[Congressional Record Volume 155, Number 91 (Wednesday, June 17, 2009)]
[Extensions of Remarks]
[Page E1456]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          BANK ACCOUNTABILITY AND RISK ASSESSMENT ACT OF 2009

                                 ______
                                 

                         HON. LUIS V. GUTIERREZ

                              of illinois

                    in the house of representatives

                         Tuesday, June 16, 2009

  Mr. GUTIERREZ. Madam Speaker, I rise in support of the ``Bank 
Accountability and Risk Assessment Act of 2009.'' This legislation, 
which I introduced today, will change the way that the FDIC charges 
premiums to federally insured banks in order to capitalize the Deposit 
Insurance Fund (DIF).
  Specifically, my bill will do two things: First, it will create a 
risk-based assessment process for all insured banks. Second, it will 
establish a special annual risk premium for the ``too-big-to fail'' 
banks that represent a systemic threat to our financial system.
  I am recommending these changes because I believe that our current 
system disproportionately advantages the largest institutions at the 
expense of small banks. For example, under the current system, the FDIC 
determines the regular quarterly premiums for each bank based only on 
the domestic deposits held by the bank, rather than on the bank's total 
assets. As a result, banks with assets of $1 billion or fewer pay 
assessments on nearly 80 percent of their liabilities because domestic 
deposits are their primary source of funding. Meanwhile, banks with 
more than $10 billion in assets pay premiums on only 47 percent of 
their liabilities.
  So, under the current system, while small banks pay insurance 
premiums on nearly their entire balance sheets, large banks pay on only 
half. I think we have it backwards. I think the largest banks with the 
riskiest investments should be responsible for paying more into the 
Deposit Insurance Funds than our Main Street banks that generally stay 
away from subprime mortgages and don't invest in mortgage backed 
securities or credit derivative swaps.
  The absurd result of the current system is that banks with fewer than 
$10 billion in assets pay approximately 30 percent of the total 
assessment base, although they hold only about 20 percent of total bank 
assets. This discrepancy is exacerbated by the fact that the largest 
institutions are ``too-big-to-fail,'' and it can be argued that their 
depositors and other creditors enjoy superior protection than do the 
depositors and creditors of ``too-small-to save'' banks.
  I believe that each institution should pay an insurance fee based on 
risk. And where does risk come from? It does not come from deposits, 
but from the assets and investments of banks. We've seen how assets--
like mortgage backed securities--can turn from assets to liabilities 
overnight. It's just common sense that banks with risky investments 
should pay more in deposit insurance premiums.
  In addition, small banks all across the nation, those under $10 
billion in total assets, will almost universally see their premiums go 
down under my proposal. For example, of the 655 federally insured banks 
in Illinois, 651 of them would see their premiums reduced. Only four 
banks would see an increase--the four largest banks.
  I like to compare this bill to the risk-based pricing that the banks 
have forced on consumers. For years, the banks have argued that risk-
based pricing for their products, such as credit cards and home 
mortgages, is not only logical but fair because they only raise rates 
on those customers they feel are the greatest risk to the overall 
health of their institution.
  Well, many of the same banks that utilize ``risk-based'' pricing for 
consumers required hundreds of billions of taxpayer dollars to survive. 
Their irresponsible actions not only created a huge risk for our 
nation's overall financial health, but also placed hundreds of billions 
of taxpayer dollars at risk. Through the ``Bank Accountability and Risk 
Assessment Act of 2009,'' I propose that the American people impose the 
same risk-based assessment on the banks that the banks have been 
imposing on our constituents for years.
  The FDIC has already taken a step forward in recognizing the greater 
risk that large, money center banks represent to the DIF. Last month, 
the FDIC's Board of Directors voted 4-1. to base their emergency 
premium assessment off a bank's assets and not their deposits. By 
basing the assessment off the institutions assets and not the deposits, 
the FDIC has recognized that any threat to the fund through a bank 
failure is dependent upon the liabilities that exist in a bank's 
assets, not their deposits.
  This was a good first step toward requiring systemically significant 
banks to pay their fair share into the DIF, but Congress must take 
action to codify this assessment base for all quarterly payments into 
the DIF and create system risk premiums for those banks deemed ``too-
big-to-fail.''
  I am introducing this bill today, because I think this issue should 
be on the table as we consider legislation to overhaul our financial 
regulatory system. Deciding who will bear the financial burden for the 
systemically important institutions is, I believe, a fundamental aspect 
of the regulatory restructuring debate. Above all, the ``Bank 
Accountability and Risk Assessment Act of 2009'' will return fairness 
to the deposit insurance assessment process.
  I urge my colleagues to support this important regulatory reform 
bill.

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