[Congressional Record Volume 149, Number 055 (Monday, April 7, 2003)]
[Extensions of Remarks]
[Page E694]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2003

                                 ______
                                 

                               speech of

                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                        Wednesday, April 2, 2003

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 522) to 
     reform the Federal deposit insurance system, and for other 
     purposes:

  Mr. BAKER. Mr. Chairman, after considerable work by Chairman Oxley 
and Mr. Bachus, the House of Representatives is once again considering 
legislation to reform Federal deposit insurance. This is important 
legislation that will have an impact on our constituents and our 
economy.
  As I stated last year, I am concerned about the potential effects of 
possible FDIC actions to develop and implement risk-based assessment 
standards under sections 4 and 7 of the legislation. My concern is that 
the FDIC may give excessive weight to Federal Home Loan Bank advances 
in the assessment process so that insured institutions with certain 
amounts or percentages of such advances would be classified as more 
risky and, therefore, pay higher deposit insurance premiums.
  My concern arises from the FDIC's report on deposit insurance reform, 
issued in April 2001, which indicated that, under a risk-based 
assessment system, the FDIC could use a sample risk ``scorecard'' that 
would result in institutions with increased amounts of FHLB advances 
paying higher risk-based insurance assessments.
  In my opinion, the use by the FDIC of risk-based assessment authority 
in this way would be contrary to Congress's clear intent to broaden 
access to FHLB advances in the Gramm-Leach-Bliley act of 1999. In the 
Gramm-Leach-Bliley act, we wanted to ensure that community institutions 
and housing lenders would be able to obtain adequate, reasonably priced 
FHLB advances as a source of funds to serve the borrowing needs of 
their customers. Providing this source of liquidity may actually reduce 
risk. I would anticipate, should the FDIC place undue weight on FHLB 
advances for its risk-based assessment system, the agency will likewise 
account for the risks associated with depository institutions holding 
U.S. agency debt and securities.
  As the principal House sponsor of the FHLB provisions in the Gramm-
Leach-Bliley act, I will follow very closely the FDIC's implementation 
of any new risk-based assessment standards to ensure such standards do 
not adversely affect the prudent use or cost of advances.

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