[Congressional Record Volume 151, Number 57 (Wednesday, May 4, 2005)]
[House]
[Pages H2919-H2936]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2005
The SPEAKER pro tempore. Pursuant to House Resolution 255 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. 1185.
{time} 1417
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. 1185) to reform the Federal deposit insurance system, and for
other purposes, with Mr. Bass in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered as having
been read the first time.
Under the rule, the gentleman from Ohio (Mr. Oxley) and the
gentlewoman from New York (Mrs. Maloney) each will control 30 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I rise in support of H.R. 1185, the Federal Deposit
Insurance Reform Act of 2005. This bipartisan legislation preserves the
value of insured deposits at America's banks, thrifts and credit
unions, advances the national priority of enhancing retirement security
for all Americans, and ensures that the benefits and costs of deposit
insurance are allocated equitably and fairly among financial
institutions.
Federal deposit insurance was first established in 1934 during the
Great Depression and has served for over 70 years as a source of
stability in the banking system and a valued safety net for depositors.
Deposits in banks and savings associations are covered either by the
Bank Insurance Fund or the Savings Association Insurance Fund, while
the deposits of America's 85 million credit union members are insured
by the National Credit Union Share Insurance Fund.
Federal deposit insurance serves as a guarantee to depositors in U.S.
depository institutions that up to $100,000 will be available to them
in the event that their institution should ever fail. It both protects
depositors from a sudden and unforeseen loss of wealth and insulates
the economy from the consequences of a loss of liquidity in the banking
system.
Shortly after I became chairman of the newly formed Committee on
Financial Services in the 107th Congress, the FDIC, the Federal agency
responsible for administering the deposit insurance program,
recommended a number of reforms to the system to address structural
imbalances that had emerged since the last major overhaul of deposit
insurance following the savings and loan crisis of the late 1980s and
early 1990s.
The gentleman from Alabama (Mr. Bachus), the chairman of the
Subcommittee on Financial Institutions and Consumer Credit, got to work
holding extensive hearings and drafting comprehensive legislation
incorporating the FDIC's recommendations and making other needed
changes to the system. The legislation that resulted from the efforts
of the gentleman from Alabama passed the House with well over 400 votes
in the 107th Congress and by an even larger margin in the 108th.
With the other body having twice failed to act on the legislation
approved overwhelmingly by this House, we are back this year with high
hopes that the third time will truly be the charm in enacting this
critically important legislation. The reasons for reforming the deposit
insurance system remain every bit as compelling today as they were
almost 4 years ago when we first began to climb this mountain.
By merging the BIF and the SAIF into a single deposit insurance fund,
H.R. 1185 will create administrative efficiencies and promote
fundamental fairness in the system. By giving the FDIC more flexible
tools for managing the insurance funds according to changing economic
conditions, while at the same time ensuring that funds are returned to
the industry in the form of rebates and credits when circumstances
warrant, H.R. 1185 will promote economic stability and address the
system's current bias toward charging excessive premiums at ``down''
points in the business cycle. All of these reforms command broad
consensus among banking regulators and in the banking industry, as well
as in the House.
On the issue of deposit insurance coverage levels, which have now
gone a record 25 years without being adjusted for inflation, the
legislation of the gentleman from Alabama provides for incremental
increases that promote retirement security and help to keep municipal
deposits in the communities where they originated to serve as a funding
source for loans and other development initiatives.
All of us recognize that the increased coverage levels prescribed in
the House bill are what have blocked its progress in the other body,
and I have therefore indicated that I am willing to entertain
compromise on that issue if it is the price of achieving the other
important reforms contained in this legislation.
That said, it should also be noted that H.R. 1185's increase in base
deposit
[[Page H2920]]
insurance coverage from $100,000 to $130,000 hardly constitutes a
radical expansion of the deposit insurance safety net. If coverage had
merely kept pace with inflation since 1980 when coverage was last
updated, it would now be well over $200,000. Even going all the way
back to the $40,000 coverage amount in effect in 1974 and indexing for
inflation from that level yields a coverage level well above $140,000.
Let me conclude by commending Chairman Bachus for his leadership and
persistence in pursuing this legislation over the course of three
Congresses. I also want to thank our committee's ranking member, the
gentleman from Massachusetts (Mr. Frank), who has championed several of
the specific reforms contained in this bill and has acted throughout
the process in a spirit of bipartisan cooperation that has become the
hallmark of our committee's work in recent years.
Mr. Chairman, I reserve the balance of my time.
Mrs. MALONEY. Mr. Chairman, I yield myself such time as I may
consume.
I rise in strong support of the Federal Deposit Insurance Reform Act
of 2005. This is a strong bipartisan effort. I commend the leadership
of Chairman Oxley and Ranking Member Frank, as well as Subcommittee
Chair Bachus and Ranking Member Sanders. This will be, hopefully, the
third time that this Congress has passed this legislation. It has
enjoyed broad bipartisan support.
Federal deposit insurance, established during the Great Depression to
restore confidence in the Nation's troubled banking system, has served
our country well; but no system is perfect, and Congress has
periodically revised our deposit insurance laws in response to changing
economic and industry conditions. There is a growing consensus
triggered in part by recommendations by the Federal Deposit Insurance
Corporation, FDIC, that deposit insurance is overdue for needed
structural reform.
H.R. 1185 would merge the Bank Insurance Fund, BIF, and the Savings
Association Insurance Fund, SAIF, into a single fund covering all banks
and thrifts; increase per-account coverage levels from $100,000 to
$130,000; and adjust that coverage for inflation every 5 years
beginning in 2007; and double the $130,000 coverage amount in the case
of certain retirement accounts, including IRAs and 401(k)s. Providing
$260,000 in deposit insurance coverage for retirement accounts is
critically important in an era when many Americans have accumulated
retirement nest eggs that far exceed $100,000, and when, according to
FDIC estimates, there is more than $200 billion in IRA accounts alone
in this Nation's banking system.
Several high-profile bank failures in recent years have given many
Americans a rude awakening as they discover that amounts in their
retirement accounts above the $100,000 coverage limit are uninsured.
The bill also raises coverage levels on in-state, municipal or public
deposits. This will have the effect of encouraging local government
agencies to keep more of their deposits in the local communities where
the funds were generated, thus promoting economic growth in those
areas.
Finally, the bill fully implements a provision enacted more than a
decade ago to give banks a discount on their deposit insurance premiums
for deposits attributable to so-called basic banking accounts which
provide a financial lifeline for low-income families that are currently
without bank coverage.
This has strong bipartisan support. This legislation passed this body
last year with a vote of 411 to 11, and this year's effort likewise
enjoys very strong bipartisan support.
Mr. Chairman, I reserve the balance of my time.
Mr. BACHUS. Mr. Chairman, I yield such time as he may consume to the
gentleman from Ohio (Mr. Gillmor).
Mr. GILLMOR. I thank the gentleman for yielding me this time.
Mr. Chairman, as an original cosponsor of H.R. 1185, I am
particularly pleased to see that this important measure again
incorporates a measure that I introduced in February, H.R. 544, the
Municipal Deposit Insurance Protection Act of 2005. Currently, towns,
counties and school districts are faced with a hard choice when
deciding where to place their deposits. Local officials care about
their communities, and they would like to foster economic development
by putting their funds in local banks. However, without the guarantee
of FDIC coverage, they are often forced instead to put their deposits
in out-of-state institutions.
This bill increases coverage for local government deposits equal to
the lesser of $2 million or $130,000 plus 80 percent of the amount of
deposits in excess of the new standard. Providing this essential
coverage will help local communities keep public moneys in their
neighborhood, improving the economic climate by enabling local banks to
offer more loans for cars, homes, education, and other community needs.
In 2002, the FDIC closed a bank in my district, the Oakwood Deposit
Bank. Local municipalities and other public entities that held deposits
at that institution were put at risk due to the $100,000 FDIC coverage.
This risk is too high for many communities in this country, and it can
have a devastating effect on local budgets. The community in Oakwood is
still feeling the effects of this failure. The village was forced to
miss a Federal loan payment for its sewers and was forced to lay off
municipal employees, all because of the funds it lost. Wayne Trace
local school district and Paulding County Hospital were also harmed by
this lack of coverage.
This legislation will enable local government funds to be retained in
the local area from which they came. It will help the economy of those
areas by being used for installment loans, mortgages, and small
business loans.
Again, I want to commend Chairman Oxley and Chairman Bachus for
bringing up this important bill, and I look forward to its passage.
Mrs. MALONEY. Mr. Chairman, I yield such time as he may consume to
the gentleman from New York (Mr. Meeks).
Mr. MEEKS of New York. Mr. Chairman, I would like to recognize,
first, Chairman Oxley and Ranking Member Frank for their work to bring
this overdue bill to the floor of the House. This is not the first time
that this bill has passed through committee with broad bipartisan
support, but hopefully this time we can work with the other body to
make this law.
The financial services industry is one of the driving engines of our
economy, and the banking industry in particular is not only a key
source of financing for consumer purchases like homes and cars or
business purchases such as equipment and facilities. It is also the
means by which the Federal Reserve implements monetary policy to
stabilize our economy. Considering the vital role that banks, both big
and small, play in our economy, it is equally important to make certain
that the Federal insurance which backs these institutions is operating
under the most efficient rules.
H.R. 1185 will merge the Bank Insurance Fund and the Savings
Association Insurance Fund into one strong fund. It will increase
deposit insurance on individual accounts from $100,000 to $130,000,
increases coverage on certain retirement accounts to $260,000, and
increases coverage on in-state municipal deposits to $2 million.
One of its most important aspects is that it provides for a 50
percent discount in the assessment rate for deposits attributable to
lifeline deposit accounts, something, and I take my hat off to her,
that the gentlewoman from the great State of California (Ms. Waters)
has been working on for many, many years in support of people who are
traditionally unbanked.
Lastly, let me thank the gentleman from Alabama (Mr. Bachus) and the
gentlewoman from Oregon (Ms. Hooley), who introduced the bill, and
encourage Members from both sides of the aisle to vote ``yes'' on final
passage.
{time} 1430
Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, there are several things about this bill that I am not
sure have been discussed or are as widely known by the Members, but the
first thing I would say is that the legislation is supported by all the
federal bank regulators. It is also supported by all the industry
groups. And it does several things. It addresses inefficiencies in the
present system and deficiencies in the present system.
[[Page H2921]]
As far as deficiencies in the present system, one of the greatest is
the fact that we have two different funds. The Savings Association
Insurance Fund and the Bank Insurance Fund. All the Federal regulators
have recommended combining those funds from the administrative cost
savings and also because we do not want a situation where some of our
institutions are paying certain basis points where others are not. We
want more equity there so it gives no advantage for our thrifts over
our banks or our banks over our thrifts.
Another problem we have had increasingly is the problem of free
riders. Since 1996, there have been no assessments of the banks for the
Federal insurance, and as a result of that, we have had several large
brokerage firms which have never paid into the fund, and what they are
doing is setting up affiliate banks, six or eight or nine affiliate
banks, and they are advertising $800,000 or $900,000 worth of federally
insured deposits. In other words, people can deposit $800,000 or
$900,000 into to their fund, and it is federally insured. This really
is an inequity because they have never paid into the system and they
are offering that something that smaller banks and other banks that do
not set up these affiliates or string of affiliates and can only offer
$100,000 of coverage; and, in fact, those banks or thrifts that are
only offering $100,000 worth of coverage are actually paying and have
paid for coverage for some of the large brokerage firms.
And the Federal Reserve, the FDIC, and the industry have said that
this ought to be corrected, and we do that in this bill. We do that in
two ways. One is by requiring that everyone pay a minimum amount;
number two, we increase the coverage; and number three, we allow more
flexibility in when the premiums are charged. Right now when the bank
reserves fall below 1.25 percent, the Federal Reserve actually has to
start charging a premium, and then if the situation is not rectified
within a year, they have to then start charging 23 basis points, and
they have little discretion in this matter. The bank regulators and the
industry have recommended that what we do as opposed to having a hard
number that we give a range, or a discretionary range, and we have done
that at 1.15 to 1.4.
What this allows to happen is, if we think about it, there are no
premiums being charged, and then all of a sudden we go into a recession
and we start charging a premium, or 23 basis points, it actually can
worsen the recession, and at the time when banks ought to be lending
money, suddenly they are having to pay these premiums. The time to fund
the insurance program and the insurance reserve is in good times.
So what we have done in this bill is allow them to build up a reserve
in the good times, and then when we come into a recessionary period and
bank reserves start dropping, they have some discretion in not
instituting a 23-basis-point charge on the banks. And policymakers and
all the Federal bank regulators believe that this will not only
strengthen the funds, but it will take away a bias against a down cycle
that could actually make a down economic cycle worse.
One of the things that is being debated, and the gentleman I am going
to yield to next is going to be in opposition to the coverage increase,
is the coverage increase. When we consider increasing the coverage,
there have been two arguments against that. One was a ``moral hazard''
argument. The FDIC, in response to some people saying that if we raise
the coverage, it will be a moral hazard, actually commissioned a study
and appointed the vice chairman of the Federal Reserve, Alan Blinder,
as the chairman of that study commission, and they came back and said
because these are risk-based premiums, there is absolutely no validity
to the moral hazard argument.
If we think about it this way, what this is, is an insurance, and
bank depositors pay a premium on their deposits for insurance coverage.
And to argue that if that coverage is increased from $100,000 to
$130,000 suddenly would cause reckless behavior, it would almost be
like arguing that if I had automobile insurance and I had $100,000
worth of automobile insurance on my automobile, and I raised that to
$200,000 of insurance coverage that I would suddenly start driving more
recklessly or be more prone to have accidents, and we know that when
people insure, whether it is a deposit, an automobile, or a home, they
are not any more apt to act in a reckless nature. So that argument has
been shot down pretty uniformly.
A second argument against it is that we do not need to increase it.
But one of our last bank failures was a bank in Chicago, a medium-sized
bank. And what we found, because we had not raised the coverage levels
above $100,000 since 1980, we found over 700 customers of that bank
lost a substantial amount of their deposits, and the reason they did
that, if we think about what depositors do, we had several hundred of
them that had an IRA account with that bank, and they had an IRA that
was over $100,000, and they basically lost everything above $100,000.
And one lady that was quoted in the Chicago Tribune said, The loss I
sustained is going to be the difference between my having a retirement
where I will not have to struggle, and now, basically having a bare
bones retirement where I will have to struggle to make ends meet.
We have another situation that we talked about in committee, and that
was the fact that today many people are selling and buying houses, and
when they do, they put the proceeds of that sale or the purchase price
for that sale in a bank account. In 1980 the average price of a home
was around $100,000. Today it is several times that amount. So imagine
that if one is closing on a house, they sell their house, they get a
$400,000 or $300,000 check or even a $200,000 check for that house, and
most Americans put their savings in a house, they go down to their bank
and they deposit that check and the bank happens to fail.
And every once in a while, a bank does fail like the one in Chicago.
In that case, they had 12 people that had deposited the proceeds from
the sale of their homes in the weeks before and they lost all of that
money above $100,000. Some would say and some have said in opposing
coverage increase that what Americans ought to do is when they sell a
home, if they sell a home for $300,000, they ought to ask the closing
attorney to write three $100,000 checks and they ought to deposit that
in three different banks, or, if they are going to purchase a house,
they ought to go to three different institutions and deposit that money
in three different institutions, and then when they show up at the
closing, they ought to write three different checks.
We know as a practical matter, Mr. Chairman, that people are not
going to do that, and we should not ask them to do that. What we ought
to do is raise coverage levels to reflect realities today.
The last time that coverage was increased in 1980, if we increased it
for inflation today, it would be well over $180,000. Instead, we are
only increasing it to $100,000 as a compromise. If we went back to not
1980 but we went back to 1974, which was the time before that that it
was increased $40,000, and if we had adjusted it in 1980, it would be
over $200,000. If we disregarded that increase and went back to 1974,
it would be $180,000. So we are actually playing catchup here, and we
have used that smaller number in an attempt to compromise with those
who objected to increasing it at all.
I will say this: This bill passed with 111 votes the first time it
was up, I think, but, anyway, I will get those statistics later, but I
think it had 18 ``no'' votes the first time, 11 ``no'' votes the second
time.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
I appreciate the gentleman from Alabama's letting us butt into his
conversation.
I want to speak in favor of the bill. It is an example of the things
that we do that are not controversial and are not exciting to a lot of
people but are, in fact, very important for the proper functioning of
the economy. This is an upgrading and an updating of the deposit
insurance system. It is widely supported by financial institutions.
There is a difference of opinion on one aspect, the coverage increase,
but I will say that, while I support the bill as written and support
the coverage increase, it is my hope that however that
[[Page H2922]]
winds up, it will not lead to the demise of the bill. The bill is an
important piece of legislation for improving the functioning of the
banking system.
I just also want to point out two things: There is a mistaken
assumption abroad that somehow things have gotten so poisonous here
that nothing ever happens. There are issues on which we disagree
vehemently, but the fact that this bill is coming forward from the
Committee on Financial Services with overwhelming support from the
committee, disagreement on one specific point, is a refutation, that I
think people ought to know that, no, it is not the case that we have
been so embittered towards each other that we cannot function. This
bill comes forward with support on both sides.
It also, as was noted by the gentleman from New York who spoke
earlier, contains a section that what we call lifeline banking. And not
all banks in the world were having parties when that was included, but
it is an important point to be made here. It is our job to pass
legislation and to do things that help the financial system function.
Banks are good institutions. They perform useful roles in our society.
But there are also needs that individuals have, particularly lower
income individuals, that are not going to be automatically taken care
of by even the best functioning market, and our job, in part, is to
advance measures that help the institutions function but at the same
time provide a degree of fairness, a kind of minimum support, for
people who will not automatically benefit from the general going
forward.
This bill is an example of that, and I want to say that the inclusion
of this lifeline provision is very important. I appreciate the
majority's accommodating the concern that people had, the gentlewoman
from California (Ms. Waters), who pushed hardest for this; so I hope
that this package will go forward as an example that even at times that
are very contentious, we can work together on legislation that bridges
some gaps and advances the system.
{time} 1445
Mr. FRANK of Massachusetts. Mr. Chairman, I reserve the balance of my
time.
Mr. BACHUS. Mr. Chairman, I yield 5 minutes to the gentleman from
California (Mr. Rohrabacher), who is in opposition to the bill.
Mr. ROHRABACHER. Mr. Chairman, I rise in opposition to H.R. 1185, but
I appreciate all the hard work that the gentleman from Alabama (Mr.
Bachus) and the gentleman from Massachusetts (Mr. Frank) have done on
this bill. I understand that they are very sincere in their efforts,
but I have a strong philosophical opposition to what this bill
represents and what it is all about.
Let me note that if section 3 were taken out of this legislation, I
could support the bill; but the heart of this bill is section 3, which
is a 30 percent increase in the Federal deposit insurance rate. What we
are talking about here is increasing Federal deposit insurance, the
taxpayers' guaranteeing private accounts in private banks from $100,000
to $130,000; for savings accounts I think it goes up to $240,000,
$250,000, or is it $260,000; as well as $1 million, I believe, for
community-type savings accounts.
But the most important factor here is this: this system was set up to
protect the little guy. It was set up to protect average Americans who
are not saving hundreds of thousands of dollars, so that they could
save $10,000, $20,000, $30,000 and not worry about having a bank
default and close up on them and then losing that money.
What has happened is a perversion of that basic premise. What has
happened now is the taxpayers, the average person out there working is
protecting the rich guy. We have the little guys now with their tax
dollars protecting the rich guys who, at $100,000 in an account, and
now they want to make it $130,000 in an account are protected by the
taxpayers. It is not just one account, however. There are multiple
accounts that these rich people use, so we are not just protecting
$130,000. We are protecting $130,000 times 10 or 20, where they can
place it in various banks. What we end up doing is having the little
guy protecting the rich people in this society.
And there is a downside to having this protection. Not only is it not
fair, but the downside is people who invest their money, when it is
guaranteed, will be less cautious about where they put their money. We
have just heard from the gentleman from Alabama (Mr. Bachus) about the
people who lost their money in a bank. Well, those people should have
paid closer attention to that bank. The fact is that we are encouraging
people to be frivolous where they are putting their money because we
are guaranteeing it as taxpayers.
This is exactly what led to the savings and loan debacle in the
1980s. In 1980, before Ronald Reagan was elected President, this went
from the early 1970s, from $10,000, to 1980 when they jumped it to
$100,000 protection. All of a sudden, people could then invest with
these multiple accounts, millions of dollars protected by the
taxpayers.
So what happened? What happened is, we have millions, billions of
dollars now in our system being invested in the most irresponsible way.
Because the banks and the savings and loans themselves, no matter what,
they ended up paying more interest than they should have. The bad
institutions were bringing down the good institutions, and the public
was protected from any bad decision they made. We ended up with a
debacle, a financial debacle created by this increase in 1980 that
ended up by the mid-1980s costing us tens of billions, maybe even $100
billion of the American taxpayers' money.
We do not need this kind of irresponsibility. That is not what this
program started out as. It has been perverted to be that now. Section 3
is just that kind of perversion, where we end up now increasing it
precipitously from $100,000 to $130,000. It should be basically back in
the arena of the average American taxpayer instead of protecting the
rich.
So with that said, I can remember personally, just to note, I
remember during the mid-1980s when I worked in the White House, a
friend of mine from the Reagan administration was in charge of one of
those institutions, savings and loans, and he was being attacked
because he was not giving out enough loans to various people and
various institutions that would be guaranteed. He was not giving out
these guaranteed loans, and I called him up, I said, Well what is the
matter? Are you not part of the team? We want to have a strong economy.
He said, Dana, we are being put behind the eight ball. Every one of
these things that we are giving out has a government guarantee because
of this deposit insurance, and it is going to take us right down the
road to economic hell.
Well, that is exactly what happened, and we should not be going in
that direction anymore. We should be doing a reversal, making the
system more responsible, asking people to be more responsible with
their money and where they put it and not having the middle-class
taxpayer subsidizing rich people by guaranteeing wherever they would
want to put their money.
I oppose the amendment, and I will be proposing an amendment later
on.
Mr. FRANK of Massachusetts. Mr. Chairman, before I yield, I just
would say sometimes we have debates about where does wealth begin and
what is middle class, et cetera. I guess I would differ with the
gentleman from California that if you have $100,000 in the bank, you
are a little guy, but if you have $130,000, you are rich. I think that
unduly compresses the middle class. I think much more is being made,
frankly, over $30,000 than is deserved.
Mr. Chairman, I yield 3 minutes to the gentlewoman from Oregon (Ms.
Hooley).
Ms. HOOLEY. Mr. Chairman, I thank the gentleman from Massachusetts
for yielding me this time. I would also like to thank the gentleman
from Ohio (Chairman Oxley) for his work. In addition, I would like to
thank the gentleman from Alabama (Mr. Bachus) whose bill we have before
us today who has done a tremendous job and recognize his staff for all
of their hard work.
The FDIC reform bill is truly a bipartisan piece of legislation that
continues the bipartisan working style of the Committee on Financial
Services that has allowed the committee to be extraordinarily
productive.
The FDIC Reform Act of 2005 contains needed reforms that will bring
the deposit insurance system into the 21st century by enhancing the
value of our insured deposits, improving retirement security for all
Americans, and ensuring that the value, cost, and benefit of deposit
insurance is shared equally.
[[Page H2923]]
Most importantly, H.R. 1185 gives flexibility of the FDIC to manage
the deposit insurance according to risk and economic conditions. No
longer will we ask financial institutions to pay higher insurance
premiums when banks can least afford to pay them and when funds are
most needed for lending to jump-start our economic growth.
H.R. 1185 updates the deposit insurance coverage levels for the first
time in 25 years. I agree with my ranking member who said we are making
a much bigger deal out of the $30,000.
H.R. 1185 also updates deposit insurance coverage levels for the
first time, as I said, in 25 years. It increases the maximum coverage
from $100,000 to $130,000, doubles the amount of coverage for
retirement funds to enhance the retirement security of our senior
citizens and those planning for retirement, and indexes for inflation
every 5 years as a way of preserving the value of the deposit insurance
safety net. H.R. 1185 also increases coverage limits for in-state
municipal deposits to $2 million or 80 percent of any deposits over
$130,000, whichever is less.
By extending municipal deposit coverage, this bill not only protects
taxpayers from potential consequences of a failure of local financial
institutions but promotes community development by encouraging local
government agencies to keep their funds on deposit with a local
financial institution, thereby making the funds available for lending
back to the community. So it makes a lot of sense when we look at our
small local banks.
Finally, this bill takes the needed step of merging FDIC's Bank
Insurance Fund and the Savings Association Insurance Fund, eliminating
potential disparities in the premiums paid by banks and thrifts, and
reducing the administrative burden of operating two separate insurance
funds.
This legislation will give Americans an even more stable and secure
insurance system for deposits in their banks, thrifts, and credit
unions. These needed reforms will bring the deposit insurance system
into the 21st century by enhancing the value of our insured deposits,
improving retirement security for all Americans, and ensuring that the
value, cost, and benefit of deposit insurance is shared equally.
I urge my colleagues to support the FDIC Reform Act of 2005.
Mr. BACHUS. Mr. Chairman, I yield myself all remaining time.
There are several things I think we need to say to correct the
record. One was it was said by the gentleman in opposition that this
was taxpayer guaranteed; and, in fact, these deposits are insured not
by the taxpayer, but by the BIF and SAIF funds; and it is the
depository that insures his own accounts. And for the taxpayer to pay
one red cent, all assets of every federally insured financial
institution would have to be exhausted before the taxpayer would have
to pay one cent. In other words, all the assets of all of the federally
insured banks and savings associations would have to be paid.
And in that regard, I am sure the gentleman from California would
agree that if that moment ever came, we would be, we would probably be
in dire straights, and I certainly never anticipate that happening. It
has never happened in the history of our country. The savings and loans
were exhausted, not the banks. The BIF account has never been
exhausted; the savings and loan account thing was exhausted because of
failures of savings and loans.
And if we say, as the gentleman said, that the reason why all the
savings and loans failed is because we increased coverage from $100,000
to $130,000, we did that for the banks and the credit unions at the
same time. No credit unions failed; very few banks failed. In some
States, no institutions failed, where in States like California, Texas,
where you had weak regulation, weak oversight, several failed; or you
had the oil patch in Texas where many of them failed.
In fact, the cost to the taxpayer would have been greater had the
first $100,000 of accounts not been insured. It would have been a much
greater loss. Thank goodness the first $100,000 of accounts were
insured. If we had another failure today, $130,000 would be insured,
and we would have insurance for it. So to say that insurance coverage
is taxpayer funded, the taxpayer is not funding this. If the taxpayer
were funding it, his analogy would be right.
And the last thing that he says, and he has said this, is that this
was the cause of the savings and loans to fail. This has been looked at
by this Congress, it has been looked at by the FDIC, it has been looked
at by the Federal Reserve and, actually, I am going to introduce this.
This is about 20 different reasons that government reports have causes
for the failures of the S&Ls; and on that list of 20, nowhere does it
say because of an increase in coverage. In fact, the FBI submitted what
they thought were the reasons, the FDIC submitted what they thought
were the reasons, all the bank regulators, and nowhere on any of those
lists do we find increase in coverage. In fact, what you do find is one
study showed that taxpayer exposure was less because the funds were
insured up to $100,000.
Mr. Chairman, I will just simply close by saying that all the Federal
bank regulators say that this legislation will strengthen and reform
our Federal guarantee program for bank deposits and by saying that
today, if you sell a house for $120,000 or $140,000 or $160,000 or
$200,000 and you deposit the proceeds in your bank account, you are
probably not a rich person by definition. If you decide to buy a house
and you put $150,000 in the bank or transfer it or get a loan from a
bank and you deposit it in your account, you lose that, you certainly
would not be defined as rich. And if you have a 401(k) and you happen
to have over $100,000 in it, that does not make you a rich person. In
fact, that represents, for many people, their entire savings is a
401(k); and, increasingly, those accounts are running over $100,000.
{time} 1500
That is why the AARP and the Securities Investment Institute both
endorsed this legislation.
Mr. Chairman, I yield back the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 3 minutes to the
gentlewoman from New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Chairman, I thank the gentleman for yielding the
time and for his leadership as a whole.
Mr. Chairman, I am very supportive of this outstanding bipartisan
bill. I am supportive of the overwhelming majority of the provisions in
it. It is long past due to merge the BIF and SAIF insurance funds, and
additionally, eliminating the 23 basis point clip, 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 credits for past
contributions to the insurance funds that is based on an amendment that
I cosponsored with former Representative Bereuter. This is a very, very
important provision as a matter of fairness to institutions that
recapitalized the funds, and I thank very much the gentleman from
Alabama (Mr. Bachus) for including this balanced and important
amendment in the base legislation.
Despite the many very positive parts of this bill, 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 many
Federal financial service regulators, including Alan Greenspan. I would
like to place in the Record his comments in opposition, and state that
I support the bill overwhelming, but this provision I am opposed to.
I thank the leadership and the ranking member for working in a
balanced way to move this important legislation forward.
Mr. FRANK of Massachusetts. Mr. Chairman, in a very impressive
display of bipartisanship, I am now going to yield some of our time to
the manager of the bill for the majority.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Alabama (Mr. Bachus) as long as he does not talk about the
Rohrabacher amendment.
Mr. BACHUS. Mr. Chairman, I had one glaring oversight in this entire
debate concerning the bill. And that is the fact that the gentlewoman
from Oregon (Ms. Hooley) who really played a monumental part in this
legislation over the past 2 or 3 years and actually was the original
cosponsor of this legislation has not been recognized.
I would like to commend her for her fine work on this bill. And I
guess it is
[[Page H2924]]
a credit to her and her personality, despite that oversight she did not
call attention to my omission. And so I commend the gentlewoman from
Oregon (Ms. Hooley). She is an outstanding Member of this body. And in
this legislation, she deserves a lot of credit for its passage and its
support.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
Mr. Chairman, I thank the gentleman from Alabama (Mr. Bachus) for his
great graciousness in what he had to say. And let me say in deference
to the chairman of the committee, the gentleman from Ohio (Mr. Oxley) a
great baseball leader, if you notice, I yielded to the gentleman from
Alabama (Mr. Bachus), who then came back to this side to thank us.
If you're scoring this, it is 3 to 6 to 3, I believe is the
appropriate scoring.
Mr. PAUL. Mr. Chairman, H.R. 1185, 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. 1185 which may increase
the premiums assessed on participating financial institutions. These
``premiums,'' which are actually taxes, are the premier sources of
funds for the Deposit Insurance Fund. This fund is used to bail out
banks who experience difficulties meeting their commitments to their
depositors. Thus, the deposit insurance system transfers liability for
poor management decisions from those who made the decisions, to their
competitors. This system punishes those financial institutions which
follow sound practices, as they are forced to absorb the losses of
their competitors. This also compounds the moral hazard problem created
whenever government socializes business losses.
In the event of a severe banking crisis, Congress will likely
transfer funds from the general revenue into the Deposit Insurance
Fund, which could make all taxpayers liable for the mistakes of a few.
Of course, such a bailout would require separate authorization from
Congress, but can anyone imagine Congress saying ``No'' to banking
lobbyists pleading for relief from the costs of bailing out their
weaker competitors?
Government subsidies lead to government control, as regulations are
imposed on the recipients of the subsidies in order to address the
moral hazard problem. This is certainly the case in banking, which is
one of the most heavily regulated industries in America. However, as
George Kaufman, the John Smith Professor of Banking and Finance at
Loyola University in Chicago, and co-chair of the Shadow Financial
Regulatory Committee, pointed out in a study for the CATO Institutes,
the FDIC's history of poor management exacerbated the banking crisis of
the eighties and nineties. Professor Kaufman properly identifies a key
reason for the FDIC's poor track record in protecting individual
depositors: regulators have incentives to downplay or even cover-up
problems in the financial system such as banking facilities. Banking
failures are black marks on the regulators' records. In addition,
regulators may be subject to political pressure to delay imposing
sanctions on failing institutions, thus increasing the magnitude of the
loss.
Immediately after a problem in the banking industry comes to light,
the media and Congress will inevitably blame it on regulators who were
``asleep at the switch.'' Yet, most politicians continue to believe
that giving the very regulators whose incompetence (or worst) either
caused or contributed to the problem will somehow prevent future
crises!
The presence of deposit insurance and government regulations removes
incentives for individuals to act on their own to protect their
deposits or even inquire as to the health of their financial
institutions. After all, why should individuals be concerned with the
health of their financial institutions when the federal government is
insuring banks following sound practices and has insured their
deposits?
Finally, I would remind my colleagues that the federal deposit
insurance program lacks constitutional authority. Congress' only
mandate in the area of money, and banking is to maintain the value of
the money. Unfortunately, Congress abdicated its responsibility over
monetary policy with the passage of the Federal Reserve Act of 1913,
which allows the federal government to erode the value of the currency
at the will of the central bank. Congress's embrace of fiat money is
directly responsible for the instability in the banking system that
created the justification for deposit insurance.
In conclusion, Mr. Speaker, H.R. 1185 imposes new taxes on financial
institutions, forces sound institutions to pay for the mistakes of
their reckless competitors, increases the chances of taxpayers being
forced to bail out unsound financial institutions, reduces individual
depositors' incentives to take action to protect their deposits, and
exceeds Congress's constitutional authority. I therefore urge my
colleagues to reject this bill. Instead of extending this federal
program, Congress should work to prevent the crises which justify
government programs like deposit insurance, by fulfilling our
constitutional responsibility to pursue sound monetary policies.
Mr. HENSARLING. Mr. Chairman, I rise today in support of H.R. 1185,
the Federal Deposit Insurance Reform Act of 2005. As a member of the
Financial Services Committee, I want to thank Chairman Oxley and
Subcommittee Chairman 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, which passed by a vote of 411-11 in the 108th
Congress, will help to create a more stable, fair, and secure banking
system. By combining the Banking Insurance Fund and the Savings
Association Insurance Fund into one single fund, the risk that a couple
of large institutions could fail and impair each fund is greatly
reduced. Merging these funds will help to increase fairness in our
banking system by eliminating the possibility that two institutions of
similar sizes could essentially be paying different premiums.
Furthermore, the merged fund will make reporting and accounting less
burdensome for both the institutions and the FDIC.
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, allowing them to properly
price premiums to reflect 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.
Although I support the majority of provisions of H.R. 1185, I do want
to take this time to express my concerns with Section 3 of this
legislation. This section of the bill would increase a financial
institution's insurance limit for individual accounts from $100,000 to
$130,000. Section 3 also doubles the coverage for retirement accounts
to $260,000 and increases the coverage limit for municipal accounts to
$2 million or 80 percent of any deposits over $130,000. I believe that
arbitrarily increasing these limits will unnecessarily expose American
taxpayers to the increased hazards associated with shifting risk from
private institutions to the federal government. Further, such a
provision is likely to decrease a depositor's concern for the financial
well being of their bank while at the same time diminishing market
discipline. It is my hope that these factors are given full
consideration should H.R. 1185 be considered in conference with the
Senate.
Mr. Chairman, FDIC Chairman Powell stated in his testimony to the
Financial Services Committee on March 17, 2005, that H.R. 1185 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, and
I urge my colleagues to vote for H.R. 1185.
Mr. CANTOR. Mr. Chairman, I rise today to speak in favor of the
Federal Deposit Insurance Reform Act. This important piece of
legislation modernizes the insurance funds on which Americans depend.
The current amount of deposit insurance coverage has been the same
since 1980, so it is important that we make these necessary increases
to keep up with inflation and encourage people to save. This bill
raises the coverage on savings and retirement accounts and gives
reassurance to investors saving for their future.
Increasing the amount of deposit insurance coverage will benefit all
banks, small and large, by providing more certainty to the investment
community. It is important that we give every American peace of mind
when placing their money in our savings system.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield back the balance of
my time.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the committee amendment in the nature of a
substitute printed in the bill shall be considered by sections as an
original bill for purpose of amendment, and each section is considered
read.
During consideration of the bill for amendment, the Chair may accord
priority in recognition to a Member offering an amendment that he has
printed in the designated place in the Congressional Record. Those
amendments will be considered read.
The Clerk will designate section 1.
The text of section 1 is as follows:
H.R. 1185
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
[[Page H2925]]
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Federal
Deposit Insurance Reform Act of 2005''.
(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.
The CHAIRMAN. Are there any amendments to section 1?
If not, the Clerk will designate section 2.
The text of section 2 is as follows:
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.
Mr. OXLEY. Mr. Chairman, I ask unanimous consent that the remainder
of the committee amendment in the nature of a substitute be printed in
the Record and open to amendment at any point.
The CHAIRMAN. Is there objection to the request of the gentleman from
Ohio?
There was no objection.
The text of the remainder of the committee amendment in the nature of
a substitute is as follows:
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 2005, $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 2007, and the 1st day of
each subsequent 5-year period, the Board of Directors and the
National Credit Union Administration Board shall jointly
prescribe the amount by which the standard maximum deposit
insurance amount and the standard maximum share insurance
amount (as defined in section 207(k) of the Federal Credit
Union Act) applicable to any depositor at an insured
depository institution shall be increased by calculating the
product of--
``(I) $130,000; and
``(II) the ratio of the value of the Personal Consumption
Expenditures Chain-Type Index (or any successor index
thereto), published by the Department of Commerce, as of
December 31 of the year preceding the year in which the
adjustment is calculated under this clause, to the value of
such index as of the date this subparagraph takes effect.
``(ii) Rounding.--If the amount determined under clause
(ii) for any period is not a multiple of $10,000, the amount
so determined shall be rounded to the nearest $10,000.
``(iii) Publication and report to the congress.--Not later
than April 5 of any calendar year in which an adjustment is
required to be calculated under clause (i) to the standard
maximum deposit insurance amount and the standard maximum
share insurance amount under such clause, the Board of
Directors and the National Credit Union Administration Board
shall--
``(I) publish in the Federal Register the standard maximum
deposit insurance 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''.
[[Page H2926]]
(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 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 2005, $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
[[Page H2927]]
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.--Subject to paragraph (3), 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) Special rule for small assessment amounts.--If the
amount of the assessment which an insured depository
institution fails or refuses to pay is less than $10,000 at
the time of such failure or refusal, the amount of any
penalty to which such institution is subject under paragraph
(1) shall not exceed $100 for each day that such violation
continues.
``(4) 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''.
(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
[[Page H2928]]
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 2005, 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 2005, 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 (I).
``(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
[[Page H2929]]
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) 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.
(c) Study Regarding Appropriate Deposit Base in Designating
Reserve Ratio.--
(1) Study required.--The Federal Deposit Insurance
Corporation shall conduct a study of the feasibility of using
actual domestic deposits rather than estimated insured
deposits in calculating the reserve ratio of the Deposit
Insurance Fund and designating a reserve ratio for such Fund.
(2) Report.--The Federal Deposit Insurance Corporation
shall submit a report to the Congress before the end of the
1-year period beginning on the date of the enactment of this
Act containing the findings and conclusions of the
Corporation with respect to the study required under
paragraph (1) together with such recommendations for
legislative or administrative action as the Board of
Directors of the Corporation may determine to be appropriate.
(d) Study of Reserve Methodology and Accounting for Loss.--
(1) Study required.--The Federal Deposit Insurance
Corporation 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, 2004,
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). The
Corporation shall obtain comments on the design of the study
from the Comptroller General.
(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 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.
Before submitting the report to Congress, the Board of
Directors shall provide a draft of the report to the
Comptroller General for comment.
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.'';
[[Page H2930]]
(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 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
[[Page H2931]]
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--
(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.
Amendment Offered by Mrs. Maloney
Mrs. MALONEY. Mr. Chairman, I offer an amendment.
The Clerk read as follows:
Amendment offered by Mrs. Maloney:
Page 4, line 8, strike ``For purposes'' and insert ``Except
as provided in subparagraph (G), for purposes''.
[[Page H2932]]
Page 4, line 15, insert ``with respect to any qualified
insured depository institution'' before the comma at the end.
Page 7, line 2, strike the closing quotation marks and the
2nd period.
Page 7, after line 2, insert the following new
subparagraph:
``(G) Conditions for increased deposit insurance
coverage.--
``(i) In general.--For purposes of subparagraph (E)(ii), an
insured depository institution shall be treated as a
qualified insured depository institution only if--
``(I) in the process of posting credits and debits against
a checking account used primarily for personal, family, or
household purposes after the close of any business day, the
depository institution credits all deposits to the account
before debiting any check drawn on the account and presented
to the depository institution for payment; and
``(II) the depository institution imposes no fee for paying
any check drawn on an account in spite of a lack of
sufficient funds in the account to pay such check or any
similar activity (commonly referred to as `bounce
protection') unless the accountholder has affirmatively
requested such service.
``(ii) Nonqualified insured depository institutions.--The
standard maximum insurance amount applicable to any insured
depository institution that is not a qualified insured
depository institution shall be the amount described in
subparagraph (E)(i) without regard to the effective date
referred to in such subparagraph or any adjustment under
subparagraph (F).''.
Mrs. MALONEY (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment be considered as read and printed in the
Record.
The CHAIRMAN. Is there objection to the request of the gentlewoman
from New York?
There was no objection.
Mrs. MALONEY. Mr. Chairman, first of all, I would like to thank the
gentleman from Massachusetts (Mr. Frank) our ranking member, and the
gentleman from Ohio (Mr. Oxley), our chairman, for working in a
bipartisan way for truly the grand goal of safety and soundness in our
financial systems and keeping them competitive in the world financial
market.
My amendment is one that I am going to offer and withdraw, because
the chairman has generously offered to work with me in committee under
a separate introduced bill to pass the intent of this. And what my
amendment would do is that it would prevent banks from charging
customers bounced check fees when the money is already there in the
bank, and when it is simply a matter of which journal entry the bank
makes first.
We did have a hearing on this earlier in the Committee on Financial
Services. And some of the banks' representatives testified that many
banks do this already. So this amendment would simply require all banks
to do so consistently and prevent abuses.
In other words, if money is there, but it has been deposited, then
you cannot withdraw that money, the deposited money should be credited
before the money is withdrawn from the bank.
My amendment would also prevent banks from charging customers for
overdraft protection when the customer has not requested this service.
Again, this is simple and fair and straightforward. And sometimes, in
some cases in some banks, the overdraft protection costs more than the
overdraft penalty.
So it would really prevent hidden charges and fees for services
customers have not even asked for, in this case, financial
institutions. So I have been assured that by the parliamentarian that
my amendment would be immune from a point of order. The Committee on
Rules accepted it.
But I will be withdrawing it with the consideration of the chairman
to fully discuss this in committee, and I yield to the gentleman from
Ohio (Mr. Oxley) our chairman, and I thank you for working in a
bipartisan way on this and so many other issues.
Mr. OXLEY. Mr. Chairman, will the gentlewoman yield?
Mrs. MALONEY. I yield to the gentleman from Ohio.
Mr. OXLEY. Mr. Chairman, I thank the gentlewoman for yielding, and I
appreciate her cooperation in this area. I think all of us recognize
some of the potential issues that are inherent in passage of Check 21.
It is also important to notice that about 1 percent of the checks
today are being truncated, so we are early into the process here. It is
also important to note that under the provision of Check 21, the Fed is
empowered should they see an imbalance between the deposits and
withdrawals to not only draw attention to it, but to deal with it.
The study, of course, will not be completed for about 2 years. And as
a result I think it is important for the committee, as we have
discussed before and I discussed with the ranking member, to have the
committee continue to monitor the situation, and we would do so, and to
that end, I would indicate to my friend, the gentlewoman from New York
(Mrs. Maloney) that we would plan to hold an oversight hearing on that
specific issue. I will be glad to work with the gentlewoman from New
York (Mrs. Maloney) as far as the potential witnesses are concerned.
Mr. FRANK of Massachusetts. Mr. Chairman, will the gentlewoman yield?
Mrs. MALONEY. I yield to the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. Mr. Chairman, I thank the gentlewoman
from New York (Mrs. Maloney). She has been very much in the forefront
overseeing this issue. Along with her, I and others have written some
letters to the Federal Reserve. We have been staying very much on top
of this.
The gentlewoman has been performing a real service, and I appreciate
the cooperation of the chairman. I look forward to our being able to
work together to make sure that consumers are protected.
Mrs. MALONEY. Mr. Chairman, I ask unanimous consent to withdraw the
amendment.
The CHAIRMAN. Is there objection to the request of the gentlewoman
from New York?
There was no objection.
Amendment Offered by Mr. Rohrabacher
Mr. ROHRABACHER. Mr. Chairman, I offer an amendment.
The Clerk read as follows:
Amendment offered by Mr. Rohrabacher:
Strike section 3 of the bill (and redesignate the
subsequent sections and any cross reference to any such
section and conform the table of contents accordingly).
Mr. ROHRABACHER. Mr. Chairman, let me reiterate that I do this with
great respect to the gentleman from Alabama (Mr. Bachus) and the
gentleman from Ohio (Mr. Oxley) and the gentleman from Massachusetts
(Mr. Frank) who put a great deal of time and effort into this bill and
this legislation.
I have a fundamental philosophical disagreement about Federal Deposit
Insurance. But I have no doubt that they have worked hard to try to
produce some good legislation here.
With that said, I offer this amendment on behalf of myself and the
gentlewoman from New York (Mrs. Maloney). The Rohrabacher-Maloney
amendment would strike out section 3, keeping the Federal Deposit
Insurance at its current level of $100,000 per account.
Let me note the argument was made earlier that simply by raising
insurance, for example, from $100,000 to $130,000, would that, we were
asked, make people more irresponsible if it was car insurance, and you
just increased the car insurance from $100,000 to $130,000? The answer
is, yes, if someone else was paying for the car insurance.
If somebody gave whatever it is, if the Federal Government ends up
coming in and saying, if all else fails, do not worry, you are going to
get paid off, because we are going to pay it, the taxpayers will pay it
in the end, if this whole system fails we are there. Yeah, people who
ended up not having to take that responsibility off their shoulders,
the institutions might be a little less responsible, and, of course,
the individuals themselves might be less responsible in picking out
where to put their money.
This bill also increases to $260,000 retirement accounts, the deposit
insurance for that, and $2 million per account for municipalities.
Well, this, as I say right in the beginning, the FDIC was supposed to
be for the little guy. And, again, there has been the argument that the
gentleman from Massachusetts (Mr. Frank) gave, well, $100,000 or
$130,000 these days is the little guy. Well, that is if you are
counting one account. Everybody involved in this knows that we are
taking about multiple accounts.
Now we are talking about multiple accounts of $130,000 per account,
and, yeah, someone who has 10 accounts at $130,000 is someone who I
would catalog as rich. But, I just say this much, yes, if someone has
$1.3 million in various accounts that are going to be ultimately
guaranteed by the Federal Government, and the question is, where
[[Page H2933]]
does this money come from? Does it come from, yes, the banks and the
savings and loans?
Well, it comes, yes, from the banks and savings and loans. But, what
is important is, the ultimate guarantor is the Federal Government,
otherwise we would not be talking about that.
But, when we put the taxpayers on the ultimate hook, will it ever
happen? Well, it has happened, and I have seen it happen, and you have
seen it happen. And this bill may or may not make that less likely. In
fact, when you combine the deposit insurances, and put them together,
yes it might add some strength to the system, but it also means that if
the system collapses, it collapses big time, big time collapse; not
just medium time collapse, but a big time collapse.
So could it happen? Yes, it could happen. I think that things like
this happen, like the savings and loan debacle, because fundamental
principles are ignored. And the fundamental principles are people
should be responsible for their own money, and that institutions should
be responsible.
If they commit acts or they are charging too much or their expenses
are too high, or they are not competent enough, people should not be
placing their money in that institution simply because there is a
guarantee, there is a deposit guarantee, which is what we have now.
By ignoring these fundamental principles, you have less
responsibility on the part of the depositor and less responsibility on
the part of the financial institution. So here we are, faced with a
major jump in the deposit insurance. What are we going to do?
I think it is about time to reexamine the fundamental issue of
whether or not we should be guaranteeing this deposit insurance in the
first place. And I will say, as I have said before, I watched this
happen during the Reagan administration. In 1980, they dramatically
increased the deposit insurance, and do not tell me that there have not
been people, well known economists suggesting that that was a major
cause of the savings and loan debacle, they are.
Because, even today Alan Greenspan, Milton Friedman and others oppose
this increase in the deposit insurance for that very reason, because
they have seen that this makes the system more vulnerable, and we
should not be doing that.
With that, I would suggest that I would hope that people could vote
for my amendment to strike section 3 out, which would then increase
that.
{time} 1515
Mr. FRANK of Massachusetts. Mr. Chairman, I move to strike the last
word.
Mr. Chairman, the gentleman from California (Mr. Rohrabacher) simply
multiplies his mathematical difficulty. He said, well, when I said if
you have $100,000 under his calculations, you are a little guy but if
you have 130,000 you are rich. He says, but what if you have 10 times
$130,000? The answer is, well, what if you have 10 times 100,000?
Thirty percent is still 30 percent.
So the fact is that he is ascribing to a 30 percent increase a
qualitative impact that simply will not stand up to analysis. He says,
well, you can have 10 accounts and you would have 1.3 million. Yes, and
you could have 10 accounts and have 1 million.
So the difference is really quite small. I must say even when the
gentleman from Alabama (Mr. Bachus), with whom I agree here, talked
about this will save people, $30,000 is not going to make a big
difference one way or the other. I believe it is a step in the right
direction.
First of all, understand that much of the argument for this comes
from smaller institutions who fear the negative competitive effect of
the doctrine of ``too big to fail.'' By the way, the large institutions
are on the whole not for this. The large institutions feel that if
people are worried about a bank failure affecting their accounts, if
they have more than the insured amount they will put it in the largest
possible institution to the detriment of smaller institutions. I do not
think it is a good thing for there to be that kind of competitive
pressure exercised against smaller banks. That is why they are very
strong advocates of this.
Mr. OXLEY. Mr. Chairman, will the gentleman yield?
Mr. FRANK of Massachusetts. I yield to the gentleman from Ohio.
Mr. OXLEY. Mr. Chairman, it occurred to me as I was listening to my
friend from California, we could go back to the old days of giving out
toasters for deposits. I would say that the system we have now, I have
not heard of toaster promotion for a long time, mercifully, but it
certainly seems to me that the consumer, saver, investor is a lot more
sophisticated than they ever were and they will not be lured by toaster
opportunities as opposed to depositing it into an institution where
they feel comfortable that their deposit is indeed insured.
Mr. FRANK of Massachusetts. I thank the gentleman.
The other thing I want to do is to disagree very strongly with the
gentleman from California (Mr. Rohrabacher) on the causality of the
savings and loan crisis.
I do not believe, having served here at the time, and I have seen
very few analyses that said the deposit insurance issue was effective,
it increased the cost but it was not the cause of the failure. And
those are really two quite distinct things.
The causes of the failure I believe were two. First of all, we
imprudently loosened substantially what savings and loans, thrift
institutions could invest their money in. So they became invested in
things that were much less insured. They were not just doing houses;
they were doing a lot of open land, et cetera.
Secondly, this Congress in 1981 passed tax legislation that greatly
inflated the value of real estate and then in 1986 undid it. If you
wanted a dictionary example of going from one extreme to another, it
was the treatment of real property and real estate in the 1981, 1986
tax act. So we kind of baited and switched people.
In the 1981 act we gave, I say ``we'' because I voted against the
1981 act. I vote for the 1986 act, but Congress gave people incentive
to invest in real estate. And because of the tax advantages, it made
sense to buy an empty building and not have anybody in there in some
cases literally because of the tax advantages. But in 1986 we
rationalized the Tax Code, but we did it too rapidly and there were
people caught in the middle. I believe those were the two major causes.
I agree that increasing deposit insurance raised the cost of it, but
I do not think it is causal. Just to go back, I think, frankly, it is
the least sophisticated saver who we protect by raising this rate.
The gentleman said correctly, you can open 10 accounts, 12 accounts,
13 accounts; but more sophisticated people unfortunately, the deposit
insurance limit is not very effective against them; but there are
people of less sophistication, less ability to be mobile, and they are
the ones who do it. I do think if your life savings is $130,000 you are
rich. And I think trying to protect the least sophisticated people that
way and to preserve against unfair competitive pressures on smaller
institutions justifies the bill.
Mr. ROHRABACHER. Mr. Chairman, will the gentleman yield?
Mr. FRANK of Massachusetts. I yield to the gentleman from California.
Mr. ROHRABACHER. If that is the criteria we are using, why do we not
then limit it to one account because the less sophisticated people will
not have multiple accounts.
Mr. FRANK of Massachusetts. May I ask the gentleman a question. Did
someone keep the gentleman from offering that amendment? Why did the
gentleman not offer that amendment? It is the gentleman's amendment. Is
the gentleman criticizing me for his amendment?
If the gentleman thinks his amendment should be different, make it
different.
Mr. ROHRABACHER. Would the gentleman support that one?
Mr. FRANK of Massachusetts. Well, we will deal with this one; and
when the gentleman brings that amendment up, we will deal with that
one.
I want to make it very clear. I did not stop the gentleman from
offering any amendment he wanted to.
Mr. ROHRABACHER. I thank the gentleman very much.
Mr. BACHUS. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, one thing the gentleman from California (Mr.
Rohrabacher) mentioned and I would like
[[Page H2934]]
to say in his defense: he has triplets at home, so I think we ought to
have a lot of patience for the gentleman. They are very young. One-
year-old triplets.
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 think we would all agree
that that would certainly justify at least three accounts. One for each
child.
Mr. BACHUS. Second, the gentleman did mention the fact that we do
have a provision in here covering municipal deposits or government
deposits and that is for $2 million. The reason we did that is not to
protect the big guy or the rich guy.
The reason we did that is from time to time a school system or a city
or a county or a governmental retirement system will put $2 million or
$1.5 million in a bank and it is really not practical for them to go
around and put $100,000 in each bank. And that is basically as a result
of the American Association of School Boards and others saying not only
do we want to deposit more than that, but in several States,
particularly the Farm Belt, there is only one hometown institution. And
the school board or the government or the city or the fire district
wants to deposit their money in their own hometown. And that is to
allow that.
Mr. OXLEY. Mr. Chairman, will the gentleman yield?
Mr. BACHUS. I yield to the gentleman from Ohio.
Mr. OXLEY. Mr. Chairman, the gentleman raises an excellent point. Our
good colleague, the gentleman from Ohio (Mr. Gillmor), this is his
contribution to this legislation, because as he shares the district
that is next to mine, a number of small communities that have exceeded
that amount of $100,000, they are under a fiduciary responsibility to
have that money protected by the FDIC. And what it has done, of course,
is drive some of that money out of the small communities and into
larger communities so you cannot put that money to use in the
community.
So I want to associate myself with the gentleman's remarks. I am glad
the gentleman brought that issue up because it is a very important part
of this legislation.
Mr. BACHUS. Mr. Chairman, I have two counties, one is Bibb County,
one is Shelby County. The school board in those counties is forced to
take about 96 percent of their money and deposit it out of county
because there are only two hometown institutions, and they would like
to deposit in those, as long as those are rated A institutions, and
again I say that they are paying a premium on their deposits for this
coverage.
The second thing I would say is if the gentleman will go back to
1980, what you had is we deregulated the savings and loans. We made
tremendous changes in their mission. And at that time they had 30-year
mortgages. They had loaned out money at 4 percent, 4.5 percent, 5
percent. From 1979 to 1981, the interest rates increased, the Federal
Reserve continued to increase the interest rate because of inflation,
which the gentleman from Massachusetts (Mr. Frank) mentioned, and they
drove the interest rate up above 20 percent. The prime rate was 21
percent.
So the savings and loans were having to borrow money at 21 percent
and had loaned it out at 4 and 5 percent; and predictably, particularly
in Texas where the price of oil fell, the savings and loans in Texas
started failing one right after the other. And as I said earlier, if it
were this increase from 40 to 100,000, you would have expected to see
it show up in the banks; you would expect it to show up throughout the
Nation.
I do not think the people in Texas where most of the first failures
occurred, Louisiana, I do not think they were engaged in any more
fraudulent conduct or reckless behavior except that what they were
doing, that was a boom economy in Texas and property values shot up,
and there was a bubble and they came back down.
But during all of that, the bank fund did not fail. And as I have
said before, before one dollar of taxpayer money comes out of this
account, it requires the funds to be exhausted. It, second, requires
the banks, their assets to be liquidated, and only at that point would
the taxpayer step in. That would be a heck of a depression. And I think
that would be a depression made only worse if school boards,
governments lost their deposits, if people lost their 401(k)s, if they
lost any of their savings above $100,000, businesses who had accounts.
And some of those might be rich people, the guy that owns the small
business and has $400,000 or $600,000 deposited or a contracting
company that has just been paid on a contract.
I think it would make the recession or depression or economic shock
that much worse. I believe that this legislation is sound legislation
and should be supported.
Mrs. MALONEY. Mr. Chairman, I rise in support of the amendment.
I believe the immediate 30 percent increase in insurance coverage in
the bill is a serious mistake. The coverage increase to $130,000 is
opposed by most of the Federal financial service regulators.
Proponents of the increased coverage argue that it poses no 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 almost unanimous opposition to increased
coverage by the regulators is a very powerful message.
I would like to really quote some of these regulators. Alan Greenspan
has come out very strongly opposed to it. He said, ``It is unlikely
that increased coverage, even by indexing, would add to the stability
of the banking system today.''
The Undersecretary of the Treasury for Domestic Monetary Policy,
Peter Fisher, said, ``Increasing the overall coverage limit would
weaken market discipline and further increase the level of risk to the
FDIC and to taxpayers.''
Mr. Chairman, I would like to put in the Record quotes from the
Comptroller of the Currency, the Director of the Office of Thrift
Supervision, and the Congressional Budget Office, all raising questions
and in opposition to this raise.
Another argument put forth by proponents of coverage increases is
that inflation has eroded deposit insurance. I do not believe that this
argument matches the actual situation of the banking industry. The fact
is that only 2 percent of insured accounts have more than $100,000
according to the Federal Reserve.
Mr. Chairman, at the appropriate time I would like to place this
study into the Record.
The same Federal Reserve study put the average account balance at
$6,000 across America. Any way you look at it, the increase in coverage
will benefit 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 the point, I think we also have to remember
that behind the Federal deposit insurance funds is the full faith and
credit of the United States Government.
Since I joined the Committee on Financial Services in 1993 at the
close of the S&L crisis, I have been committed as all of my colleagues
are on both sides of the aisle to protecting the safety and soundness
of the banking system.
{time} 1530
While I concede and agree with my colleagues that the causes of the
S&L failures were many, the fact is that standing behind the insurance
system are our constituent taxpayers. The bailout we voted for was
constituent taxpayer dollars to bail out the S&L.
No matter what the reasons are for a future bank failure or a string
of failures, there could be many reasons for them, by raising the
insurance coverage, we increase the potential liability of the
government and, thereby, the American taxpayer.
I also believe that raising the 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 ensured by the
Federal Government.
I would also like to place in the Record a letter to Members of
Congress from The Financial Services Roundtable, which very strongly
supports the underlying bill, which is a
[[Page H2935]]
fine piece of work that has passed this body two times previously, but
also raises many concerns about raising the limit to $130,000.
The material that I referred to previously I will insert into the
Record at this point.
The Financial Services Roundtable,
Washington, DC, April 22, 2005.
Hon. Barney Frank,
House of Representatives,
Washington, DC.
Dear Barney: I would like to commend you on your leadership
and continued efforts on deposit insurance reform. An
effective deposit insurance system is critical to the economy
and maintaining public confidence in the U.S. banking system.
The Roundtable is committed to working with the Financial
Services Committee to develop reasonable, responsible deposit
insurance reform legislation that the Roundtable and the
industry can support.
The Roundtable supports the passage of H.R. 1185, the
``Federal Deposit Insurance Reform Act of 2005.'' We also
support the adoption of the ``Managers Amendment.''
The Financial Services Roundtable, a national association
representing 100 of the largest integrated financial services
companies that together constitute nearly 70 percent of the
deposit insurance assessment base, believe that H.R. 1185
will help assure a sound deposit insurance system. In
particular, we believe a major improvement to the bill was a
provision that stated no insured depository institution shall
be barred from the lowest-risk category solely because of
size.
Further, the Roundtable supports: Merging the Bank
Insurance Fund (``BIF'') and the Savings Association
Insurance Fund (``SAIF''). A combined BIF/SAIF would be
stronger and more resilient. The provision in your bill that
caps the FDIC's assessment authority at 1 basis point for
those institutions in the lowest-risk category. The bill's
study of the effectiveness of the prompt corrective action
program, and a strong system of credits and rebates such as
you have in your legislation.
We remain concerned about provisions in the bill that would
increase deposit insurance coverage limits. Our members
believe that raising coverage limits could weaken market
discipline and increase risk to the FDIC, all insured
institutions, and ultimately American taxpayers. Federal
Reserve Board Chairman Alan Greenspan has stated there is no
evidence that an increase in coverage levels would promote
competition or materially improve the ability of financial
institutions to obtain funds. As Chairman Greenspan noted,
the evidence in recent years shows that financial
institutions of all sizes have not experienced difficulty
in obtaining funding from insured or uninsured deposits.
For those customers with substantial deposits, ample
opportunities exist to obtain FDIC coverage equal to
several multiples of $100,000. Since the FDIC is in good
shape financially, there is no need to grant the FDIC
additional authority to levy deposit insurance premiums.
Thank you again for your leadership on deposit insurance
reform and your consideration of the Roundtable's views on
this important matter. We look forward to working with you as
this legislation moves through the legislative process. If
you or your staff have any questions or would like to discuss
these issues further, please call Irving Daniels or me at
(202) 289-4322.
Best regards,
Steve Bartlett,
President and CEO.
____
Keep Deposit Insurance Safe and Sound Support the Rohrabacher-Maloney
Amendment to H.R. 1185
``It is unlikely that increased coverage, even by indexing,
would add measurably to the stability of the banking system
today.''--Federal Reserve Board Chairman Alan Greenspan
``Increasing the overall coverage limit could weaken market
discipline and further increase the level of risk to the FDIC
and taxpayers.''--Undersecretary of Treasury for Domestic
Monetary Policy Peter Fisher
``We see no compelling evidence that increased coverage
levels would offer depositors substantial benefits.''--
Comptroller of the Currency John D. Hawke, Jr.
``Increasing the current insurance coverage level to
$130,000 would incur significant costs for insured
institutions since premiums would necessarily be increased.
The benefits of an increase are unclear. I have heard from
many of our institutions that they see no merit to bumping up
the current limit for standard accounts. In their view,
projected increases in insured deposits would not lead to a
substantive increase in new accounts.''--Director of the
Office of Thrift Supervision James E. Gilleran
``CBO estimates H.R. 522 would increase the net cost of
resolving failed financial institutions by $2.1 billion over
the next ten years.''--Congressional Budget Office Cost
Estimate
The Acting CHAIRMAN (Mr. Gingrey). The question is on the amendment
offered by the gentleman from California (Mr. Rohrabacher).
The amendment was rejected.
The Acting CHAIRMAN. Are there any other amendments?
If not, 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 Acting CHAIRMAN. Accordingly, under the rule, the Committee will
now rise.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Putnam) having assumed the Chair, Mr. Gingrey, Acting 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. 1185) to
reform the Federal deposit insurance system, and for other purposes,
pursuant to House Resolution 255, he reported the bill back to the
House with an amendment adopted by the Committee of the Whole.
The Acting CHAIRMAN. Under the rule, 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.
The SPEAKER pro tempore. 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. OXLEY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. There will be a 5-minute vote after this
vote on the motion to suspend.
The vote was taken by electronic device, and there were--yeas 413,
nays 10, not voting 10, as follows:
[Roll No. 157]
YEAS--413
Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Andrews
Baca
Bachus
Baird
Baker
Baldwin
Barrett (SC)
Barrow
Bartlett (MD)
Barton (TX)
Bass
Bean
Beauprez
Becerra
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boren
Boswell
Boucher
Boustany
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (SC)
Brown, Corrine
Brown-Waite, Ginny
Burgess
Burton (IN)
Butterfield
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Cardoza
Carnahan
Carson
Carter
Case
Castle
Chabot
Chandler
Chocola
Clay
Cleaver
Clyburn
Coble
Cole (OK)
Conaway
Conyers
Costa
Costello
Cox
Cramer
Crenshaw
Crowley
Cubin
Cuellar
Culberson
Cummings
Cunningham
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (KY)
Davis (TN)
Davis, Tom
Deal (GA)
DeGette
Delahunt
DeLauro
DeLay
Dent
Dicks
Dingell
Doggett
Doolittle
Doyle
Dreier
Duncan
Edwards
Ehlers
Emanuel
Emerson
Engel
English (PA)
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Feeney
Ferguson
Filner
Fitzpatrick (PA)
Foley
Forbes
Ford
Fortenberry
Fossella
Foxx
Frank (MA)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gohmert
Gonzalez
Goode
Goodlatte
Gordon
Granger
Graves
Green (WI)
Green, Al
Green, Gene
Grijalva
Gutierrez
Gutknecht
Hall
Harman
Harris
Hart
Hastings (FL)
Hayes
Hayworth
Hefley
Hensarling
Herseth
Higgins
Hinchey
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
Hooley
Hostettler
Hoyer
Hulshof
Hunter
Hyde
Inglis (SC)
Inslee
Israel
Issa
Istook
Jackson (IL)
Jefferson
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick (MI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Langevin
Lantos
Larsen (WA)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren, Zoe
Lowey
Lucas
Lungren, Daniel E.
Lynch
Mack
Maloney
Manzullo
Marchant
Markey
Marshall
Matheson
Matsui
McCarthy
McCaul (TX)
McCollum (MN)
McCotter
McCrery
McDermott
McGovern
McHenry
McHugh
McIntyre
McKeon
McKinney
McMorris
McNulty
Meehan
Meek (FL)
Meeks (NY)
Melancon
Menendez
Mica
Michaud
Millender-McDonald
[[Page H2936]]
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Mollohan
Moore (KS)
Moore (WI)
Moran (KS)
Moran (VA)
Murphy
Murtha
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Neugebauer
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
Poe
Pombo
Pomeroy
Porter
Price (GA)
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reichert
Renzi
Reyes
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Saxton
Schakowsky
Schiff
Schwartz (PA)
Schwarz (MI)
Scott (GA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Sodrel
Solis
Souder
Spratt
Stearns
Strickland
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Walden (OR)
Walsh
Wamp
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NAYS--10
Cooper
Davis, Jo Ann
DeFazio
Flake
Paul
Rohrabacher
Royce
Sanders
Stark
Taylor (MS)
NOT VOTING--10
Brown (OH)
Diaz-Balart, L.
Diaz-Balart, M.
Drake
Franks (AZ)
Hastings (WA)
Herger
Jackson-Lee (TX)
Larson (CT)
Scott (VA)
{time} 1558
Mrs. JO ANN DAVIS of Virginia and Mr. STARK 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.
Stated for:
Mr. HERGER. Mr. Speaker, on rollcall No. 157 I was unavoidably
detained. Had I been present, I would have voted ``yea.''
Mrs. DRAKE. Mr. Speaker, on rollcall No. 157, I regret that I was
unable to return quickly enough for this vote. I was at the Pentagon
for an awards presentation for an environmental award presented to a
Command at Naval Base Norfolk. Had I been present, I would have voted
``yea.''
____________________