[Congressional Record Volume 155, Number 39 (Thursday, March 5, 2009)]
[Senate]
[Pages S2848-S2849]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD (for himself, Mr. Crapo, Mr. Akaka, Mr. Brown, Mr. 
        Corker, Mr. Bond, and Mr. Isakson):
  S. 541. A bill to increase the borrowing authority of the Federal 
Deposit Insurance Corporation, and for other purposes; to the Committee 
on Banking, Housing, and Urban Affairs.
  Mr. DODD. Mr. President, I have been approached, along with my 
colleague Senator Shelby and leaders of the House Financial Services 
Committee, by the Chairman of the Federal Deposit Insurance 
Corporation, Sheila Bair, with a request to increase substantially the 
FDIC's borrowing authority from Treasury from the current $30 billion 
to $100 billion, for use by the FDIC's Deposit Insurance Fund and for 
temporary additional borrowing authority to help weather the economic 
crisis. In response to her request, I am introducing the Depositor 
Protection Act of 2009, which provides this authority. We are taking 
this step out of an abundance of caution and to meet any contingencies 
that the fund may face in the coming months.
  The FDIC's Deposit Insurance Fund DIF absorbs losses that result from 
the corporation's obligation to protect insured deposits when FDIC-
insured financial institutions fail. Insured financial institutions pay 
premiums that support the DIF and under current law those premiums can 
be increased to cover any losses to the fund.
  Today, the House passed legislation to substantially and permanently 
increase this borrowing authority as part of H.R. 1106, the Helping 
Families Save Their Homes Act of 2009. Last month, Treasury Secretary 
Geithner and Chairman Bernanke of the Federal Reserve Board wrote to me 
to underscore their support for the FDIC's increased borrowing 
authority.
  Since the FDIC's borrowing authority was last increased in 1991, the 
asset size of banks has tripled. Even more important, the financial 
system is under considerable stress, and the level of thrift and bank 
failures has been rising. This line of credit is designed strictly to 
serve as a backstop to cover potential losses to the DIF.
  Though this statutory borrowing authority has historically never been 
tapped, and Chairman Bair has made clear she does not anticipate doing 
so, I agree with Chairman Bair, Secretary Geithner, and Chairman 
Bernanke that under current economic circumstances such an increase in 
borrowing authority is both prudent and necessary. It is important that 
we increase this line of borrowing authority so that the FDIC has the 
funds available which might be needed to meet its obligations to 
protect insured depositors and to reassure the public that the 
Government continues to stand firmly behind the FDIC's insurance 
guarantee.
  Additionally, on Friday, February 27, the FDIC Board voted to impose 
a one-time special assessment of 20 basis points on insured depository 
institutions because of concern about the level of the DIF. This 
special assessment is in addition to the regular premiums, which were 
increased on February 27 to a range of 12 to 16 basis points. The DIF 
is significantly below the statutory minimum reserve ratio of 1.15. As 
of December 31, 2008, the DIF ratio stood at .4. The FDIC has informed 
us that with the increased borrowing authority provided in this 
legislation, it believes it can reduce the size of the special 
assessment while still maintaining appropriate assessments at a level 
that supports the DIF with funding from the banking industry.
  Mr. President, I ask unanimous consent that the text of the bill and 
letters of support be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 541

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``The Depositor Protection Act 
     of 2009''.

     SEC. 2. INCREASED BORROWING AUTHORITY OF THE FEDERAL DEPOSIT 
                   INSURANCE CORPORATION.

       Section 14(a) of the Federal Deposit Insurance Act (12 
     U.S.C. 1824(a)) is amended--
       (1) by striking ``$30,000,000,000'' and inserting 
     ``$100,000,000,000'';
       (2) by striking ``The Corporation is authorized'' and 
     inserting the following:
       ``(1) In general.--The Corporation is authorized'';
       (3) by striking ``There are hereby'' and inserting the 
     following:
       ``(2) Funding.--There are hereby''; and
       (4) by adding at the end the following:
       ``(3) Temporary increases authorized.--
       ``(A) Recommendations for increase.--During the period 
     beginning on the date of enactment of this paragraph and 
     ending on December 31, 2010, if, upon the written 
     recommendation of the Board of Directors (upon a vote of not 
     less than two-thirds of the members of the Board of 
     Directors) and

[[Page S2849]]

     the Board of Governors of the Federal Reserve System (upon a 
     vote of not less than two-thirds of the members of such 
     Board), the Secretary of the Treasury (in consultation with 
     the President) determines that additional amounts above the 
     $100,000,000,000 amount specified in paragraph (1) are 
     necessary, such amount shall be increased to the amount so 
     determined to be necessary, not to exceed $500,000,000,000.
       ``(B) Report required.--If the borrowing authority of the 
     Corporation is increased above $100,000,000,000 pursuant to 
     subparagraph (A), the Corporation shall promptly submit a 
     report to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives describing the reasons and 
     need for the additional borrowing authority and its intended 
     uses.''.
                                  ____

         Federal Deposit


                                        Insurance Corporation,

                                    Washington, DC, March 5, 2009.
     Hon. Christopher J. Dodd,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         U.S. Senate, Washington, DC.
       1Dear Mr. Chairman: I am writing to express my support for 
     the Depositor Protection Act of 2009, legislation to increase 
     the Federal Deposit Insurance Corporation's borrowing 
     authority with the Treasury Department if losses from failed 
     financial institutions exceed the industry funded resources 
     of the Deposit Insurance Fund (DIF).
       As you know, the FDIC's borrowing authority was set in 1991 
     at $30 billion and has not been raised since that date. 
     Assets in the banking industry have tripled since 1991, from 
     $4.5 trillion to $13.6 trillion. As I indicated in my 
     previous letter of January 26, 2009, the FDIC believes it is 
     prudent to adjust the statutory line of credit 
     proportionately to leave no doubt that the FDIC can 
     immediately access the necessary resources to resolve failing 
     banks and provide timely protection to insured depositors.
       The legislation would include important additional 
     authority for the FDIC and would rationalize the FDIC's 
     current borrowing authority. Under current law, the FDIC has 
     the authority to borrow up to $30 billion from Treasury to 
     cover losses incurred in insuring deposits up to $100,000. In 
     addition, when Congress temporarily increased deposit 
     insurance coverage to $250,000, it temporarily lifted all 
     limits on the FDIC's borrowing authority to implement the new 
     deposit insurance obligation.
       The bill would permanently increase the FDIC's authority to 
     borrow from Treasury from $30 billion to $100 billion. In 
     addition the bill also would temporarily authorize an 
     increase in that borrowing authority above $100 billion (but 
     not to exceed $500 billion) based on a process that would 
     require the concurrence of the FDIC, the Federal Reserve 
     Board, and the Treasury Department, in consultation with the 
     President.
       Because the existing borrowing authority for losses from 
     bank failures provides a thin margin of error, it was 
     necessary for the FDIC recently to impose increased 
     assessments on the banking industry. These assessments will 
     have a significant impact on insured financial institutions, 
     particularly during a financial crisis and recession when 
     banks must be a critical source of credit to the economy.
       The size of the special assessment reflected the FDIC's 
     responsibility to maintain adequate resources to cover 
     unforeseen losses. Increased borrowing authority, however, 
     would give the FDIC flexibility to reduce the size of the 
     recent special assessment, while still maintaining 
     assessments at a level that supports the DIF with industry 
     funding. While the industry would still pay assessments to 
     the DIF to cover projected losses and rebuild the Fund over 
     time, a lower special assessment would mitigate the impact on 
     banks at a time when they need to serve their communities and 
     revitalize the economy.
       In conclusion, the Depositor Protection Act would leave no 
     doubt that the FDIC will have the resources necessary to 
     address future contingencies and seamlessly fulfill the 
     government's commitment to protect insured depositors against 
     loss. I strongly support this legislation and look forward to 
     working with you to enact it into law.
           Sincerely,
                                                   Sheila C. Bair,
     Chairman.
                                  ____

                                         Board of Governors of the


                                       Federal Reserve System,

                                 Washington, DC, February 2, 2009.
     Hon. Christopher J. Dodd,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         U.S. Senate, Washington, DC.
       Dear Mr. Chairman: I am writing to join the Secretary of 
     the Treasury in expressing my agreement that the authority of 
     the Federal Deposit Insurance Corporation (FDIC) to borrow 
     from the Treasury Department should be increased to $100 
     billion from its current level of $30 billion. While the FDIC 
     has substantial resources in the Deposit Insurance Fund, the 
     line of credit with the Treasury Department provides an 
     important back-stop to the fund and has not been adjusted 
     since 1991. An increase in the line of credit is a reasonable 
     and prudent step to ensure that the FDIC can effectively meet 
     potential future obligations during periods such as the 
     difficult and uncertain economic climate that we are 
     currently experiencing.
       I also support legislation that would allow the Secretary 
     of the Treasury, in consultation with the Chairman of the 
     Board of Governors of the Federal Reserve System if Congress 
     believes that to be appropriate, to increase the FDIC's line 
     of credit with the Treasury in exigent circumstances. This 
     mechanism would allow the FDIC to respond expeditiously to 
     emergency situations that may involve substantial risk to the 
     financial system.
       The Federal Reserve would be happy to work with your staff 
     on this matter, as well as on the other amendments under 
     consideration that would allow the FDIC more flexibility in 
     the timing and scope of assessments that it charges to 
     recover costs to the Deposit Insurance Fund in the event that 
     the systemic risk exception in the Federal Deposit Insurance 
     Act has been invoked.
           Sincerely,
                                                  Ben S. Bernanke,
     Chairman.
                                  ____



                                   Department of the Treasury,

                                 Washington, DC, February 2, 2009.
     Hon. Christopher J. Dodd,
     Chairman, Committee on Banking, Housing & Urban Affairs, U.S. 
         Senate, Washington, DC.
       Dear Mr. Chairman: I am writing to express my support for 
     the Federal Deposit Insurance Corporation's (FDIC) current 
     request to increase its permanent statutory borrowing 
     authority under its line of credit with the Treasury 
     Department from $30 billion to $100 billion. Since the last 
     increase in that authority in 1991, the banking industry's 
     assets have tripled. More importantly, the financial and 
     credit markets continue to be under acute stress, and the 
     level of thrift and bank failures has been rising. Although 
     the FDIC's Deposit Insurance Fund remains substantial at $35 
     billion, and the FDIC has never needed to tap the existing 
     line of credit with the Treasury Department in the past, the 
     proposed increase in the limit is a reasonable and prudent 
     step to ensure that the FDIC can effectively meet any 
     potential future. obligations.
       The Treasury Department also supports the FDIC's request to 
     make future adjustments to the line of credit based on 
     exigent circumstances, but recommends that such future 
     adjustments require the concurrence of both the Secretary of 
     the Treasury and the Chairman of the Board of Governors of 
     the Federal Reserve System. This future adjustment mechanism 
     would provide an additional layer of protection for insured 
     depositors and enhance the confidence of financial markets 
     during this turbulent period.
       The Treasury Department also supports the FDIC having 
     authority to determine the time period for recovering any 
     loss to the insurance fund resulting from actions taken after 
     a systemic risk determination by the Secretary of the 
     Treasury.
       I hope that you find our views useful in the Committee's 
     consideration of the FDIC's request. Thank you for the 
     opportunity to share these views.
           Sincerely,
                                              Timothy F. Geithner,
     Secretary of the Treasury.

                          ____________________