, Before the
Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February
26, 2003

Chairman Shelby, Senator Sarbanes, and members of the
Committee, it is a pleasure to appear once again before this
Committee to present the views of the Board of Governors of
the Federal Reserve System on deposit insurance. Rather than
refer to any specific bill, I will express the broad views of
the Federal Reserve Board on the issues associated with
modifications of deposit insurance. Those views have not
changed since our testimony before this Committee on April
23, 2002.
At the outset, I note that the 2001 report of the Federal
Deposit Insurance Corporation (FDIC) on deposit insurance
highlighted the significant issues and developed an
integrated framework for addressing them. Although as before
the Board opposes any increase in coverage, we continue to
support the framework constructed by the FDIC report for
addressing other reform issues.

benefits and costs of deposit insurance

Deposit insurance was adopted in this country as part of
the legislative effort to limit the impact of the Great
Depression on the public. Against the backdrop of a record
number of bank failures, the Congress designed deposit
insurance mainly to protect the modest savings of
unsophisticated depositors with limited financial assets.
With references being made to ``the rent money,'' the initial
1934 limit on deposit insurance was $2,500; the Congress
promptly doubled the limit to $5,000 but then kept it at that
level for the next sixteen years. I should note that the
$5,000 of insurance provided in 1934, an amount consistent
with the original intent of the Congress, is equal to
slightly less than $60,000 today, based on the personal
consumption expenditures deflator in the gross domestic
product accounts.
Despite its initial quite limited intent, the Congress has
raised the maximum amount of coverage five times since 1950,
to its current level of $100,000. The last increase, in 1980,
more than doubled the limit and was clearly designed to let
depositories, particularly thrift institutions, offer an
insured deposit free of the then-prevailing interest rate
ceilings on such instruments, which applied only to deposits
below $100,000. Insured deposits of exactly $100,000 thus
became fully insured instruments in 1980 but were not subject
to an interest rate ceiling. The efforts of thrift
institutions to use $100,000 CDs to stem their liquidity
outflows resulting from public withdrawals of smaller, below-
market-rate insured deposits led first to an earnings squeeze
and an associated loss of capital and then to a high-risk
investment strategy that led to failure after failure.
Depositors acquiring the new larger-denomination insured
deposits were aware of the plight of the thrift institutions
but unconcerned about the risk because the principal amounts
of their $100,000 deposits were fully insured by the federal
government. In this way, the 1980 increase in deposit
insurance to $100,000 exacerbated the fundamental problem
facing thrift institutions--a concentration on long-term
assets in an environment of high and rising interest rates.
Indeed, it significantly increased the taxpayer cost of the
bailout of the bankrupt thrift institution deposit insurance
fund.
Despite this problematic episode, deposit insurance has
clearly played a key--at times even critical--role in
achieving the stability in banking and financial markets that
has characterized the nearly seventy years since its
adoption. Deposit insurance, combined with other components
of our banking safety net (the Federal Reserve's discount
window and its payment system guarantees), has meant that
periods of financial stress no longer entail widespread
depositor runs on banks and thrift institutions. Quite the
opposite: Asset holders now seek out deposits--both insured
and uninsured--as safe havens when they have strong doubts
about other financial assets.
Looking beyond the contribution of deposit insurance to
overall financial stability, we should not minimize the
importance of the security it has brought to millions of
households and small businesses with relatively modest
financial assets. Deposit insurance has given them a safe and
secure place to hold their transaction and other balances.
The benefits of deposit insurance, as significant as they
are, have not come without a cost. The very process that has
ended deposit runs has made insured depositors largely
indifferent to the risks taken by their depository
institutions, just as it did with depositors in the 1980s
with regard to insolvent, risky thrift institutions. The
result has been a weakening of the market discipline that
insured depositors would otherwise have imposed on
institutions. Relieved of that discipline, depositories
naturally feel less cautious about taking on more risk than
they would otherwise assume. No other type of private
financial institution is able to attract funds from the
public without regard to the risks it takes with its
creditors' resources. This incentive to take excessive risks
at the expense of the insurer, and potentially the taxpayer,
is the so-called moral hazard problem of deposit insurance.
Thus, two offsetting implications of deposit insurance must
be kept in mind. On the one hand, it is clear that deposit
insurance has contributed to the prevention of bank runs that
could have destabilized the financial structure in the short
run. On the other, even the current levels of deposit
insurance may have already increased risk-taking at insured
depository institutions to such an extent that future
systemic risks have arguably risen.
Indeed, the reduced market discipline and increased moral
hazard at depositories have intensified the need for
government supervision to protect the interests of taxpayers
and, in essence, substitute for the reduced market
discipline. Deposit insurance and other components of the
safety net also enable banks and thrift institutions to
attract more resources, at lower costs, than would otherwise
be the case. In short, insured institutions receive a subsidy
in the form of a government guarantee that allows them both
to attract deposits at lower interest rates than would be
necessary without deposit insurance and to take more risk
without the fear of losing their deposit funding. Put another
way, deposit insurance misallocates resources by breaking the
link between risks and rewards for a select set of market
competitors.
In sum, from the very beginning, deposit insurance has
involved a tradeoff. Deposit insurance contributes to overall
short-term financial stability and the protection of small
depositors. But at the same time, because it also subsidizes
deposit growth and induces greater risk-taking, deposit
insurance misallocates resources and creates larger long-term
financial imbalances that increase the need for government
supervision to protect the taxpayers' interests. Deposit
insurance reforms must balance these tradeoffs. Moreover, any
reforms should be aimed primarily at protecting the interest
of the economy overall and not just the profits or market
shares of particular businesses.
The Federal Reserve Board believes that deposit insurance
reforms should be designed to preserve the benefits of
heightened financial stability and the protection of small
depositors without a further increase in moral hazard or
reduction in market discipline. In addition, we urge that the
implementing details be kept as straightforward as possible
to minimize the risk of unintended consequences that comes
with complexity.

Mr. Chairman, I yield back the balance of my time.

[[Page H2624]]

Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume
and simply close by doing two things. One is responding to the
gentleman from California when he uses the analogy that if someone
wants to deposit or wants over $100,000 in their account they can
simply take part of that money out of one account and place it in
another account or they can drive down the street.
Now, Americans today are a highly mobile society, and we know that
Americans sell their homes and we know that in almost every case, when
they do that, they deposit that money in their bank. They do not take
that check and split it. They do not ask for two checks. We know that
the average cost of a house is well in excess of $100,000 and we know
that they deposit that money in a bank. And if that bank fails, they
lose all but $100,000. We do not think that is right.
The authors of this amendment also do a strange thing. They say we
are increasing the coverage and that is a bad thing; but then they
increase the coverage for retirement accounts to $260,000 and municipal
accounts to $2 million. So they basically argue against their own
amendment.
Mr. Chairman, may I inquire into the amount of time remaining?
The CHAIRMAN. The gentleman from Alabama has 30 seconds remaining.
Mr. BACHUS. Mr. Chairman, I yield 30 seconds to the gentleman from
Alabama (Mr. Davis).
Mr. DAVIS of Alabama. Mr. Chairman, let me thank my colleague from
Alabama for yielding me this time and for his leadership and his work
on this bill.
Mr. Chairman, let me say in 30 seconds, just this: This is an
important bill from the perspective of small banks. We will not get
sustained community development in America until we find ways to put
more small community-based banks in rural America.
I happen to think, and those of who support this bill happen to
think, that increasing these limits will provide an incentive for small
banks to do more of the business that they need to do that will help
the people who are living in rural America. A lot of people, if they
know the limits have been increased, will feel much more comfortable
putting their assets and putting their resources in small community
banks.
The CHAIRMAN. All time has expired. The question is on the amendment
offered by the gentleman from California (Mr. Ose).
The amendment was rejected.
The CHAIRMAN. It is now in order to consider amendment No. 2 printed
in the Congressional Record by the gentleman from California (Mr.
Rohrabacher).
There being no further amendments in order, the question is on the
committee amendment in the nature of a substitute.
The committee amendment in the nature of a substitute was agreed to.
The CHAIRMAN. Under the rule, the Committee rises.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Aderholt) having assumed the chair, Mr. LaHood, Chairman of the
Committee of the Whole House on the State of the Union, reported that
that Committee, having had under consideration the bill (H.R. 522) to
reform the Federal deposit insurance system, and for other purposes,
pursuant to the previous order of the House of April 1, 2003, he
reported the bill back to the House with an amendment adopted by the
Committee of the Whole.
The SPEAKER pro tempore. Under the previous order of the House, the
previous question is ordered.
The question is on the committee amendment in the nature of a
substitute.
The committee amendment in the nature of a substitute was agreed to.

{time} 1145

The SPEAKER pro tempore (Mr. Aderholt). The question is on the
engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
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, this 15-
minute vote on the passage of H.R. 522 will be followed by a 5-minute
vote on ordering the previous question on H. Res. 168, as well as on
any other electronic vote that may be ordered on adoption of H. Res.
168.
The vote was taken by electronic device, and there were--yeas 411,
nays 11, not voting 12, as follows:

[Roll No. 98]

YEAS--411

Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Andrews
Baca
Bachus
Baird
Baker
Baldwin
Ballance
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Becerra
Bell
Bereuter
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boswell
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown, Corrine
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Carter
Case
Castle
Chabot
Chocola
Clay
Clyburn
Coble
Cole
Collins
Conyers
Costello
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cummings
Cunningham
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeGette
Delahunt
DeLauro
DeLay
DeMint
Deutsch
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emanuel
Emerson
Engel
English
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Feeney
Ferguson
Filner
Fletcher
Foley
Forbes
Ford
Fossella
Frank (MA)
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gonzalez
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grijalva
Gutierrez
Gutknecht
Hall
Harman
Harris
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hill
Hinchey
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley (OR)
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Inslee
Isakson
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Janklow
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick
Kind
King (IA)
King (NY)
Kingston
Kirk
Kleczka
Kline
Knollenberg
Kucinich
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lowey
Lucas (KY)
Lucas (OK)
Lynch
Majette
Maloney
Manzullo
Markey
Marshall
Matheson
Matsui
McCarthy (NY)
McCollum
McCotter
McCrery
McDermott
McGovern
McHugh
McIntyre
McKeon
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Mollohan
Moore
Moran (KS)
Moran (VA)
Murphy
Murtha
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Nethercutt
Ney
Northup
Norwood
Nunes
Nussle
Oberstar
Obey
Olver
Ortiz
Osborne
Otter
Owens
Oxley
Pallone
Pascrell
Pastor
Payne
Pearce
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Pomeroy
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Renzi
Reyes
Reynolds
Rodriguez
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sandlin
Saxton
Schakowsky
Schiff
Schrock
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Solis
Spratt
Stearns
Stenholm
Strickland
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Toomey
Towns
Turner (OH)
Turner (TX)
Udall (CO)
Udall (NM)

[[Page H2625]]

Upton
Van Hollen
Velazquez
Visclosky
Vitter
Walsh
Wamp
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Young (AK)
Young (FL)

NAYS--11

Boucher
Cooper
DeFazio
Flake
Ose
Paul
Rohrabacher
Royce
Sanders
Stark
Taylor (MS)

NOT VOTING--12

Combest
Davis (TN)
Doolittle
Gephardt
Hyde
Jones (NC)
Kolbe
McCarthy (MO)
McInnis
Souder
Walden (OR)
Wynn

Announcement by the Speaker Pro Tempore

The SPEAKER pro tempore (Mr. LaHood) (during the vote). The Chair
reminds Members that there are 2 minutes remaining to vote.

{time} 1205

Mr. DeFAZIO and Mr. TAYLOR of Mississippi changed their vote from
``yea'' to ``nay.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.

____________________