[Congressional Record (Bound Edition), Volume 149 (2003), Part 6]
[House]
[Pages 8075-8098]
[From the U.S. Government Publishing Office, www.gpo.gov]




              FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2003

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

                              {time}  1039


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 522) to reform the Federal deposit insurance system, and for 
other purposes, with Mr. LaHood in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the order of the House of Tuesday, April 1, 
2003, the bill is considered as having been read the first time.
  Under the rule, the gentleman from Alabama (Mr. Bachus) and the 
gentleman from Massachusetts (Mr. Frank) each will control 30 minutes.
  The Chair recognizes the gentleman from Alabama (Mr. Bachus).
  Mr. BACHUS. Mr. Chairman, I yield myself 7 minutes.
  Mr. Chairman, I rise in support of H.R. 522, the Federal Deposit 
Insurance Reform Act of 2003. I want to begin by thanking the gentleman 
from Ohio (Mr. Oxley), the chairman of the committee, for his 
tremendous leadership in steering what is a complex bill through the 
legislative process. I also want to thank the ranking member of the 
committee, the gentleman from Massachusetts (Mr. Frank), for his 
support of this important piece of legislation. The committee and the 
Congress in its votes on this legislation in the past, legislation very 
similar, has shown that it can work together in a very bipartisan 
manner.
  Deposit insurance reform has been thoroughly discussed and debated 
over the past several years. During the 107th Congress, I introduced 
comprehensive deposit insurance reform, H.R. 3717. The legislation was 
a by-product of recommendations by the FDIC in early 2001, industry 
representatives coming together urging that we take action. The 
American Banking Association, The Credit Union National Association, 
Independent Bankers and Financial Services Roundtable, all urging the 
Federal Reserve, the administration, urging us to take action to reform 
Federal deposit insurance. We did take action, and the 107th Congress 
passed H.R. 3717 by a vote of 408 to 18.
  Unfortunately, that bill died in the other body.
  Earlier this year, I introduced the same legislation. This time it is 
H.R. 522, the Deposit Insurance Reform Act of 2003. The gentleman from 
Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank) 
joined me in introducing this legislation, along with 57 other 
cosponsors on both sides of the aisle. It was approved by the Committee 
on Financial Services by a unanimous voice vote. I am pleased that the 
Senate now plans to act on similar legislation in the very near future, 
and that the President's budget for fiscal year 2004 outlines a 
proposal similar to our legislation.
  The legislation is supported not only by American bankers, the 
Financial Services Roundtable made up of the 100 largest financial 
corporations in America, but also by the credit unions, the thrift 
associations, the community bankers, the securities industry, and also 
by groups that we sometimes do not find on the same side; the American 
Association of Retired Persons has recently endorsed this legislation.

[[Page 8076]]

  Federal deposit insurance has been the hallmark of our Nation's 
banking system for almost 70 years. The reforms made by this 
legislation will ensure that the system that serves savers and 
depositors so well for so long will continue for future generations.
  What does the legislation do? First, it merges separate insurance 
funds that currently apply to deposits held by banks on the one hand 
and savings associations on the other, creating a stronger, more stable 
fund that benefits banks and thrifts alike.
  Second, it changes the ``pro-cyclical'' bias of the current system. 
In other words, it spreads out over time the assessments to the 
institutions which results in, by doing this, a more uniform 
assessment. Presently we have sharply higher premiums served during 
recessionary times and much lower premiums during good times. Banks can 
least afford to pay a higher premium during recessions, and we found 
that out, and this corrects that.

                              {time}  1045

  Third, the legislation includes modest increases in the amount of 
coverage available. The system has gone from 1980 without an increase 
in coverage. If we took 1980 as our basis and we increased coverage 
based on inflation, we would go to $200,000. If we went back to 1980, 
the $100,000, and we increased it based on per capita income, it would 
actually go to $300,000. So we are proposing $130,000, a very modest 
increase.
  If we went back to 1974, because some have said they should not have 
raised it in 1980, they should have kept it at the 1974 level, and we 
increased it for inflation, it would go to $140,000.
  Mr. Chairman, there are some who will offer amendments who have 
actually publicly stated that they do not believe in Federal deposit 
insurance, one of the gentlemen offering an amendment later on. So 
there are Members of the body who do not believe that our deposits in 
banks should be federally insured.
  I understand that; but I, for one, disagree with that. I think 
Americans have come to rely and have a sense of security in knowing 
that when they put their retirement funds in a bank or thrift that it 
is federally insured. Particularly in light of the recent volatility on 
Wall Street, people have, I think, come to rely more and value more the 
fact that they can put their money in a federally insured financial 
institution and not lose that money.
  All of us have heard from community bankers in our districts about 
the challenges that they face in competing for deposits with large-
money center banks that are perceived by the market, rightly or 
wrongly, as being too big to fail. By strengthening the deposit 
insurance system, our legislation will help small neighborhood-based 
financial institutions across the country, especially in rural areas, 
continue to play an important role in financing economic development.
  The independent bankers have actually said that this legislation is 
key to maintaining local home-owned banking institutions. The deposits 
that community banks are able to attract through Federal deposit 
insurance guarantees are cycled back into local communities in the form 
of consumer and small business loans. One reason for this legislation 
is we value the right of every American to go down to his corner 
financial institution.
  My thanks go to the chairman of the committee.
  Mr. Chairman, I reserve the balance of my time.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as 
I may consume.
  Mr. Chairman, I support this legislation. It is a very useful 
synthesis of several important elements. It merges the two bank funds. 
We have had two bank funds because we previously had a separate thrift 
and commercial system that was undone by earlier events. We deal here 
to some extent with the complication of newer entities now coming into 
the system as a result of the previous legislation we adopted repealing 
the old restrictions on banking.
  There is one particular point I want to stress, that is, that an 
amendment that is included in this, and I thank the gentleman from 
Alabama (Mr. Bachus) and the chairman of the committee, the gentleman 
from Ohio (Mr. Oxley), for agreeing to this, cosponsored, when we last 
debated this bill last year when it passed in our body and did not go 
further, sponsored by our colleague, the gentlewoman from California 
(Ms. Waters).
  Years ago, two Members, two former Members, a Member from 
Pennsylvania named Ridge and a Member from New York named Flake, 
sponsored a bill to get low-income people who are outside the banking 
system into the banking system. The bankers of America should recognize 
this for what it is, a great compliment, a tribute to the role that a 
banking system plays in enhancing the ability of consumers to manage 
their lives well.
  We have people who are victimized by unscrupulous lending practices. 
We have people who pay too much to do remittances to other countries, 
hard-working people in this country who are sending money to family 
elsewhere. We have payday lending exploitation. Getting people into the 
banking system is a way to resolve that.
  The problem was, there was no funding source for that. In this bill 
there is a funding source. It comes through deposit insurance. I know 
there are people in the banking industry, with whom I agree on many 
issues, who do not like that funding source. If they can come up with 
an equally reliable alternative funding source, I will work with them.
  But I want to make clear, this bill is a synthesis. It helps the 
people in the banking industry, who are a very important part of our 
economy; and I am all for it for that reason. It also, and there is one 
provision, does something about equity. I think that is the model we 
ought to be following. We ought to be doing what we can to enhance the 
ability of the free market system to create wealth, which it does so 
well; but we ought also to be looking for opportunities to accompany 
those moves with smaller measures, generally, in scope, measures that 
do not cost any great deal of money very often, although sometimes it 
might be more, that provide some equity, as well.
  This bill does both. It is to me a whole joined together; and it will 
leave here, and I appreciate the support of the leadership of the 
committee on the majority side, with those two elements conjoined. I do 
want to note that if it came back and somebody has put asunder what we 
have joined, the support for this bill would not be what it is. So I 
thank the gentleman from Alabama for his leadership.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Ohio (Mr. Tiberi).
  Mr. TIBERI. Mr. Chairman, I rise today in support of H.R. 522, 
legislation to reform the Federal deposit insurance system. As a member 
of the Committee on Financial Services, I am pleased to see the House 
take up this legislation today, and provide my colleague, the gentleman 
from Alabama, kudos for bringing this measure to the floor and to the 
debate today.
  One of the provisions of H.R. 522 is it increases deposit insurance 
coverage from $100,000 to $130,000 per account. The hike in coverage 
limits is most appropriate, as the current ceiling was set in 1980; and 
inflation has eroded the real value of that coverage by more than 50 
percent. Increased coverage limits will be especially helpful to 
community banks in bringing, and just as importantly keeping, deposits 
in their institutions that can be used in local economies and local 
communities.
  In addition, the bill would provide $260,000 in coverage for certain 
retirement products, certain IRAs, certain 401(k)s, a key step in an 
ongoing effort here in the Capitol to encourage consumers to build 
their savings. This provision in particular is relevant to our seniors, 
who benefit by being able to be more savers as they move toward 
retirement savings and retirement age to the security of the insured 
deposit system.
  Mr. Chairman, I strongly support this provision and urge all of my 
colleagues to support it, as well, and vote

[[Page 8077]]

in favor not only of this important piece of legislation, but also 
against the amendment that will be offered later to move this provision 
from $130,000 back to $100,000.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Kansas (Mr. Moran).
  Mr. MORAN of Kansas. Mr. Chairman, I appreciate the gentleman from 
Alabama for yielding time to me, and I commend him on his leadership 
and persistence with regard to this legislation. It has been a long 
time coming, and I am pleased today to support H.R. 522.
  Much of my focus as a Member of Congress has been on what can we do 
to improve the chances that rural America will survive, what can we do 
to make certain that the communities across our country and the people 
who live there have a little prosperity today, but they also are able 
to preserve that way of life in small-town America for future 
generations.
  One of the concerns that is clearly there and can be demonstrated is 
the need for credit for small loans, the need for credit for small 
business, the need for credit for small farmers and ranchers. We must 
take steps that will strengthen the financial opportunities available 
for citizens of our communities across the country to save, to set 
their money aside. This will encourage those individuals to be able to 
do that in larger amounts, without having to take the necessary risks 
of investing in some more volatile kind of market or shopping for 
deposit ability in towns far away.
  Perhaps, even more importantly, if we want rural America to survive, 
if we want small business and agriculture to have an opportunity to 
succeed, they have to have access to credit. The opportunity that this 
legislation presents is a step in the right direction toward making 
certain that credit is available to our creditworthy business owners, 
farmers, and ranchers.
  I commend the committee and thank them for their efforts in this 
regard. I lend my wholehearted support toward increasing the amount of 
coverage and making it possible for our communities to have a greater 
volume of assets on deposit in their local bank.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Texas (Mr. Hensarling).
  Mr. HENSARLING. Mr. Chairman, I rise today in support of H.R. 522, 
the Federal Deposit Insurance Reform Act of 2003. As a member of the 
Committee on Financial Services, I want to thank the gentleman from 
Ohio (Chairman Oxley) and the subcommittee chairman, the gentleman from 
Alabama (Mr. Bachus), for their work on this legislation and for acting 
quickly in this new Congress to address this matter of importance to 
banks and depositors alike.
  This legislation will help create a more stable and a more fair and 
secure banking system. By combining the Banking Insurance Fund and the 
Savings Association Insurance Fund into one fund, the risks that a 
couple of large institutions could fail and impair each fund is greatly 
reduced.
  Merging these funds will help increase fairness in our banking system 
as well by eliminating the possibility that two institutions of similar 
sizes would essentially be paying two completely different premiums. 
Further, the merged fund will make reporting and accounting less 
burdensome for both the institutions and the FDIC as well.
  Our deposit insurance system plays a vital role in our economic 
security. This legislation will give the FDIC the necessary flexibility 
to respond to varying economic conditions and allow them to properly 
price premiums to reflect actual risk. By eliminating the 23 basis 
point premium ``rate cliff'' required under current law, more 
institutions will have more capital to invest in our economy. That 
means more jobs, more hope, more opportunity.
  Mr. Chairman, FDIC Chairman Powell stated in his testimony before the 
Committee on Financial Services last month that H.R. 522 gives Congress 
``an opportunity to remedy flaws in the deposit insurance system before 
those flaws cause actual damage, either to the banking industry or our 
economy as a whole.''
  As a member of that committee, I am glad to see this body act so 
expeditiously on this legislation. I urge all of my colleagues to vote 
for H.R. 522.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentlewoman from 
Florida (Ms. Ginny Brown-Waite).
  Ms. GINNY BROWN-WAITE of Florida. Mr. Chairman, I thank the gentleman 
for yielding time to me.
  I rise today in very strong support of the Federal Deposit Insurance 
Reform Act of 2003. This very critical legislation increases the 
standard maximum deposit coverage from $100,000 to $130,000, and then 
indexes the increase every 5 years to account for inflation.
  However, most importantly to the seniors in my district, H.R. 522 
calls for a doubling of the maximum deposit coverage for retirement 
accounts. This would allow seniors to maintain coverage on up to 
$260,000 in their retirement accounts.
  The amendment offered today would strike this coverage without doing 
it for any good reason. The increases are modest and necessary in this 
bill. If the coverage limit actually had been keeping pace with 
inflation, today the standard limit would be about $200,000. This bill 
proposes an increase to only $130,000.
  The FDIC is in great need of these commonsense reforms, and I urge my 
colleagues to join with me in support of H.R. 522 and to oppose any 
amendment that would strike the coverage increases.

                              {time}  1100

  Mr. FRANK of Massachusetts. Mr. Chairman, I yield 3 minutes to the 
gentleman from Texas (Mr. Gonzalez).
  Mr. GONZALEZ. Mr. Chairman, I rise in support of H.R. 522. I believe 
this bill makes important changes to the deposit insurance system to 
improve its effectiveness and increases incentives for people to save.
  I wish to particularly speak in support of the provision in this bill 
that will require the FDIC to report annually on efforts by insured 
institutions to increase their deposit base by encouraging unbanked 
households to enter the conventional finance system and to avail 
themselves of bank accounts and other conventional services offered by 
depository institutions.
  Unbanked families as defined by this provision are those individuals 
who rarely, if ever, held a checking account or savings account or 
other type of conventional account in an insured depository 
institution. Joining me attaching this provision in committee was the 
gentleman from Illinois (Mr. Gutierrez) and the gentleman from Texas 
(Mr. Hinojosa).
  Mr. Chairman, too many families lack access to basic fundamental 
services. It is currently estimated that nearly 10 million American 
families are unbanked. Unfortunately, for unbanked families there are 
no real financial alternatives but payday lenders or check cashers, 
which is often the worst form of financing for a struggling American 
family.
  The Hispanic community particularly struggles with high rates of 
unbanked families. One recent survey found that 35 percent of Hispanic 
families did not have a bank account, with that number rising to 42 
percent for those Hispanics who are foreign born. With limited access 
to formal saving tools, it is no surprise that the financial net worth 
of the median Hispanic family in the United States today is estimated 
to be zero.
  Fortunately, great strides have been made by major financial 
institutions to increase their presence in the Hispanic community 
through the use of such things as money remittance technology and the 
matricula card. It is my hope and expectation that all major depository 
institutions will look at unbanked minority families as a business 
opportunity and aggressively attempt to include them in the 
conventional finance system.
  A relationship to a mainstream financial institution has long-term 
positive economic and financial effects on families and the communities 
where they reside, fostering their greater integration into the United 
States economy. The best defense against predatory financing is 
education and a bank

[[Page 8078]]

account. The unbanked provision in H.R. 522 is intended to highlight 
those efforts which are most effective in expanding the banking system 
to every American family. I urge the passage of this bill.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Colorado (Mr. Beauprez).
  Mr. BEAUPREZ. Mr. Chairman, I thank the gentleman for yielding me 
time. I particularly commend him for bringing H.R. 522 to the floor of 
this body.
  Before I was sworn in as a Member of Congress I was a community 
banker. Our family still operates a community bank back home, and I 
want to highlight why I am supporting this bill from particularly a 
community banker's position.
  Chairman Powell, Chairman of the FDIC, has indicated that the buying 
power of the $100,000 that is in reference today has deteriorated since 
1980, the last time that FDIC insurance rates were adjusted to just 
$47,000 currently. Well, the same holds true on the lending side, and 
that is what I want to focus on is credit availability.
  One of the biggest challenges, especially for community banks like I 
ran back home, was to have adequate deposits to meet credit demand. 
Now, if the $100,000 in 1980 is representative of $47,000 worth of 
buying power today, similarly, demand for credit has escalated the same 
way. Access to those deposits is critical and insurance coverage for 
those deposits is one of the main criteria for large deposit customers 
to bring their cash to the bank, knowing that it is covered. They 
either spread it out among other financial institutions at tremendous 
burden to them, or they put it in uninsured accounts out in the 
marketplace, both poor options. They like to establish a relationship 
and like to keep that relationship. This only makes good sense.
  Another reason it makes such good sense is that it is a self-
insurance program. The banks pay the premium that guarantees the 
insurance protection for these deposits.
  Mr. Chairman, let me again commend the gentleman for bringing this 
legislation to the floor of this body. It is legislation I have long 
supported and long encouraged, and I thank the gentleman from Alabama 
(Mr. Bachus) for his leadership on this issue.
  Mr. BACHUS. Mr. Chairman, I yield 4 minutes to the gentleman from 
Ohio (Mr. Oxley), the chairman of the Committee on Financial Services.
  Mr. OXLEY. Mr. Chairman, I rise today in strong support of H.R. 522, 
the Federal Deposit Insurance Reform Act of 2003. Our country has the 
largest, most complex, most stable banking system in the world. Deposit 
insurance is one of the major reasons for this stability. And today we 
will strengthen this system so that it continues to serve as a model 
for the rest of the world.
  Depositors, taxpayers, and depository institutions would be well-
served by this legislation which will modernize the Federal deposit 
insurance system. Federal deposit insurance was created by the Congress 
in 1934 and it has successfully served the American people for almost 
70 years. Public confidence has been maintained, and the stability of 
the Nation's banking system has been preserved during periods of 
financial uncertainty.
  The deposit insurance system has been significantly modified only 
twice since 1934, both times in response to the savings and loan crisis 
of the late 1980s and 1990s. During this crisis the Federal Government 
resolved 2,363 failures of insured institutions involving more than 
$700 billion in assets. As FDIC Chairman Powell has stated, ``There 
were no bank runs, no panics, no disruptions to financial markets, and 
no debilitating impact on overall economic activity.''
  The existence of the Federal deposit insurance was a critical factor 
in maintaining public confidence in the banking system during these 
troubled times. H.R. 522, though technical in nature, seeks to apply 
the experience of the last decade to today's banking marketplace. It is 
the 21st century legislation for a 21st century banking industry, and 
this is it. And while the purpose of deposit insurance remains the 
same, industry growth, bank expansion from new powers, and the 
integration of banking and securities activities require that the scope 
and coverage of deposit insurance evolve so as to reflect the realities 
of a modern financial services industry. Moreover, the presence of 
Federal deposit insurance continues to be a key consideration for 
consumers in their decisions about where they do their banking and what 
level of deposit risk they are willing to assume.
  Mr. Chairman, there is broad consensus in this body, the Bush 
administration, the Federal banking and thrift regulators, and business 
and consumer groups in favor of improving and strengthening the deposit 
insurance system and making it more responsive to the cyclical nature 
of banking activities and the post-Gramm-Leach-Bliley financial and 
economic environment. This legislation fulfills our commitment to the 
American public. Indeed, H.R. 522 was reported out of committee on a 
voice vote, a testimony to its responsiveness and timeliness. 
Substantially similar legislation passed this body just last year with 
over 400 votes.
  This legislation is based on the recognition that depositors, savers, 
and investors have integrated financial needs and that the deposit 
insurance system must be stronger, more flexible, and adaptable to 
changing depositor behaviors in real times. The bill provides the FDIC 
with the necessary supervisory tools to manage the deposit insurance 
fund in a way that balances all affected interests and allocates the 
benefits and costs of the system evenly and fairly.
  I want to thank the chairman of the Subcommittee on Financial 
Institutions and Consumer Credit, the gentleman from Alabama (Mr. 
Bachus) for taking on this challenging, highly technical legislative 
process and for engaging all the major stakeholders in developing a 
bipartisan piece of well-balanced, highly effective legislation.
  I also want to thank all of the bipartisan co-sponsors of this 
important legislation, particularly our distinguished ranking member, 
the gentleman from Massachusetts (Mr. Frank), for their good work in 
this effort. I strongly urge all of my colleagues to support this 
legislation, and by doing so we ensure the public continues to maintain 
its confidence in the U.S. financial services industry, by far the most 
stable in the world.
  Mr. Chairman, in scoring last year's deposit insurance reform 
legislation, the CBO concluded that the bill would decrease net Federal 
spending by $700 million. This year, presented with a substantially 
similar piece of legislation reforming the deposit insurance system, 
the CBO applied a different set of assumptions in performing its 
analysis of H.R. 522, and concluded that this year's bill would 
increase net Federal spending by some $1.9 billion.
  This large swing between last year's estimate and this year's is 
attributable in large measure to a change in CBO's calculation of how 
much premiums the FDIC will be able to collect from insured depository 
institutions under the two bills. In making this calculation, CBO 
acknowledged the speculative nature of its analysis, stating that ``it 
is possible that the FDIC could use its broad discretion [under the 
legislation] differently than we have assumed and that could result in 
either fewer or greater premium collections than CBO has estimated.''
  The CBO's analysis is grounded in an arbitrary assumption that the 
FDIC Board will choose not to exercise its authority in a revenue 
neutral way. This assumption is directly contrary to the consistent 
congressional testimony of the FDIC that a central goal of deposit 
insurance reform is revenue neutrality.
  In fact, in a letter that the Committee received on March 31, 2003, 
from the Chairman of the FDIC, the Honorable Don Powell, Chairman 
Powell stated the FDIC's position that H.R. 522 gives the agency 
``appropriate tools and incentives to manage the deposit insurance 
system such that it will not result in increased net government 
spending.''
  Chairman Powell's letter, which conclusively rebuts the notion that 
H.R. 522 will have an adverse affect on Federal spending, goes on to 
state:

       H.R. 522 provides the FDIC with the tools to achieve 
     revenue neutrality in the management of the deposit insurance 
     system. Because any analysis that determines H.R. 522 will 
     result in an increase in net government

[[Page 8079]]

     spending must necessarily rely on assumptions regarding how 
     the FDIC Board will exercise the discretion provided in the 
     legislation, I can assure Congress that the leadership of the 
     FDIC has no intention of managing the deposit insurance 
     system in a way that increases the costs to the government or 
     increases the burden on insured institutions. The costs of 
     the deposit insurance system will continue to be borne by the 
     banking industry, but in a manner that establishes a strong 
     risk-based premium system and avoids the procyclical risks 
     inherent in current law.

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

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                   Washington, DC, March 28, 2003.
     Hon. Michael G. Oxley,
     Chairman Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for H.R. 522, the Federal 
     Deposit Insurance Reform Act of 2003.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Mark 
     Hadley and Ken Johnson (for federal costs), and Judith Ruud 
     (for the private-sector impact).
           Sincerely,
                                                 Barry B. Anderson
                                for Douglas Holtz-Eakin, Director.
       Enclosure.
     H.R. 522--Federal Deposit Insurance Reform Act of 2003
       Summary: H.R. 522 would amend provisions of banking and 
     credit union law to reform the deposit insurance system. 
     Specifically, the bill would increase insurance coverage for 
     insured accounts from $100,000 per account to $130,000 for 
     most accounts (with higher levels of coverage for retirement 
     accounts and municipal deposits). Over time, the coverage 
     limit for insured deposits would increase to account for 
     inflation. Those provisions of the bill would affect deposits 
     held by banks and thrifts, which are insured by the Federal 
     Deposit Insurance Corporation (FDIC), as well as those held 
     by credit unions, which are insured by the National Credit 
     Union Administration (NCUA). In addition, the bill would 
     merge the Bank Insurance Fund (BIF) and the Savings 
     Association Insurance Fund (SAIF) to create a new Deposit 
     Insurance Fund (DIF) to pay the claims of depositors of 
     failed banks and thrifts. Finally, H.R. 522 would amend the 
     conditions under which banks and thrifts would pay insurance 
     premiums to the FDIC, which administers the funds.
       CBO estimates that H.R. 522 would increase the net cost of 
     resolving failed financial institutions by $2.1 billion over 
     the next 10 years. Under the bill, the FDIC and NCUA would 
     offset some of that cost through increased insurance premiums 
     paid by financial institutions. Because H.R. 522 would allow 
     institutions to pay FDIC premiums with credits in lieu of 
     cash, the additional cost of resolving failed financial 
     institutions under the bill would exceed the cash receipts 
     from additional premiums. Consequently, we estimate that the 
     FDIC would bear nearly all of the increased costs of 
     resolving failed institutions during the next five years, 
     when most of the credits would be used. As a result, CBO 
     estimates that a would increase net direct spending by $1.9 
     billion over the 2004-2013 period.
       H.R. 522 contains an intergovernmental mandate as defined 
     in the Unfunded Mandates Reform Act (UMRA). CBO estimates 
     that the mandate would impose no costs on state, local, or 
     tribal governments and, therefore, that it costs would not 
     exceed the threshold established in UMRA ($59 million 2003, 
     adjusted annually for inflation).
       The bill contains private-sector mandates as defined by 
     UMRA, primarily because it would necessitate the payment of 
     increased deposit insurance premiums. CBO estimates that the 
     direct cost of those mandates would be below the annual 
     threshold specified in UMRA ($117 million in 2003, adjusted 
     annually for inflation) during the first five years after 
     enactment because the bill would provide credits to certain 
     institutions that would largely offset their insurance 
     premium assessments over the 2004-2008 period. We do not have 
     sufficient information to provide a precise estimate of the 
     aggregate cost of all the mandates in the bill.
       Estimated cost to the Federal Government: The estimated 
     budgetary impact of H.R. 522 is shown in the following table. 
     The costs of this legislation fall within budget function 370 
     (commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in billions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                               2004       2005       2006       2007       2008       2009       2010       2011       2012       2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     DIRECT SPENDING
 
FDIC and NCUA Spending Under Current Law:
    Estimated Budget Authority............          *          *          *          *          *          *          *          *          *          *
    Estimated Outlays.....................        1.1        1.5        0.9        0.7        0.7        0.8        0.6        0.3        0.1        0.3
    Changes in Costs to Resolve Failed
     Institutions Insured by FDIC and
     NCUA:
        Estimated Budget Authority........          0          0          0          0          0          0          0          0          0          0
        Estimated Outlays.................        0.2        0.2        0.2        0.2        0.2        0.3        0.3        0.2        0.2        0.2
    Changes to FDIC and NCUA Premium
     Collections:
        Estimated Budget Authority........          0          0          0          0          0          0          0          0          0          0
        Estimated Outlays.................        0.5        0.4        1.1        0.4          *       -0.3       -0.4       -0.5       -0.6       -0.9
                                           -------------------------------------------------------------------------------------------------------------
          Total Changes Under H.R. 522:...
              Estimated Budget Authority..          0          0          0          0          0          0          0          0          0          0
              Estimated Outlays...........        0.7        0.6        1.3        0.6        0.2          *       -0.1       -0.3       -0.4       -0.7
FDIC and NCUA Spending Under H.R. 522:
    Estimated Budget Authority............          *          *          *          *          *          *          *          *          *          *
    Estimated Outlays.....................        1.8        2.1        2.2        1.3        0.9        0.8        0.5          *       -0.3       -0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--*=Between 0 and -$50 million.

       Basis of estimate: Two federal agencies are primarily 
     responsible for the deposit insurance system. The FDIC 
     insures the deposits in banks with the BIF and the deposits 
     of thrifts with the SAIF. The NCUA insures the deposits in 
     credit unions (referred to as shares) with the Share 
     Insurance Fund. When a financial institution fails, the FDIC 
     or NCUA use the insurance funds to reimburse the insured 
     depositors of the failed institution. These agencies then 
     sell the assets of the failed institution and deposit any 
     money recovered into the insurance funds.
       CBO estimates that H.R 522 would increase both the cost of 
     resolving failed financial institutions and the premiums paid 
     by financial institutions. Over the 2004-2013 period, we 
     estimate that the cost of resolving failed institutions would 
     increase by $2.1 billion and premiums paid by financial 
     institutions would increase by $200 million. Thus, we 
     estimate that enacting H.R. 522 would result in a net 
     increase in direct spending of $1.9 billion over the 2004-
     2013 period. The major components of this estimate are 
     explained below.
     Increase in the Cost of Resolving Failed Financial 
         Institutions
       H.R. 522 would increase deposit insurance coverage from 
     $100,000 to $130,000 for most accounts, with higher coverage 
     levels for employee benefit plans and in-state municipal 
     deposits. Such increases would apply to deposits held by 
     credit unions as well as banks and thrifts. In addition, the 
     bill would require the FDIC and NCUA to adjust deposit 
     insurance coverage every five years beginning January 1, 
     2006, to account for inflation. because H.R. 522 would 
     require that coverage levels be rounded to the nearest 
     $10,000, CBO estimates that coverage would remain at $130,000 
     in 2006 and would increase to $150,000 in 2011.
       By 2004, we expect that insured deposits will total more 
     than $3.5 trillion under current law. Based on information 
     from the FDIC and the experience of past increases in deposit 
     insurance coverage, CBO estimates that the increased 
     insurance coverage under H.R. 522 would increase the deposits 
     insured by the FDIC by about $300 billion--or around 8 
     percent.
       By insuring current deposits that are now uninsured, the 
     bill would increase the liability of the FDIC and NCUA when 
     institutions fail without significantly increasing the assets 
     of those institutions. Under current law, we expect the 
     FDIC's net losses on failed institutions to total about $12.2 
     billion over the 2004-2013 period. (We project that gross 
     losses of $56.3 billion would be offset, in part, by 
     recoveries of $44.1 billion from selling the assets of the 
     failed institutions.) CBO estimates that the bill would lead 
     to an increase in net losses of $1 billion over the next 10 
     years. Outlays for resolving failed institutions would 
     increase by a larger amount over the next 10 years, however, 
     because selling the assets of failed banks often takes many 
     years. As a result, CBO estimates H.R. 522 would increase the 
     FDIC's net outlays to resolve failed banks and thrifts by 
     about $2.1

[[Page 8080]]

     billion over the 2004-2013 period. Similarly, we estimate 
     that enacting H.R. 552 would increase NCUA's net outlays to 
     resolve failed credit unions by about $10 million over the 
     2004-2013 period.
       By increasing deposit insurance coverage, H.R. 522 could 
     reduce incentives of depositors to monitor the behavior of 
     financial institutions. Over the long term, this could lead 
     to increased risk-taking by those institutions and ultimately 
     to higher losses. On the other hand, if the DIF incurs larger 
     losses to resolve failed banks and thrifts, H.R. 522 would 
     give the FDIC the flexibility to set premiums to restore the 
     balances in the fund over several years, thus allowing the 
     agency to recover from large losses without imperiling other 
     institutions. This new authority could reduce future losses. 
     CBO has no basis for estimating the magnitude of either of 
     these effects. We expect, however, that any changes in the 
     costs of resolving failed institutions would eventually be 
     borne by banks and thrifts through premiums.
     Effects on Premiums Paid to the FDIC By Financial 
         Institutions
       Three general provisions of H.R. 522 would affect the total 
     amount of premiums collected by the FDIC. The bill would 
     provide the FDIC with increase discretion to set premiums. 
     Financial institutions would be given credits that could be 
     used to pay the FDIC assessments in lieu of cash. Finally, 
     the bill would require the FDIC to merge the BIF and SAIF.
       The amount of premiums that banks and thrifts would pay 
     through the combined effects of the three major provisions of 
     H.R. 522 would depend on the DIF's balance in each year, 
     which in turn would depend on the costs of resolving failed 
     institutions. To estimate the effects of the bill's 
     provisions on premium collections, CBO considered several 
     thousand scenarios of the magnitude and timing of possible 
     losses to the FDIC and the subsequent impact on premiums that 
     would be collected under the bill. Because the fund balance 
     in any given year depends on the losses in all prior years, 
     each scenario included an estimate of losses over the entire 
     2004-2013 period. Applying a probability distribution to 
     those loss scenarios, CBO estimated premium income to the 
     government under H.R. 522, reflecting the wide range of 
     uncertainty about future costs of resolving failed financial 
     institutions.
       Overall, CBO estimates that the net effect of these 
     provisions on deposit insurance premiums would be an increase 
     in collections of about $100 million over the next 10 years, 
     considerably less than our projected increase in the FDIC's 
     costs to resolve failed financial institutions ($2.1 
     billion). Each of the bill's three major provisions that 
     would affect premium assessments is described below.
       Increased FDIC Discretion Over Premiums. Under current law, 
     the FDIC is required to assess premiums so as to maintain 
     reserves equal to 1.25 percent of insured deposits in the BIF 
     and SAIF. H.R. 522 would give the FDIC broad discretion to 
     set premiums paid by insured financial institutions. As a 
     result, the total amount collected would depend on how the 
     FDIC chooses to exercise that discretion. Specifically, the 
     bill would charge the FDIC with assessing premiums based on 
     the degree of risk for each institution, it would authorize 
     the FDIC to assess other premiums if it considers the DIF's 
     reserves to be inappropriately low, and it would require the 
     FDIC to implement a 10-year restoration plan if the DIF 
     reserve ratio falls below 1.15 percent. It is possible that 
     the FDIC could use its broad discretion differently than we 
     have assumed and that could result in either fewer or greater 
     premium collections than CBO has estimated. The following 
     sections describe how CBO expects that the FDIC would 
     exercise its discretion under the bill.
       Premiums Based on the Risk of Each Institution. For this 
     estimate CBO assumes that when setting premiums, the FDIC 
     will consider all of the bill's criteria. Specifically, H.R. 
     522 would authorize that the FDIC charge premiums based on 
     each institution's risk of failure. CBO expects that the FDIC 
     would choose to charge all institutions some premiums all of 
     the time because even the strongest institutions pose some 
     risk. (Under current law, the vast majority of institutions 
     do not pay any premiums if the BIF or the SAIF are above 1.25 
     percent of insured deposits.) The bill, however, would limit 
     the amount of premiums the strongest institutions could pay 
     to 0.01 percent of their deposits. Based on information from 
     the FDIC, CBO expects that the risk posed by the strongest 
     institutions will not be much less than that of the next 
     strongest institutions. Therefore, we do not expect that the 
     FDIC would charge those groups vastly different premiums.
       Authority To Set Other Premiums. Based on information from 
     the FDIC, CBO expects that the FDIC would increase premiums 
     above the amount required by risk only when the FDIC 
     determines that the DIF's reserves are inappropriately low. 
     For this estimate, CBO assumes the FDIC would charge 
     additional premiums if the DIF's reserves are between 1.15 
     percent and 1.20 percent of insured deposits. However, there 
     may be limits on the amount by which the FDIC could increase 
     premiums as the DIF nears 1.15 percent. For instance, the 
     increased premiums would not apply to the least risky group 
     of institutions because of the bill's limitation on 
     assessments. Furthermore, we expect that the FDIC would 
     attempt to charge similar premiums to banks with similar 
     risks. Even if the fund were smaller than the FDIC would 
     prefer, we expect that the FDIC would not significantly raise 
     premiums charged to more risky institutions. Finally, CBO 
     expects that the FDIC would attempt to limit volatility in 
     premiums charged and avoid increases in premiums for 
     temporary reductions in the fund. For these reasons, CBO 
     assumes that, when the DIF reserve ratio is between 1.15 
     percent and 1.2 percent, the FDIC would charge all 
     institutions other than the least risky group only an extra 
     two basis points in premiums.
       Ten-Year Restoration Plans. If the DIF's reserves fall 
     below 1.15 percent of insured deposits, then H.R. 522 would 
     require the FDIC to devise and implement a restoration plan 
     to bring the reserve ratio back to 1.15 percent within 10 
     years. This flexibility to set restoration plans could reduce 
     assessment income of the FDIC because it could spread the 
     necessary premiums over 10 years. On the other hand, this 
     provision of H.R. 522 might provide the FDIC the discretion 
     necessary to recover from a large loss in the fund without 
     imperiling other institutions. For this estimate, CBO assumes 
     that the FDIC would charge all institutions premiums at least 
     two basis points above their risk premiums and, under some 
     conditions, would attempt to return the fund's reserve ratio 
     to 1.15 percent in fewer than 10 years.
       Credits for Future Assessments. H.R. 522 would require the 
     FDIC to provide certain banks and thrifts with one-time 
     credits against future assessments, based on their payments 
     to the BIF or SAIF prior to 1997. FDIC's income from premiums 
     would decline to the extent such credits are used. CBO 
     estimates that financial institutions would use credits worth 
     nearly $5.4 billion during the 2004-2013 period. Therefore, 
     FDIC's collections would fall by an equivalent amount over 
     the next 10 years. CBO expects most of the credits would be 
     used over the 2004-2008 period.
       The credits would equal 12 basis points (0.12 percent) of 
     the combined assessment base of the BIF and SAIF as of 
     December 31, 2001. Based on information from the FDIC, CBO 
     estimates that the credits would total nearly $5.4 billion. 
     They would be allocated to each institution based on their 
     market share as of December 31, 1996. Institutions 
     established after that date would be ineligible for these 
     one-time credits against their future assessments.
       H.R. 522 would limit the use of credits by institutions 
     that are not well capitalized or that exhibit financial, 
     operational, or compliance weaknesses that range from 
     moderately severe to unsatisfactory. Under the bill, such 
     institutions could only use credits worth no more than the 
     average assessment on all depository institutions for that 
     period. In addition, if the DIF's reserves fall below 1.15 
     percent of insured deposits, institutions would be prohibited 
     from using more than three basis points worth of credits in 
     that year. Even with those limitations, CBO expects that all 
     of the credits awarded would be used during the 2004-2013 
     period.
       H.R. 522 also would give the FDIC broad authority to award 
     additional credits on an ongoing basis. For the purposes of 
     this estimate, CBO assumes that the FDIC would award those 
     ongoing credits only when DIF reserve ratio approaches 1.35 
     percent. Based on the growth of insured deposits, increased 
     losses, and the impact that one-time credits would have on 
     premium income, CBO estimates that it is very unlikely the 
     fund balance would approach 1.35 percent of insured deposits.
       Merging BIF and SAIF. H.R. 522 would require the FDIC to 
     merge the Bank Insurance Fund and the Savings Association 
     Insurance Fund and create a new Deposit Insurance Fund. By 
     2004, CBO expects the net worth of the combined fund would be 
     about $45 billion. Considered separately from the other 
     reforms in the bill, merging the funds would delay the 
     collection of premiums on institutions now insured by the BIF 
     for a few years and would have a minor impact on net outlays 
     from the fund over the 2004-2013 period.
     Increase in Premiums Paid to NCUA By Financial Institutions
       Under current law, credit unions must pay NCUA 1 percent of 
     the net change in deposits each year. NCUA provides rebates 
     to credit unions if the balance in the share insurance fund 
     exceeds 1.3 percent of insured deposits. Under current law, 
     CBO estimates that NCUA will collect net premiums of about 
     $3.3 billion from its members over the 2004-2013 period.
       Based on information from NCUA, CBO expects that H.R. 522 
     would extend insurance coverage to about $6 billion in 
     currently uninsured deposits in 2004 and that the higher 
     insurance levels would attract about $50 million in new 
     deposits that year. CBO estimates that, under the bill, the 
     net premiums collected by NCUA would increase by $100 million 
     over the 2004-2013 period. About $60 million of that amount 
     would be realized in 2004. The premiums collected for the 
     expanded insurance coverage would more than offset the 
     estimated additional costs to NCUA of $10 million over the 
     next 10 years.

[[Page 8081]]

       Estimated impact on state, local, and tribal governments: 
     H.R. 522 contains an intergovernmental mandate as defined in 
     UMRA. A provision in section 3 would preempt New York state 
     laws that bar savings banks and savings and loan associations 
     from accepting municipal deposits. Enacting this provision 
     would impose no costs on state, local, or tribal governments 
     and, therefore, the costs of the mandate would not exceed the 
     threshold established in UMRA ($59 million in 2003 adjusted 
     annually for inflation). Enacting the bill could benefit 
     municipalities in New York to the extent that more depository 
     institutions may compete for their deposits and offer more 
     favorable terms as part of that competition.
       Estimated impact on the private sector: The bill contains 
     private-sector mandates as defined by UMRA, primarily because 
     it would necessitate the payment of increased deposit 
     insurance premiums. CBO estimates that the direct cost of 
     those mandates would be below the annual threshold specified 
     in UMRA ($117 million in 2003, adjusted annually for 
     inflation) during the first five years after enactment 
     because the bill would provide credits to certain 
     institutions that would largely offset their insurance 
     premium assessments over the 2004-2008 period. We do not have 
     sufficient information to provide a precise estimate of the 
     aggregate cost of all mandates in the bill.
     Banks and Savings Associations
       Commercial banks and savings associations must have federal 
     deposit insurance. CBO, therefore, considers changes in the 
     federal deposit insurance system that increase requirements 
     on those institutions to be private-sector mandates under 
     UMRA. Specifically, the bill would increase federal insurance 
     coverage for insured depository accounts. Because premiums 
     are based in part on the amount of insured deposits, that 
     increase in coverage would require banks and savings 
     associations to pay more in deposit insurance premiums.
       Three provisions of H.R. 522 would affect the total amount 
     of premiums collected by the FDIC. The bill would require the 
     FDIC to merge the BIF and the SAIF. The bill would provide 
     the FDIC with greater discretion to set premiums. The FDIC 
     would grant credits to some financial institutions that could 
     be used to pay deposit insurance premiums in lieu of cash.
       CBO estimates that as a result of the merger of the deposit 
     insurance funds, increase deposit insurance coverage, and the 
     greater discretion given to the FDIC to set premiums for 
     banks and savings associations, banks and savings 
     associations would be assessed about $200 million less in 
     premiums in fiscal year 2004 (largely because of the savings 
     provided by the merger of the BIF and the SAIF) but would be 
     assessed about $1 billion more in 2005 when compared with 
     current law. The additional assessments would total about 
     $2.4 billion over the five-year period from 2004 to 2008.
       However, H.R. 522 would require the FDIC to award credits 
     to certain banks and savings associations that may be used to 
     offset future deposit insurance premium assessments. The 
     credits would amount to about $5.4 billion. Only banks and 
     savings associations that paid deposit insurance premiums 
     prior to 1997 would be eligible to receive credits. CBO 
     expects that institutions that are awarded credits would use 
     them as soon as they are available. For example, CBO 
     estimates that in 2005, the industry would use about $1.5 
     billion of these credits towards the $1.7 billion of deposit 
     insurance assessments. Although some institutions would have 
     to pay more in premiums, the industry as a whole would pay 
     about $400 million less in 2005 than it would have to pay 
     under current law because of the use of the credits.
       Over the 2004-2007 period, CBO expects that the industry 
     would pay less in premiums than it would under current law 
     due to the credits. However, as the industry exhausts its 
     credits, it would have to pay more in premiums than under 
     current law. By 2008, CBO expects that the industry would 
     have to pay premiums of about $50 million more. In 2009, the 
     industry would pay additional premiums of about $300 million, 
     and the amount of additional premiums paid would increase in 
     subsequent years.
     Credit Unions
       Because the bill would increase the coverage of insured 
     accounts for federally insured credit unions, those credit 
     unions would have to contribute more to the National Credit 
     Union Insurance Fund. CBO estimates that those institutions 
     would contribute an additional $60 million in fiscal year 
     2004. The additional contributions would total about $100 
     million over the 2004-2008 period.
     Employee Benefit Plan Deposits
       The bill would also prohibit banks, savings associations, 
     and credit unions that are not well capitalized or adequately 
     capitalized from accepting employee benefit plan deposits. 
     CBO does not have sufficient information to assess the cost 
     of this mandate.
       Estimate prepared by: Federal Costs: Mark Hadley (226-
     2860), Ken Johnson (226-2860), and Judith Ruud (226-2940). 
     Impact on State, Local, and Tribal Governments: Victoria Heid 
     Hall (225-3220). Impact on the Private Sector: Judith Ruud 
     (226-2940).
       Estimate approved by: Robert A. Sunshine, Assistant 
     Director for Budget Analysis
                                  ____

                                                   Federal Deposit


                                        Insurance Corporation,

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


                           Revenue Neutrality

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


             Difficulty of Analyzing Discretionary Actions

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


                          benefits of h.r. 522

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

[[Page 8082]]

     revenue neutrality. I hope that the House of Representatives 
     will take a major step toward a safer and sounder deposit 
     insurance system by passing H.R. 522.
           Sincerely,
                                                 Donald E. Powell.

  Mr. FRANK of Massachusetts. Mr. Chairman, I reserve the balance of my 
time.
  Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from 
Texas (Mr. Burgess).
  Mr. BURGESS. Mr. Chairman, I thank the gentleman for yielding me 
time.
  I rise today in support of H.R. 522, the Federal Deposit Insurance 
Reform Act of 2003. This legislation would accomplish a much-needed 
modernization of our Federal deposit insurance system. It would help 
millions of typical Americans get important protection for their 
savings that they deserve.
  H.R. 522 would help modernize the system by increasing the deposit 
coverage levels for our Nation's savers from $100,000 to $130,000. I 
have no doubt that H.R. 522 would help many Americans get the important 
protection that they deserve for their savings, for their nest eggs.
  H.R. 522 strengthens the Nation's insured depository institutions, 
especially small banks, thrifts, and credit unions. It also ensures 
that the Federal deposit insurance system does not harm the ability of 
the insured depository institutions to meet the Nation's credit needs 
at all stages of the economic cycle. And who can argue against a bill 
which advances the national priority of enhancing retirement security 
for all Americans?
  Coverage levels are increased for, IRAs and 401(k) plans. This is 
essential to our economy as our population ages and retirees are 
realizing the sums of money that it will take today to maintain an 
adequate standard of living. This is why the American Association of 
Retired Persons supports this bill.
  We must pass this bill in order to encourage retirees in smaller 
towns to keep their savings in local community banks instead of 
transferring monies to larger banks headquartered in some distant city. 
Transactions to larger banks hurt the local community's economy because 
the savers' monies are not recycled back into the community. It also 
directly hurts the local community's residents because there are less 
funds available; thus access to credit become more difficult and the 
costs of raising funds to lend becomes higher.
  This evolution of bank transactions ultimately hurts the local 
economy, threatening the job base and the economic vitality of the 
local community. I know this bill has widespread support in this 
Chamber. During the last Congress, the 107th Congress, the House passed 
similar legislation with an overwhelming bipartisan vote. Last year's 
solid vote of support indicates to me the importance of this measure 
and the grassroots support behind it. I urge my colleagues to pass H.R. 
522 with similar resolve.
  Today more than ever, American savers and investors need reassurance, 
reassurance that their elected representatives are helping to ensure 
that their hard-earned savings are safe with a modern deposit insurance 
system.
  Let us promote confidence for today's disheartened saver and investor 
and promote confidence for the system for our children. I urge passage 
of H.R. 522.
  Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from 
Alabama (Mr. Aderholt).
  Mr. ADERHOLT. Mr. Chairman, I rise today in support of H.R. 522 which 
merges the Bank Insurance Fund and the Savings Association Insurance 
Fund, and which updates a successful program by increasing the standard 
maximum deposit insurance limit to $130,000 and indexing it every 5 
years for inflation, doubling the new coverage level for certain 
retirement accounts and increasing the coverage amount for in-State 
municipal deposits.
  The FDIC deposit insurance system has served a critical role in the 
stability of our Nation's financial system. The reform to increase 
deposit insurance coverage from $100,000 to $130,000 will provide 
American savers the ability to better secure their nest egg while 
ensuring ongoing consumer confidence and the stability of the banking 
system. At an earlier time in history, a person may have felt it better 
to put their money in a metal box underneath a loose floor board in the 
house. At the other end of the spectrum would be the venture 
capitalists. They take risks, but that is their choice.
  The FDIC deposit insurance system creates some stability for the 
average person looking to secure some of their savings, not only for 
their retirement but for education and family needs as well. The 
increase in protection for retirement funds is significant not only for 
the overall picture, but also it is important that we pass this as 
reported out by committee.
  The image of a metal box brings up another point. If that money is in 
a bank as opposed to underneath a house, it obviously becomes part of 
the Nation's overall cash flow and investment system. This bill 
updates, at even less than the rate of inflation, the deposit insurance 
amount. That allows depositors who wish to put their funds in local 
independent banks to do so with confidence. In turn, those banks are 
able to approve loans related to local projects.
  I think even opponents of this bill in its current form would agree 
that competition is indeed good. For Congress to keep this amount of 
$100,000 is a not a harmless action. Not increasing the insurance 
amount in the face of 21 years of inflation in effect makes Congress a 
partner in the erosion of the ability of local communities to compete 
fairly with larger banks.

                              {time}  1115

  References to the savings and loan crisis have to be weighed in the 
context of the actions taken after that situation by both government 
and industry.
  This bill passed last year by a vote of 408 to 18. I urge support 
today for this bill as reported out of committee and a ``yes'' vote on 
final passage.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield back the balance of 
my time.
  Mr. BACHUS. Mr. Chairman, I yield myself such time as remains.
  Mr. Chairman, there are opponents to this legislation. Those 
opponents give several reasons, and we may hear those during the 
amendments; but I think the most honest opponent of this legislation is 
the gentleman from California (Mr. Rohrabacher), who will offer an 
amendment or who may not offer an amendment but who has filed an 
amendment to strike the increases in coverage.
  The gentleman from California (Mr. Rohrabacher) said in the American 
Banker, and I quote him, in today's edition, ``I don't believe in 
Federal deposit insurance.'' I think that pretty much sums up the 
opposition because if a person does not believe in it, then a person 
does not want it to increase to allow for inflation or for increase in 
per capita income. If a person does believe in it, then they want it to 
remain current. They want it to remain current with per capita income 
and inflation.
  As I said, we last increased the levels in 1980. If we adjusted them 
for per capita income, they would actually go to $300,000. If we 
increased them for inflation, they would go to $200,000. We, to build a 
consensus, only increased them to $130,000; but we did increase 
retirement funds to $260,000, but we felt that there were people other 
than retirees who deserve the protection to keep up with per capita 
income and inflation.
  So we increased everyone's coverage to 130, including small 
businesses and depositors, many of whom we found in testimony sell 
their house, deposit the entire proceeds in a financial institution and 
assume, sometimes tragically, that there is sufficient coverage.
  There are additional reasons why people are opposing this 
legislation. There is a question of cost. The CBO scored the same bill 
last year as a savings of $750 million. This year they say it has a 
cost of $1 billion.
  Chairman Powell of the FDIC responded to the CBO estimate and said 
this, because it conclusively rebuts any CBO estimate that this will 
cost the taxpayers and any argument that may be made on the floor today 
about the

[[Page 8083]]

budgetary impact of the legislation, and he says, ``H.R. 522 provides 
the FDIC with the tools to achieve revenue neutrality in the management 
of the deposit insurance system. Because any analysis that determines 
522 will result in an increase in net government spending must 
necessarily rely on assumptions regarding how the FDIC Board will 
exercise the discretion provided in the legislation.'' And here is the 
most pertinent part: ``I can assure Congress that the leadership of the 
FDIC has no intention of managing the deposit insurance system in a way 
that increases the cost to the government or increases the burden on 
insured institutions. The costs of the deposit insurance system will 
continue to be borne by the banking industry, but in a manner that 
establishes a strong risk-based premium system and avoids the 
procyclical risks inherent in current law.'' I do stress there are 
risks in the current law if we do not amend it.
  He also in a letter to this body on March 31 says, ``No analysis of 
the `costs' of legislation is complete without a full consideration of 
the benefits provided by the bill,'' and he goes on to list many 
benefits to the economy, to savers and to strengthening our banking 
institution.
  Another rabbit that has been turned loose by opponents of this bill 
is that the increase in coverage, the last increase was what 
precipitated the savings and loan crisis. That is simply not a fact. 
There were many causes. In fact, let me read from a report from this 
own body as to the reason for the savings and loan crisis. The causes 
of the thrift crisis can be traced to a number of factors: poorly timed 
deregulation, the dismal performance of some thrift management, 
inadequate oversight supervision and regulation.
  Mr. TIAHRT. Mr. Chairman, I rise today in support of the Federal 
Deposit Insurance Reform Act of 2003. This much needed, bipartisan 
legislation will help rural communities in my district, as well as 
thousands of other small towns across this country. H.R. 522 
strengthens the deposit insurance fund and helps address a major 
funding need for community banks.
  I have heard from many farm banks in Kansas that continue to have 
problems increasing their core deposits. These banks are forced to turn 
to noncore funds to support their asset growth. I am told noncore funds 
can often be more expensive and volatile than core deposits. This is 
not good for either the bankers or the customers who are investing 
their money.
  The FDIC's Kansas City office noted in their Spring 2003 Regional 
Outlook report that ``core funding takes on added importance for 
community banks with a significant presence in rural communities facing 
long-term negative growth . . .''. This report goes on to say that core 
funds are the staple of rural banks, but they are increasingly becoming 
more difficult to attract or even retain.
  Because of the artificially low deposit insurance cap, rural 
residents are being forced to send deposits that are not insured with 
the current $100,000 limit to institutions outside their local 
communities.
  I see no good reason to allow this loss of capital from rural areas. 
It is capital that could be used for loans to diversify our rural 
communities and create or expand small businesses. At a time when our 
small towns are really suffering economically, we need all the local 
investment available. Local investment encourages entrepreneurship and 
ultimately creates local jobs. H.R. 522 will help ensure that objective 
is not eroded over time as it has done for more than two decades.
  A declining rural population leads to a declining deposit base. An 
increasing rural population tends to create more demand for loans. 
Either way, this situation indicates we need to increase deposit 
insurance levels. Local dollars should stay invested in our local 
communities.
  The bill today increases the basic coverage level from $100,000 to 
$130,000. This modest increase is long overdue, especially in context 
of other changes made to the system in recent years. Higher coverage 
levels will strengthen depositor confidence in the entire financial 
services system.
  H.R. 522 also gives the FDIC flexibility. Right now, the FDIC is 
mandated to have the ratio of reserves to estimated insured deposits at 
a hard target of 1.25 percent. This bill we are considering today would 
allow that ratio to be within a range of 1.15 to 1.4 percent.
  Finally, H.R. 522 directs the FDIC to study its administrative and 
managerial processes and alternative means for administering the 
deposit insurance system. These studies will ensure the deposit 
insurance fund and the overall insurance system are managed and 
operated as efficiently and effectively as possible.
  I encourage my colleagues to join me in supporting the Federal 
Deposit Insurance Reform Act of 2003. It is good common-sense 
legislation that will help people in our rural communities.
  Mr. CRAMER. Mr. Chairman, I rise today in support of H.R. 522, the 
Federal Deposit Insurance Reform Act of 2003. With the banking industry 
currently in good health, now is the time for Congress to act on needed 
reforms to the insured deposit system that has protected the American 
financial system and consumers so well since the program began in the 
dark days of the Depression.
  Among its other provisions, this legislation will enhance the safety 
and soundness of the financial services industry by maintaining the 
value of deposit insurance coverage in the years to come, as well as 
providing additional coverage of certain retirement products, which 
will greatly aid in boosting retirement savings.
  H.R. 522 will increase general deposit insurance coverage from 
$100,000 to $130,000 per account, and index this coverage to inflation 
going forward, so that the real value of that coverage does not erode 
over time. The existing $100,000 limit was set in 1980, but the real 
value of that coverage has decreased to around $45,000 due to inflation 
over the last 23 years.
  For certain IRS-approved retirement products, this legislation will 
double general coverage to $260,000. Increasing coverage of these 
retirement products will provide citizens, particularly senior 
citizens, with added assurance that their hard-earned savings are safe 
and secure and will continue to grow in value. These provisions are an 
excellent step in the right direction to increase the consumer savings 
rate. The bill will also provide additional coverage of municipal 
deposits, thereby keeping public funds in the communities in which they 
are generated.
  As I noted earlier, federal deposit insurance has served this country 
extremely well for some 70 years. One of the best examples of the 
critical importance of deposit insurance was its role in ensuring 
public confidence in the banking system during the thrift crisis of the 
late 1980s. Now H.R. 522 will provide further revisions to the deposit 
insurance system that will help make certain that the program remains 
as effective as it has historically been in protecting both the U.S. 
banking system and its customers in the decades to come. Please join me 
in support of this important legislation.
  Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise in support of H.R. 
522, The Federal Deposit Insurance Reform Act of 2003.
  H.R. 522 is a bi-partisan bill that benefits our senior citizens, 
small businesses, and local banks by updating and preserving the value 
of our insured deposit system. H.R. 522 helps our Nation's senior 
citizens by increasing the coverage limits for retirement accounts at 
insured depository institutions to more than double the current federal 
coverage level. H.R. 522 helps small businesses and local banks by 
encouraging small business owners to consolidate their funds into 
smaller, local banks.
  Furthermore, H.R. 522 benefits all of our communities by helping to 
keep local deposits in the local communities they should be serving. 
H.R. 522 encourages local government entities to keep their funds in 
local banks, also fostering local economic development. H.R. 522 
includes provisions that increase coverage for municipal deposits as 
well. The increased coverage helps keep local monies at home and 
improves the local economy by enabling institutions to offer more car, 
home, and education loans in their communities.
  Last year a bill virtually identical to H.R. 522 cleared the House by 
a 408-18 vote. This bipartisan support is echoed by organizations such 
as the American Association of Retired Persons, and the Independent 
Community Bankers Association who also support H.R. 522.
  I support H.R. 522 as well, Mr. Chairman, because I support our local 
communities.
  Mr. BEREUTER. Mr. Chairman, this Member rises today to express his 
support for H.R. 522, the Federal Deposit Insurance Reform Act. This 
bill, of which this Member is an original cosponsor, will encourage 
private savings which is a crucial factor in promoting economic 
stability.
  First, this Member would like to thank the distinguished gentleman 
from Alabama, the Chairman of the House Financial Services Subcommittee 
on Financial Institutions and Consumer Credit (Mr. Bachus) for 
introducing this legislation. This Member would also like to thank both 
the distinguished gentleman from Ohio, the Chairman of the House 
Financial Services Committee (Mr. Oxley), and the distinguished 
gentleman from Massachusetts, the

[[Page 8084]]

Ranking Member of this Committee (Mr. Frank), for their efforts in 
bringing this measure to the House Floor.
  This bill, H.R. 522, passed the House Financial Services Committee, 
by a voice vote, on March 13, 2003. This legislation is virtually 
identical to a bill that passed the House last year, by a vote of 408-
18. Unfortunately, the Senate chose not to act on Federal Deposit 
Insurance Corporation, FDIC, reform in the 107th Congress.
  As a matter of background, Congress in 1934 initially set the deposit 
insurance coverage limit at $5,000. The last increase was in 1980, when 
Congress raised the value of coverage to $100,000, per person, per 
institution. According to the FDIC, due to inflation, the real value of 
this $100,000 coverage limit has decreased by about half.
  This Member would like to focus on the following four provisions in 
this important legislation which will:
  1. Increase the FDIC coverage level to $130,000 and index this level 
for inflation every five years thereafter;
  2. Increase the FDIC coverage level for retirement accounts to 
$260,000;
  3. Increase the FDIC coverage level for in-state municipal deposits 
to the lower of $2 million or the sum of the new coverage level plus 80 
percent of the deposits in excess of the new standard; and
  4. Ensure the financial institutions receive their equitable share of 
dividends and credits from the deposit insurance fund.
  First, this legislation would increase the $100,000 FDIC insurance 
limit to a new limit of $130,000. The deposit insurance limit would 
then be indexed every five years to a cost of living adjustment and 
rounded to the nearest $10,000. This Member believes this increase in 
the FDIC limit is warranted and justified.
  This Member has met with many Nebraska community bankers who have 
emphasized the importance of increasing the deposit insurance coverage 
limit in order for community banks to attract and maintain core 
deposits. Currently, community banks are losing deposits to more 
distant brokerage and mutual fund companies. If community banks do not 
have the core deposits to make loans, the economic development of 
communities suffer. Local money needs to stay in a community where it 
can build infrastructure and create jobs.
  Second, this bill would increase the coverage level for retirement 
accounts from the current $100,000 to a level of $260,000, which will 
encourage greater retirement savings. It is important to take this 
action, since the current rate of savings by Americans is quite low. 
Moreover, this change is particularly important to older Americans to 
ensure that they have secure banking services nearby. In many rural 
areas, the alternative to this coverage level increase is for consumers 
to bank at more distant institutions.
  Third, this legislation would also importantly increase coverage for 
in-state municipal deposits to the lower of $2 million or the sum of 
the new coverage level plus 80 percent of the deposits in excess of the 
new standard. Community bankers have stressed to this Member their 
support for greater coverage of municipal deposits as they now only 
receive $100,000 of FDIC protection. Municipal deposits are taxpayer 
funds from state and local governments, and schools deposited in local 
banks. This change is very important in Nebraska since there are so 
many different public entities collecting revenue and in turn making 
deposits in local banks.
  Lastly, this Member supports the provisions in H.R. 522 which were 
authored by the distinguished gentlelady from New York (Ms. Maloney) 
and this Member. These three provisions were included in the Manager's 
Amendment which passed by voice vote during the Committee's 
consideration of the virtually identical bill in the 107th Congress. We 
offered the following changes to help ensure that financial 
institutions receive their equitable share of dividends and credits 
from the deposit insurance fund.
  This bill establishes a 1 basis point cap on the premiums that the 
FDIC can charge those institutions that qualify for the lowest-risk 
category under the risk-based premium system, when the actual level of 
the reserve ratio is above 1.15 per $100 of insured deposits. 
Furthermore, H.R. 522 provides that when the reserve ratio of the 
deposit insurance fund is between 1.35 and 1.4 per $100 of insured 
deposits, the FDIC must pay dividends equal to 50 percent of the amount 
in excess of 1.35. This bill also includes language which establishes 
an ongoing credit pool that could be used by institutions against their 
premium assessments based on the historical contributions of the 
institution to the deposit insurance fund. This provision will reward 
those institutions who helped fully recapitalize the bank insurance 
fund in 1996.
  In conclusion, for the reasons mentioned and many others, this Member 
urges his colleagues to support H.R. 522.
  Mr. OSBORNE. Mr. Chairman, banks that primarily serve agricultural 
customers remain concerned with the possibility of having to rely more 
and more on nontraditional funding sources to support their asset 
growth and continued ability to provide the necessary financing for 
their customers--farmers, ranchers, consumers and rural businesses.
  Today, more than 1,820 of our nation's banks hold more than 25 
percent of their loans. According to the Federal Deposit Insurance 
Corporation, FDIC, office in Kansas City, in Nebraska, there are 210 
farm banks that are FDIC insured institutions with at least 25 percent 
of total loans comprised of agriculture loans. A majority of these 
banks are located in rural areas and are the economic engines that help 
support the local community.
  The legislation we are considering today, H.R. 522, the Federal 
Deposit Insurance Reform Act of 2003, includes modest reforms to the 
deposit insurance system that will substantially benefit local banks in 
my community and our nation's agricultural economy. During the 1990s 
many farm banks experienced a decline in core deposits and would likely 
see that trend reversed with increased deposit insurance coverage 
levels. A key component of this legislation includes a provision that 
provides for a modest increase of general coverage levels to $130,000 
and then indexes it for inflation. Deposit insurance coverage levels 
have not been increased in twenty-three years, the longest period in 
FDIC history without an increase. Deposit protection has eroded by one-
half due to inflation since 1980.
  Higher coverage levels would provide rural residents such as farmers 
and ranchers with the additional security to deposit their funds in the 
local bank. These funds would be reinvested in the local communities to 
support projects such as the building of new ethanol plants and other 
value-added processing activities that will benefit local agricultural 
producers and provide employment for rural residents. Additional 
economic development in rural areas would create new opportunities for 
recent college and high school graduates and would help stop the rural 
depopulation that has been occurring over the past 20 years in many of 
our agriculturally dependent areas.
  I urge my colleagues to support our nation's local banks and rural 
communities by voting ``yea'' on H.R. 522.
  Mr. Chairman, H.R. 522, the Federal Deposit Insurance Reform Act, 
expands the federal government's unconstitutional control over the 
financial services industry and raises taxes on all financial 
institutions. Furthermore, this legislation could increase the 
possibility of future bank failures. Therefore, I must oppose this 
bill.
  I primarily object to the provisions in H.R. 522 which may increase 
the premiums assessed on participating financial institutions. These 
``premiums,'' which are actually taxes, are the premier sources of 
funds for the Deposit Insurance Fund. This fund is used to bail out 
banks that experience difficulties meeting their commitments to their 
depositors. Thus, the deposit insurance system transfers liability for 
poor management decisions form those who made the decisions, to their 
competitors. This system punishes those financial institutions which 
follow sound practices, as they are forced to absorb the losses of 
their competitors. This also compounds the moral hazard problem created 
whenever government socializes business losses.
  In the event of a severe banking crisis, Congress will likely 
transfer funds from the general revenue into the Deposit Insurance 
Fund, which could make all taxpayers liable for the mistakes of a few. 
Of course, such a bailout would require separate authorization from 
Congress, but can anyone imagine Congress saying ``No'' to banking 
lobbyists pleading for relief from the costs of bailing out their 
weaker competitors?
  Government subsidies lead to government control, as regulations are 
imposed on the recipients of the subsidies in order to address the 
moral hazard problem. This is certainly the case in banking, which is 
one of the most heavily regulated industries in America. However, as 
George Kaufman, the John Smith Professor of Banking and Finance at 
Loyola University in Chicago, and co-chair of the Shadow Financial 
Regulatory Committee, pointed out in a study for the CATO Institute, 
the FDIC's history of poor management exacerbated the banking crisis of 
the eighties and nineties. Professor Kaufman properly identifies a key 
reason for the FDIC's poor track record in protection individual 
depositors: regulators have incentives to downplay or even cover-up 
problems in the financial system such as banking failures. Banking 
failures are black marks on the regulators' records. In addition, 
regulators may be subject to political pressure

[[Page 8085]]

to delay imposing sanctions on failing institutions, thus increasing 
the magnitude of the loss.
  Immediately after a problem in the banking industry comes to light, 
the media and Congress will inevitably blame it on regulators who were 
``asleep at the switch.'' Yet, most politicians continue to believe 
that giving the very regulators whose incompetence (or worse) either 
caused or contributed to the problem will somehow prevent future 
crises!
  The presence of deposit insurance and government regulations removes 
incentives for individuals to act on their own to protect their 
deposits or even inquire as to the health of their financial 
institutions. After all, why should individuals be concerned with the 
health of their financial institutions when the federal government is 
insuring banks following sound practices and has insured their 
deposits?
  Finally, I would remind my colleague that the federal deposit 
insurance programs lacks constitutional authority. Congress' only 
mandate in the area of money, and banking is to maintain the value of 
the money. Unfortunately, Congress abdicated its responsibility over 
monetary policy with the passage of the Federal Reserve Act of 1913, 
which allows the federal government to erode the value of the currency 
at the will of the central bank. Congress' embrace of fiat money is 
directly responsible for the instability in the banking system that 
created the justification for deposit insurance.
  In conclusion, Mr. Chairman, H.R. 522 imposes new taxes on financial 
institutions, forces sound institutions to pay for the mistakes of 
their reckless competitors, increases the chances of taxpayers being 
forced to bail out unsound financial institutions, reduces individual 
depositors' incentives to take action to protect their deposits, and 
exceeds Congress's constitutional authority. I therefore urge my 
colleagues to reject this bill. Instead of extending the Federal 
program, Congress should work to prevent the crises which justify 
government programs like deposit insurance, by fulfilling our 
constitutional responsibility to pursue sound monetary policies.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the order of the House of Tuesday, April 1, 2003, the 
committee amendment in the nature of a substitute printed in the bill 
shall be considered as an original bill for the purpose of amendment 
under the 5-minute rule and shall be considered read.
  The text of the committee amendment in the nature of a substitute is 
as follows:

                                H.R. 522

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Federal 
     Deposit Insurance Reform Act of 2003''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Merging the BIF and SAIF.
Sec. 3. Increase in deposit insurance coverage.
Sec. 4. Setting assessments and repeal of special rules relating to 
              minimum assessments and free deposit insurance.
Sec. 5. Replacement of fixed designated reserve ratio with reserve 
              range.
Sec. 6. Requirements applicable to the risk-based assessment system.
Sec. 7. Refunds, dividends, and credits from Deposit Insurance Fund.
Sec. 8. Deposit Insurance Fund restoration plans.
Sec. 9. Regulations required.
Sec. 10. Studies of FDIC structure and expenses and certain activities 
              and further possible changes to deposit insurance system.
Sec. 11. Bi-annual FDIC survey and report on increasing the deposit 
              base by encouraging use of depository institutions by the 
              unbanked.
Sec. 12. Technical and conforming amendments to the Federal Deposit 
              Insurance Act relating to the merger of the BIF and SAIF.
Sec. 13. Other technical and conforming amendments relating to the 
              merger of the BIF and SAIF.

     SEC. 2. MERGING THE BIF AND SAIF.

       (a) In General.--
       (1) Merger.--The Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be merged into the Deposit 
     Insurance Fund.
       (2) Disposition of assets and liabilities.--All assets and 
     liabilities of the Bank Insurance Fund and the Savings 
     Association Insurance Fund shall be transferred to the 
     Deposit Insurance Fund.
       (3) No separate existence.--The separate existence of the 
     Bank Insurance Fund and the Savings Association Insurance 
     Fund shall cease on the effective date of the merger thereof 
     under this section.
       (b) Repeal of Outdated Merger Provision.--Section 2704 of 
     the Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) 
     is repealed.
       (c) Effective Date.--This section shall take effect on the 
     first day of the first calendar quarter that begins after the 
     end of the 90-day period beginning on the date of the 
     enactment of this Act.

     SEC. 3. INCREASE IN DEPOSIT INSURANCE COVERAGE.

       (a) In General.--Section 11(a)(1) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1821(a)(1)) is amended--
       (1) by striking subparagraph (B) and inserting the 
     following new subparagraph:
       ``(B) Net amount of insured deposit.--The net amount due to 
     any depositor at an insured depository institution shall not 
     exceed the standard maximum deposit insurance amount as 
     determined in accordance with subparagraphs (C), (D), (E) and 
     (F) and paragraph (3).''; and
       (2) by adding at the end the following new subparagraphs:
       ``(E) Standard maximum deposit insurance amount defined.--
     For purposes of this Act, the term `standard maximum deposit 
     insurance amount' means--
       ``(i) until the effective date of final regulations 
     prescribed pursuant to section 9(a)(2) of the Federal Deposit 
     Insurance Reform Act of 2003, $100,000; and
       ``(ii) on and after such effective date, $130,000, adjusted 
     as provided under subparagraph (F).
       ``(F) Inflation adjustment.--
       ``(i) In general.--By April 1 of 2005, and the 1st day of 
     each subsequent 5-year period, the Board of Directors and the 
     National Credit Union Administration Board shall jointly 
     prescribe the amount by which the standard maximum deposit 
     insurance amount and the standard maximum share insurance 
     amount (as defined in section 207(k) of the Federal Credit 
     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)--

[[Page 8086]]

       (A) by moving the margins of clauses (i) through (v) 4 ems 
     to the right;
       (B) by striking, in the matter following clause (v), ``such 
     depositor shall'' and all that follows through the period; 
     and
       (C) by striking the semicolon at the end of clause (v) and 
     inserting a period;
       (2) by striking ``(2)(A) Notwithstanding'' and all that 
     follows through ``a depositor who is--'' and inserting the 
     following:
       ``(2) Municipal depositors.--
       ``(A) In general.--Notwithstanding any limitation in this 
     Act or in any other provision of law relating to the amount 
     of deposit insurance available to any 1 depositor--
       ``(i) a municipal depositor shall, for the purpose of 
     determining the amount of insured deposits under this 
     subsection, be deemed to be a depositor separate and distinct 
     from any other officer, employee, or agent of the United 
     States or any public unit referred to in subparagraph (E); 
     and
       ``(ii) except as provided in subparagraph (B), the deposits 
     of a municipal depositor shall be insured in an amount equal 
     to the standard maximum deposit insurance amount (as 
     determined under paragraph (1)).
       ``(B) In-state municipal depositors.--In the case of the 
     deposits of an in-State municipal depositor described in 
     clause (ii), (iii), (iv), or (v) of subparagraph (E) at an 
     insured depository institution, such deposits shall be 
     insured in an amount not to exceed the lesser of--
       ``(i) $2,000,000; or
       ``(ii) the sum of the standard maximum deposit insurance 
     amount and 80 percent of the amount of any deposits in excess 
     of the standard maximum deposit insurance amount.
       ``(C) Municipal deposit parity.--No State may deny to 
     insured depository institutions within its jurisdiction the 
     authority to accept deposits insured under this paragraph, or 
     prohibit the making of such deposits in such institutions by 
     any in-State municipal depositor.
       ``(D) In-state municipal depositor defined.--For purposes 
     of this paragraph, the term `in-State municipal depositor' 
     means a municipal depositor that is located in the same State 
     as the office or branch of the insured depository institution 
     at which the deposits of that depositor are held.
       ``(E) Municipal depositor.--In this paragraph, the term 
     `municipal depositor' means a depositor that is--'';
       (3) by striking ``(B) The'' and inserting the following:
       ``(F) Authority to limit deposits.--The''; and
       (4) by striking ``depositor referred to in subparagraph (A) 
     of this paragraph'' each place such term appears and 
     inserting ``municipal depositor''.
       (e) Technical and Conforming Amendment Relating to 
     Insurance of Trust Funds.--Paragraphs (1) and (3) of section 
     7(i) of the Federal Deposit Insurance Act (12 U.S.C. 1817(i)) 
     are each amended by striking ``$100,000'' and inserting ``the 
     standard maximum deposit insurance amount (as determined 
     under section 11(a)(1))''.
       (f) Other Technical and Conforming Amendments.--
       (1) Section 11(m)(6) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1821(m)(6)) is amended by striking ``$100,000'' 
     and inserting ``an amount equal to the standard maximum 
     deposit insurance amount''.
       (2) Subsection (a) of section 18 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1828(a)) is amended to read as 
     follows:
       ``(a) Insurance Logo.--
       ``(1) Insured depository institutions.--
       ``(A) In general.--Each insured depository institution 
     shall display at each place of business maintained by that 
     institution a sign or signs relating to the insurance of the 
     deposits of the institution, in accordance with regulations 
     to be prescribed by the Corporation.
       ``(B) Statement to be included.--Each sign required under 
     subparagraph (A) shall include a statement that insured 
     deposits are backed by the full faith and credit of the 
     United States Government.
       ``(2) Regulations.--The Corporation shall prescribe 
     regulations to carry out this subsection, including 
     regulations governing the substance of signs required by 
     paragraph (1) and the manner of display or use of such signs.
       ``(3) Penalties.--For each day that an insured depository 
     institution continues to violate this subsection or any 
     regulation issued under this subsection, it shall be subject 
     to a penalty of not more than $100, which the Corporation may 
     recover for its use.''.
       (3) Section 43(d) of the Federal Deposit Insurance Act (12 
     U.S.C. 1831t(d)) is amended by striking ``$100,000'' and 
     inserting ``an amount equal to the standard maximum deposit 
     insurance amount''.
       (4) Section 6 of the International Banking Act of 1978 (12 
     U.S.C. 3104) is amended--
       (A) by striking ``$100,000'' each place such term appears 
     and inserting ``an amount equal to the standard maximum 
     deposit insurance amount''; and
       (B) by adding at the end the following new subsection:
       ``(e) Standard Maximum Deposit Insurance Amount Defined.--
     For purposes of this section, the term `standard maximum 
     deposit insurance amount' means the amount of the maximum 
     amount of deposit insurance as determined under section 
     11(a)(1) of the Federal Deposit Insurance Act.''.
       (g) Conforming Change to Credit Union Share Insurance 
     Fund.--
       (1) In general.--Section 207(k) of the Federal Credit Union 
     Act (12 U.S.C. 1787(k)) is amended--
       (A) by striking ``(k)(1)'' and all that follows through the 
     end of paragraph (1) and inserting the following:
       ``(k) Insured Amounts Payable.--
       ``(1) Net insured amount.--
       ``(A) In general.--Subject to the provisions of paragraph 
     (2), the net amount of share insurance payable to any member 
     at an insured credit union shall not exceed the total amount 
     of the shares or deposits in the name of the member (after 
     deducting offsets), less any part thereof which is in excess 
     of the standard maximum share insurance amount, as determined 
     in accordance with this paragraph and paragraphs (5) and (6), 
     and consistently with actions taken by the Federal Deposit 
     Insurance Corporation under section 11(a) of the Federal 
     Deposit Insurance Act.
       ``(B) Aggregation.--Determination of the net amount of 
     share insurance under subparagraph (A), shall be in 
     accordance with such regulations as the Board may prescribe, 
     and, in determining the amount payable to any member, there 
     shall be added together all accounts in the credit union 
     maintained by that member for that member's own benefit, 
     either in the member's own name or in the names of others.
       ``(C) Authority to define the extent of coverage.--The 
     Board may define, with such classifications and exceptions as 
     it may prescribe, the extent of the share insurance coverage 
     provided for member accounts, including member accounts in 
     the name of a minor, in trust, or in joint tenancy.'';
       (B) in paragraph (2)--
       (i) in subparagraph (A)--

       (I) in clauses (i) through (v), by moving the margins 4 ems 
     to the right;
       (II) in the matter following clause (v), by striking ``his 
     account'' and all that follows through the period; and
       (III) by striking the semicolon at the end of clause (v) 
     and inserting a period;

       (ii) by striking ``(2)(A) Notwithstanding'' and all that 
     follows through ``a depositor or member who is--'' and 
     inserting the following:
       ``(2) Municipal depositors or members.--
       ``(A) In general.--Notwithstanding any limitation in this 
     Act or in any other provision of 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

[[Page 8087]]

     greater than such credit union is authorized to accept under 
     any other provision of Federal or State law.
       ``(5) Standard maximum share insurance amount defined.--For 
     purposes of this Act, the term `standard maximum share 
     insurance amount' means--
       ``(A) until the effective date of final regulations 
     prescribed pursuant to section 9(a)(2) of the Federal Deposit 
     Insurance Reform Act of 2003, $100,000; and
       ``(B) on and after such effective date, $130,000, adjusted 
     as provided under section 11(a)(1)(F) of the Federal Deposit 
     Insurance Act.''.
       (2) Doubling of share insurance for certain retirement 
     accounts.--Section 207(k)(3) of the Federal Credit Union Act 
     (12 U.S.C. 1787(k)(3)) is amended by striking ``$100,000'' 
     and inserting ``2 times the standard maximum share insurance 
     amount (as determined under paragraph (1))''.
       (h) Effective Date.--This section and the amendments made 
     by this section shall take effect on the date the final 
     regulations required under section 9(a)(2) take effect.

     SEC. 4. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES 
                   RELATING TO MINIMUM ASSESSMENTS AND FREE 
                   DEPOSIT INSURANCE.

       (a) Setting Assessments.--Section 7(b)(2) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
       (1) by striking subparagraphs (A) and (B) and inserting the 
     following new subparagraphs:
       ``(A) In general.--The Board of Directors shall set 
     assessments for insured depository institutions in such 
     amounts as the Board of Directors may determine to be 
     necessary or appropriate, subject to subparagraph (D).
       ``(B) Factors to be considered.--In setting assessments 
     under subparagraph (A), the Board of Directors shall consider 
     the following factors:
       ``(i) The estimated operating expenses of the Deposit 
     Insurance Fund.
       ``(ii) The estimated case resolution expenses and income of 
     the Deposit Insurance Fund.
       ``(iii) The projected effects of the payment of assessments 
     on the capital and earnings of insured depository 
     institutions.
       ``(iv) the risk factors and other factors taken into 
     account pursuant to paragraph (1) under the risk-based 
     assessment system, including the requirement under such 
     paragraph to maintain a risk-based system.
       ``(v) Any other factors the Board of Directors may 
     determine to be appropriate.''; and
       (2) by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Base rate for assessments.--
       ``(i) In general.--In setting assessment rates pursuant to 
     subparagraph (A), the Board of Directors shall establish a 
     base rate of not more than 1 basis point (exclusive of any 
     credit or dividend) for those insured depository institutions 
     in the lowest-risk category under the risk-based assessment 
     system established pursuant to paragraph (1). No insured 
     depository institution shall be barred from the lowest-risk 
     category solely because of size.
       ``(ii) Suspension.--Clause (i) shall not apply during any 
     period in which the reserve ratio of the Deposit Insurance 
     Fund is less than the amount which is equal to 1.15 percent 
     of the aggregate estimated insured deposits.''.
       (b) Assessment Recordkeeping Period Shortened.--Paragraph 
     (5) of section 7(b) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)) is amended to read as follows:
       ``(5) Depository institution required to maintain 
     assessment-related records.--Each insured depository 
     institution shall maintain all records that the Corporation 
     may require for verifying the correctness of any assessment 
     on the insured depository institution under this subsection 
     until the later of--
       ``(A) the end of the 3-year period beginning on the due 
     date of the assessment; or
       ``(B) in the case of a dispute between the insured 
     depository institution and the Corporation with respect to 
     such assessment, the date of a final determination of any 
     such dispute.''.
       (c) Increase in Fees for Late Assessment Payments.--
     Subsection (h) of section 18 of the Federal Deposit Insurance 
     Act (12 U.S.C. 1828(h)) is amended to read as follows:
       ``(h) Penalty for Failure to Timely Pay Assessments.--
       ``(1) In general.--Any insured depository institution which 
     fails or refuses to pay any assessment shall be subject to a 
     penalty in an amount not more than 1 percent of the amount of 
     the assessment due for each day that such violation 
     continues.
       ``(2) Exception in case of dispute.--Paragraph (1) shall 
     not apply if--
       ``(A) the failure to pay an assessment is due to a dispute 
     between the insured depository institution and the 
     Corporation over the amount of such assessment; and
       ``(B) the insured depository institution deposits security 
     satisfactory to the Corporation for payment upon final 
     determination of the issue.
       ``(3) Authority to modify or remit penalty.--The 
     Corporation, in the sole discretion of the Corporation, may 
     compromise, modify or remit any penalty which the Corporation 
     may assess or has already assessed under paragraph (1) upon a 
     finding that good cause prevented the timely payment of an 
     assessment.''.
       (d) Assessments for Lifeline Accounts.--
       (1) In general.--Section 232 of the Federal Deposit 
     Insurance Corporation Improvement Act of 1991 (12 U.S.C. 
     1834) is amended by striking subsection (c).
       (2) Clarification of rate applicable to deposits 
     attributable to lifeline accounts.--Section 7(b)(2)(H) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(H)) is 
     amended by striking ``at a rate determined in accordance with 
     such Act'' and inserting ``at \1/2\ the assessment rate 
     otherwise applicable for such insured depository 
     institution''.
       (3) Regulations.--Section 232(a)(1) of the Federal Deposit 
     Insurance Corporation Improvement Act of 1991 (12 U.S.C. 
     1834(a)(1)) is amended by striking ``Board of Governors of 
     the Federal Reserve System, and the''.
       (e) Technical and Conforming Amendments.--
       (1) Paragraph (3) of section 7(a) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(a)(3)) is amended by striking 
     the 3d sentence and inserting the following: ``Such reports 
     of condition shall be the basis for the certified statements 
     to be filed pursuant to subsection (c).''.
       (2) Subparagraphs (B)(ii) and (C) of section 7(b)(1) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) are each 
     amended by striking ``semiannual'' where such term appears in 
     each such subparagraph.
       (3) Section 7(b)(2) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1817(b)(2)) is amended--
       (A) by striking subparagraphs (E), (F), and (G);
       (B) in subparagraph (C), by striking ``semiannual''; and
       (C) by redesignating subparagraph (H) (as amended by 
     subsection (e)(2) of this section) as subparagraph (E).
       (4) Section 7(b) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)) is amended by striking paragraph (4) and 
     redesignating paragraphs (5) (as amended by subsection (b) of 
     this section), (6), and (7) as paragraphs (4), (5), and (6) 
     respectively.
       (5) Section 7(c) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(c)) is amended--
       (A) in paragraph (1)(A), by striking ``semiannual'';
       (B) in paragraph (2)(A), by striking ``semiannual''; and
       (C) in paragraph (3), by striking ``semiannual period'' and 
     inserting ``initial assessment period''.
       (6) Section 8(p) of the Federal Deposit Insurance Act (12 
     U.S.C. 1818(p)) is amended by striking ``semiannual''.
       (7) Section 8(q) of the Federal Deposit Insurance Act (12 
     U.S.C. 1818(q)) is amended by striking ``semiannual period'' 
     and inserting ``assessment period''.
       (8) Section 13(c)(4)(G)(ii)(II) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)(II)) is amended by 
     striking ``semiannual period'' and inserting ``assessment 
     period''.
       (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.

[[Page 8088]]

       ``(D) Publication of proposed change in ratio.--In 
     soliciting comment on any proposed change in the designated 
     reserve ratio in accordance with subparagraph (A), the Board 
     of Directors shall include in the published proposal a 
     thorough analysis of the data and projections on which the 
     proposal is based.''.
       (b) Technical and Conforming Amendment.--Section 3(y) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) is 
     amended--
       (1) by striking ``(y) The term'' and inserting ``(y) 
     Definitions Relating to Deposit Insurance Fund.--
       ``(1) Deposit insurance fund.--The term''; and
       (2) by inserting after paragraph (1) (as so designated by 
     paragraph (1) of this subsection) the following new 
     paragraph:
       ``(2) Designated reserve ratio.--The term `designated 
     reserve ratio' means the reserve ratio designated by the 
     Board of Directors in accordance with section 7(b)(3).''.
       (c) Effective Date.--This section and the amendments made 
     by this section shall take effect on the date that the final 
     regulations required under section 9(a)(1) take effect.

     SEC. 6. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT 
                   SYSTEM.

       Section 7(b)(1) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)(1)) is amended by adding at the end the 
     following new subparagraphs:
       ``(E) Information concerning risk of loss and economic 
     conditions.--
       ``(i) Sources of information.--For purposes of determining 
     risk of losses at insured depository institutions and 
     economic conditions generally affecting depository 
     institutions, the Corporation shall collect information, as 
     appropriate, from all sources the Board of Directors 
     considers appropriate, such as reports of condition, 
     inspection reports, and other information from all Federal 
     banking agencies, any information available from State bank 
     supervisors, State insurance and securities regulators, the 
     Securities and Exchange Commission (including information 
     described in section 35), the Secretary of the Treasury, the 
     Commodity Futures Trading Commission, the Farm Credit 
     Administration, the Federal Trade Commission, any Federal 
     reserve bank or Federal home loan bank, and other regulators 
     of financial institutions, and any information available from 
     credit rating entities, and other private economic or 
     business analysts.
       ``(ii) Consultation with federal banking agencies.--

       ``(I) In general.--Except as provided in subclause (II), in 
     assessing the risk of loss to the Deposit Insurance Fund with 
     respect to any insured depository institution, the 
     Corporation shall consult with the appropriate Federal 
     banking agency of such institution.
       ``(II) Treatment on aggregate basis.--In the case of 
     insured depository institutions that are well capitalized (as 
     defined in section 38) and, in the most recent examination, 
     were found to be well managed, the consultation under 
     subclause (I) concerning the assessment of the risk of loss 
     posed by such institutions may be made on an aggregate basis.

       ``(iii) Rule of construction.--No provision of this 
     paragraph shall be construed as providing any new authority 
     for the Corporation to require submission of information by 
     insured depository institutions to the Corporation.
       ``(F) Modifications to the risk-based assessment system 
     allowed only after notice and comment.--In revising or 
     modifying the risk-based assessment system at any time after 
     the date of the enactment of the Federal Deposit Insurance 
     Reform Act of 2003, the Board of Directors may implement such 
     revisions or modification in final form only after notice and 
     opportunity for comment.''.

     SEC. 7. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT 
                   INSURANCE FUND.

       (a) In General.--Subsection (e) of section 7 of the Federal 
     Deposit Insurance Act (12 U.S.C. 1817(e)) is amended to read 
     as follows:
       ``(e) Refunds, Dividends, and Credits.--
       ``(1) Refunds of overpayments.--In the case of any payment 
     of an assessment by an insured depository institution in 
     excess of the amount due to the Corporation, the Corporation 
     may--
       ``(A) refund the amount of the excess payment to the 
     insured depository institution; or
       ``(B) credit such excess amount toward the payment of 
     subsequent assessments until such credit is exhausted.
       ``(2) Dividends from excess amounts in deposit insurance 
     fund.--
       ``(A) Reserve ratio in excess of 1.4 percent of estimated 
     insured deposits.--Whenever the reserve ratio of the Deposit 
     Insurance Fund exceeds 1.4 percent of estimated insured 
     deposits, the Corporation shall declare the amount in the 
     Fund in excess of the amount required to maintain the reserve 
     ratio at 1.4 percent of estimated insured deposits, as 
     dividends to be paid to insured depository institutions.
       ``(B) Reserve ratio equal to or in excess of 1.35 percent 
     of estimated insured deposits and not more than 1.4 
     percent.--Whenever the reserve ratio of the Deposit Insurance 
     Fund equals or exceeds 1.35 percent of estimated insured 
     deposits and is not more than 1.4 percent of such deposits, 
     the Corporation shall declare the amount in the Fund that is 
     equal to 50 percent of the amount in excess of the amount 
     required to maintain the reserve ratio at 1.35 percent of the 
     estimated insured deposits as dividends to be paid to insured 
     depository institutions.
       ``(C) Basis for distribution of dividends.--
       ``(i) In general.--Solely for the purposes of dividend 
     distribution under this paragraph and credit distribution 
     under paragraph (3)(B), the Corporation shall determine each 
     insured depository institution's relative contribution to the 
     Deposit Insurance Fund (or any predecessor deposit insurance 
     fund) for calculating such institution's share of any 
     dividend or credit declared under this paragraph or paragraph 
     (3)(B), taking into account the factors described in clause 
     (ii).
       ``(ii) Factors for distribution.--In implementing this 
     paragraph and paragraph (3)(B) in accordance with 
     regulations, the Corporation shall take into account the 
     following factors:

       ``(I) The ratio of the assessment base of an insured 
     depository institution (including any predecessor) on 
     December 31, 1996, to the assessment base of all eligible 
     insured depository institutions on that date.
       ``(II) The total amount of assessments paid on or after 
     January 1, 1997, by an insured depository institution 
     (including any predecessor) to the Deposit Insurance Fund 
     (and any predecessor deposit insurance fund).
       ``(III) That portion of assessments paid by an insured 
     depository institution (including any predecessor) that 
     reflects higher levels of risk assumed by such institution.
       ``(IV) Such other factors as the Corporation may determine 
     to be appropriate.

       ``(D) Notice and opportunity for comment.--The Corporation 
     shall prescribe by regulation, after notice and opportunity 
     for comment, the method for the calculation, declaration, and 
     payment of dividends under this paragraph.
       ``(3) Credit pool.--
       ``(A) One-time credit based on total assessment base at 
     year-end 1996.--
       ``(i) In general.--Before the end of the 270-day period 
     beginning on the date of the enactment of the Federal Deposit 
     Insurance Reform Act of 2003, the Board of Directors shall, 
     by regulation, provide for a credit to each eligible insured 
     depository institution, based on the assessment base of the 
     institution (including any predecessor institution) on 
     December 31, 1996, as compared to the combined aggregate 
     assessment base of all eligible insured depository 
     institutions, taking into account such factors as the Board 
     of Directors may determine to be appropriate.
       ``(ii) Credit limit.--The aggregate amount of credits 
     available under clause (i) to all eligible insured depository 
     institutions shall equal the amount that the Corporation 
     could collect if the Corporation imposed an assessment of 12 
     basis points on the combined assessment base of the Bank 
     Insurance Fund and the Savings Association Insurance Fund as 
     of December 31, 2001.
       ``(iii) Eligible insured depository institution defined.--
     For purposes of this paragraph, the term `eligible insured 
     depository institution' means any insured depository 
     institution that--

       ``(I) was in existence on December 31, 1996, and paid a 
     deposit insurance assessment prior to that date; or
       ``(II) is a successor to any insured depository institution 
     described in subclause (II).

       ``(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).

[[Page 8089]]

       ``(4) Administrative review.--
       ``(A) In general.--The regulations prescribed under 
     paragraph (2)(D) and subparagraphs (A) and (B) of paragraph 
     (3) shall include provisions allowing an insured depository 
     institution a reasonable opportunity to challenge 
     administratively the amount of the credit or dividend 
     determined under paragraph (2) or (3) for such institution.
       ``(B) Administrative review.--Any review under subparagraph 
     (A) of any determination of the Corporation under paragraph 
     (2) or (3) shall be final and not subject to judicial 
     review.''.
       (b) Definition of Reserve Ratio.--Section 3(y) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended 
     by section 5(b) of this Act) is amended by adding at the end 
     the following new paragraph:
       ``(3) Reserve ratio.--The term `reserve ratio', when used 
     with regard to the Deposit Insurance Fund other than in 
     connection with a reference to the designated reserve ratio, 
     means the ratio of the net worth of the Deposit Insurance 
     Fund to the value of the aggregate estimated insured 
     deposits.''.

     SEC. 8. DEPOSIT INSURANCE FUND RESTORATION PLANS.

       Section 7(b)(3) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)(3)) (as amended by section 5(a) of this Act) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(E) DIF restoration plans.--
       ``(i) In general.--Whenever--

       ``(I) the Corporation projects that the reserve ratio of 
     the Deposit Insurance Fund will, within 6 months of such 
     determination, fall below the minimum amount specified in 
     subparagraph (B)(ii) for the designated reserve ratio; or
       ``(II) the reserve ratio of the Deposit Insurance Fund 
     actually falls below the minimum amount specified in 
     subparagraph (B)(ii) for the designated reserve ratio without 
     any determination under subclause (I) having been made,

     the Corporation shall establish and implement a Deposit 
     Insurance Fund restoration plan within 90 days that meets the 
     requirements of clause (ii) and such other conditions as the 
     Corporation determines to be appropriate.
       ``(ii) Requirements of restoration plan.--A Deposit 
     Insurance Fund restoration plan meets the requirements of 
     this clause if the plan provides that the reserve ratio of 
     the Fund will meet or exceed the minimum amount specified in 
     subparagraph (B)(ii) for the designated reserve ratio before 
     the end of the 10-year period beginning upon the 
     implementation of the plan.
       ``(iii) Restriction on assessment credits.--As part of any 
     restoration plan under this subparagraph, the Corporation may 
     elect to restrict the application of assessment credits 
     provided under subsection (e)(3) for any period that the plan 
     is in effect.
       ``(iv) Limitation on restriction.--Notwithstanding clause 
     (iii), while any restoration plan under this subparagraph is 
     in effect, the Corporation shall apply credits provided to an 
     insured depository institution under subsection (e)(3) 
     against any assessment imposed on the institution for any 
     assessment period in an amount equal to the lesser of--

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

       ``(v) Transparency.--Not more than 30 days after the 
     Corporation establishes and implements a restoration plan 
     under clause (i), the Corporation shall publish in the 
     Federal Register a detailed analysis of the factors 
     considered and the basis for the actions taken with regard to 
     the plan.''.

     SEC. 9. REGULATIONS REQUIRED.

       (a) In General.--Not later than 270 days after the date of 
     the enactment of this Act, the Board of Directors of the 
     Federal Deposit Insurance Corporation shall prescribe final 
     regulations, after notice and opportunity for comment--
       (1) designating the reserve ratio for the Deposit Insurance 
     Fund in accordance with section 7(b)(3) of the Federal 
     Deposit Insurance Act (as amended by section 5 of this Act);
       (2) implementing increases in deposit insurance coverage in 
     accordance with the amendments made by section 3 of this Act;
       (3) implementing the dividend requirement under section 
     7(e)(2) of the Federal Deposit Insurance Act (as amended by 
     section 7 of this Act);
       (4) implementing the 1-time assessment credit to certain 
     insured depository institutions in accordance with section 
     7(e)(3) of the Federal Deposit Insurance Act, as amended by 
     section 7 of this Act, including the qualifications and 
     procedures under which the Corporation would apply assessment 
     credits; and
       (5) providing for assessments under section 7(b) of the 
     Federal Deposit Insurance Act, as amended by this Act.
       (b) Rule of Construction.--No provision of this Act or any 
     amendment made by this Act shall be construed as affecting 
     the authority of the Corporation to set or collect deposit 
     insurance assessments before the effective date of the final 
     regulations prescribed under subsection (a).

     SEC. 10. STUDIES OF FDIC STRUCTURE AND EXPENSES AND CERTAIN 
                   ACTIVITIES AND FURTHER POSSIBLE CHANGES TO 
                   DEPOSIT INSURANCE SYSTEM.

       (a) Study by Comptroller General.--
       (1) Study required.--The Comptroller General shall conduct 
     a study of the following issues:
       (A) The efficiency and effectiveness of the administration 
     of the prompt corrective action program under section 38 of 
     the Federal Deposit Insurance Act by the Federal banking 
     agencies (as defined in section 3 of such Act), including the 
     degree of effectiveness of such agencies in identifying 
     troubled depository institutions and taking effective action 
     with respect to such institutions, and the degree of accuracy 
     of the risk assessments made by the Corporation.
       (B) The appropriateness of the organizational structure of 
     the Federal Deposit Insurance Corporation for the mission of 
     the Corporation taking into account--
       (i) the current size and complexity of the business of 
     insured depository institutions (as such term is defined in 
     section 3 of the Federal Deposit Insurance Act);
       (ii) the extent to which the organizational structure 
     contributes to or reduces operational inefficiencies that 
     increase operational costs; and
       (iii) the effectiveness of internal controls.
       (2) Report to the congress.--The Comptroller General shall 
     submit a report to the Congress before the end of the 1-year 
     period beginning on the date of the enactment of this Act 
     containing the findings and conclusions of the Comptroller 
     General with respect to the study required under paragraph 
     (1) together with such recommendations for legislative or 
     administrative action as the Comptroller General may 
     determine to be appropriate.
       (b) Internal Study by the FDIC.--
       (1) Study required.--Concurrently with the study required 
     to be conducted by the Comptroller General under subsection 
     (a), the Federal Deposit Insurance Corporation shall conduct 
     an internal study of the same conditions and factors included 
     in the study under subsection (a).
       (2) Report to the congress.--The Federal Deposit Insurance 
     Corporation shall submit a report to the Congress before the 
     end of the 1-year period beginning on the date of the 
     enactment of this Act containing the findings and conclusions 
     of the Corporation with respect to the study required under 
     paragraph (1) together with such recommendations for 
     legislative or administrative action as the Board of 
     Directors of the Corporation may determine to be appropriate.
       (c) Study of Further Possible Changes to Deposit Insurance 
     System.--
       (1) Study required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation and the National Credit Union 
     Administration Board shall each conduct a study of the 
     following:
       (A) The feasibility of establishing a voluntary deposit 
     insurance system for deposits in excess of the maximum amount 
     of deposit insurance for any depositor and the potential 
     benefits and the potential adverse consequences that may 
     result from the establishment of any such system.
       (B) The feasibility of privatizing all deposit insurance at 
     insured depository institutions and insured credit unions.
       (2) Report.--Before the end of the 1-year period beginning 
     on the date of the enactment of this Act, the Board of 
     Directors of the Federal Deposit Insurance Corporation and 
     the National Credit Union Administration Board shall each 
     submit a report to the Congress on the study required under 
     paragraph (1) containing the findings and conclusions of the 
     reporting agency together with such recommendations for 
     legislative or administrative changes as the agency may 
     determine to be appropriate.
       (d) Study Regarding Appropriate Deposit Base in Designating 
     Reserve Ratio.--
       (1) Study required.--The Federal Deposit Insurance 
     Corporation shall conduct a study of the feasibility of using 
     actual domestic deposits rather than estimated insured 
     deposits in calculating the reserve ratio of the Deposit 
     Insurance Fund and designating a reserve ratio for such Fund.
       (2) Report.--The Federal Deposit Insurance Corporation 
     shall submit a report to the Congress before the end of the 
     1-year period beginning on the date of the enactment of this 
     Act containing the findings and conclusions of the 
     Corporation with respect to the study required under 
     paragraph (1) together with such recommendations for 
     legislative or administrative action as the Board of 
     Directors of the Corporation may determine to be appropriate.
       (e) Study of Reserve Methodology and Accounting for Loss.--
       (1) Study required.--The Federal Deposit Insurance 
     Corporation, in consultation with the Comptroller General, 
     shall conduct a study of the reserve methodology and loss 
     accounting used by the Corporation during the period 
     beginning on January 1, 1992, and ending December 31, 2002, 
     with respect to insured depository institutions in a troubled 
     condition (as defined in the regulations prescribed pursuant 
     to section 32(f) of the Federal Deposit Insurance Act).
       (2) Factors to be included.--In conducting the study 
     pursuant to paragraph (1), the Federal Deposit Insurance 
     Corporation shall--
       (A) consider the overall effectiveness and accuracy of the 
     methodology used by the Corporation for establishing and 
     maintaining reserves and estimating and accounting for losses 
     at insured depository institutions, during the period 
     described in such paragraph;
       (B) consider the appropriateness and reliability of 
     information and criteria used by the Corporation in 
     determining--
       (i) whether an insured depository institution was in a 
     troubled condition; and
       (ii) the amount of any loss anticipated at such 
     institution;
       (C) analyze the actual historical loss experience over the 
     period described in paragraph (1) and the causes of the 
     exceptionally high rate of losses experienced by the 
     Corporation in the final 3 years of that period; and

[[Page 8090]]

       (D) rate the efforts of the Corporation to reduce losses in 
     such 3-year period to minimally acceptable levels and to 
     historical levels.
       (3) Report required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation shall submit a report to the 
     Congress before the end of the 6-month period beginning on 
     the date of the enactment of this Act, containing the 
     findings and conclusions of the Corporation, in consultation 
     with the Comptroller General, with respect to the study 
     required under paragraph (1), together with such 
     recommendations for legislative or administrative action as 
     the Board of Directors may determine to be appropriate.

     SEC. 11. BI-ANNUAL FDIC SURVEY AND REPORT ON INCREASING THE 
                   DEPOSIT BASE BY ENCOURAGING USE OF DEPOSITORY 
                   INSTITUTIONS BY THE UNBANKED.

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

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

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

     SEC. 12. TECHNICAL AND CONFORMING AMENDMENTS TO THE FEDERAL 
                   DEPOSIT INSURANCE ACT RELATING TO THE MERGER OF 
                   THE BIF AND SAIF.

       (a) In General.--The Federal Deposit Insurance Act (12 
     U.S.C. 1811 et seq.) is amended--
       (1) in section 3 (12 U.S.C. 1813)--
       (A) by striking subparagraph (B) of subsection (a)(1) and 
     inserting the following new subparagraph:
       ``(B) includes any former savings association.''; and
       (B) by striking paragraph (1) of subsection (y) (as so 
     designated by section 5(b) of this Act) and inserting the 
     following new paragraph:
       ``(1) Deposit insurance fund.--The term `Deposit Insurance 
     Fund' means the Deposit Insurance Fund established under 
     section 11(a)(4).'';
       (2) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking 
     ``the Bank Insurance Fund or the Savings Association 
     Insurance Fund,'' and inserting ``the Deposit Insurance 
     Fund,'';
       (3) in section 5(c)(4), by striking ``deposit insurance 
     fund'' and inserting ``Deposit Insurance Fund'';
       (4) in section 5(d) (12 U.S.C. 1815(d)), by striking 
     paragraphs (2) and (3) (and any funds resulting from the 
     application of such paragraph (2) prior to its repeal shall 
     be deposited into the general fund of the Deposit Insurance 
     Fund);
       (5) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
       (A) in subparagraph (A), by striking ``reserve ratios in 
     the Bank Insurance Fund and the Savings Association Insurance 
     Fund as required by section 7'' and inserting ``the reserve 
     ratio of the Deposit Insurance Fund'';
       (B) by striking subparagraph (B) and inserting the 
     following:
       ``(2) Fee credited to the deposit insurance fund.--The fee 
     paid by the depository institution under paragraph (1) shall 
     be credited to the Deposit Insurance Fund.'';
       (C) by striking ``(1) Uninsured institutions.--''; and
       (D) by redesignating subparagraphs (A) and (C) as 
     paragraphs (1) and (3), respectively, and moving the left 
     margins 2 ems to the left;
       (6) in section 5(e) (12 U.S.C. 1815(e))--
       (A) in paragraph (5)(A), by striking ``Bank Insurance Fund 
     or the Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (B) by striking paragraph (6); and
       (C) by redesignating paragraphs (7), (8), and (9) as 
     paragraphs (6), (7), and (8), respectively;
       (7) in section 6(5) (12 U.S.C. 1816(5)), by striking ``Bank 
     Insurance Fund or the Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (8) in section 7(b) (12 U.S.C. 1817(b))--
       (A) in paragraph (1)(C), by striking ``deposit insurance 
     fund'' each place that term appears and inserting ``Deposit 
     Insurance Fund'';
       (B) in paragraph (1)(D), by striking ``each deposit 
     insurance fund'' and inserting ``the Deposit Insurance 
     Fund''; and
       (C) in paragraph (5) (as so redesignated by section 4(e)(4) 
     of this Act)--
       (i) by striking ``any such assessment'' and inserting ``any 
     such assessment is necessary'';
       (ii) by striking subparagraph (B);
       (iii) in subparagraph (A)--

       (I) by striking ``(A) is necessary--'';
       (II) by striking ``Bank Insurance Fund members'' and 
     inserting ``insured depository institutions''; and
       (III) by redesignating clauses (i), (ii), and (iii) as 
     subparagraphs (A), (B), and (C), respectively, and moving the 
     margins 2 ems to the left; and

       (iv) in subparagraph (C) (as so redesignated)--

       (I) by inserting ``that'' before ``the Corporation''; and
       (II) by striking ``; and'' and inserting a period;

       (9) in section 7(j)(7)(F) (12 U.S.C. 1817(j)(7)(F)), by 
     striking ``Bank Insurance Fund or the Savings Association 
     Insurance Fund'' and inserting ``Deposit Insurance Fund'';
       (10) in section 8(t)(2)(C) (12 U.S.C. 1818(t)(2)(C)), by 
     striking ``deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (11) in section 11 (12 U.S.C. 1821)--
       (A) by striking ``deposit insurance fund'' each place that 
     term appears and inserting ``Deposit Insurance Fund'';
       (B) by striking paragraph (4) of subsection (a) and 
     inserting the following new paragraph:
       ``(4) Deposit insurance fund.--
       ``(A) Establishment.--There is established the Deposit 
     Insurance Fund, which the Corporation shall--
       ``(i) maintain and administer;
       ``(ii) use to carry out its insurance purposes, in the 
     manner provided by this subsection; and
       ``(iii) invest in accordance with section 13(a).
       ``(B) Uses.--The Deposit Insurance Fund shall be available 
     to the Corporation for use with respect to insured depository 
     institutions the deposits of which are insured by the Deposit 
     Insurance Fund.
       ``(C) Limitation on use.--Notwithstanding any provision of 
     law other than section 13(c)(4)(G), the Deposit Insurance 
     Fund shall not be used in any manner to benefit any 
     shareholder or affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act) of--
       ``(i) any insured depository institution for which the 
     Corporation has been appointed conservator or receiver, in 
     connection with any type of resolution by the Corporation;
       ``(ii) any other insured depository institution in default 
     or in danger of default, in connection with any type of 
     resolution by the Corporation; or
       ``(iii) any insured depository institution, in connection 
     with the provision of assistance under this section or 
     section 13 with respect to such institution, except that this 
     clause shall not prohibit any assistance to any insured 
     depository institution that is not in default, or that is not 
     in danger of default, that is acquiring (as defined in 
     section 13(f)(8)(B)) another insured depository institution.
       ``(D) Deposits.--All amounts assessed against insured 
     depository institutions by the Corporation shall be deposited 
     into the Deposit Insurance Fund.'';
       (C) by striking paragraphs (5), (6), and (7) of subsection 
     (a); and
       (D) by redesignating paragraph (8) of subsection (a) as 
     paragraph (5);
       (12) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by 
     striking ``, except that--'' and all that follows 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'';

[[Page 8091]]

       (C) in subsection (c)(4)(E)--
       (i) in the subparagraph heading, by striking ``funds'' and 
     inserting ``fund''; and
       (ii) in clause (i), by striking ``any insurance fund'' and 
     inserting ``the Deposit Insurance Fund'';
       (D) in subsection (c)(4)(G)(ii)--
       (i) by striking ``appropriate insurance fund'' and 
     inserting ``Deposit Insurance Fund'';
       (ii) by striking ``the members of the insurance fund (of 
     which such institution is a member)'' and inserting ``insured 
     depository institutions'';
       (iii) by striking ``each member's'' and inserting ``each 
     insured depository institution's''; and
       (iv) by striking ``the member's'' each place that term 
     appears and inserting ``the institution's'';
       (E) in subsection (c), by striking paragraph (11);
       (F) in subsection (h), by striking ``Bank Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (G) in subsection (k)(4)(B)(i), by striking ``Savings 
     Association Insurance Fund member'' and inserting ``savings 
     association''; and
       (H) in subsection (k)(5)(A), by striking ``Savings 
     Association Insurance Fund members'' and inserting ``savings 
     associations'';
       (20) in section 14(a) (12 U.S.C. 1824(a)), in the 5th 
     sentence--
       (A) by striking ``Bank Insurance Fund or the Savings 
     Association Insurance Fund'' and inserting ``Deposit 
     Insurance Fund''; and
       (B) by striking ``each such fund'' and inserting ``the 
     Deposit Insurance Fund'';
       (21) in section 14(b) (12 U.S.C. 1824(b)), by striking 
     ``Bank Insurance Fund or Savings Association Insurance Fund'' 
     and inserting ``Deposit Insurance Fund'';
       (22) in section 14(c) (12 U.S.C. 1824(c)), by striking 
     paragraph (3);
       (23) in section 14(d) (12 U.S.C. 1824(d))--
       (A) by striking ``Bank Insurance Fund member'' each place 
     that term appears and inserting ``insured depository 
     institution'';
       (B) by striking ``Bank Insurance Fund members'' each place 
     that term appears and inserting ``insured depository 
     institutions'';
       (C) by striking ``Bank Insurance Fund'' each place that 
     term appears (other than in connection with a reference to a 
     term amended by subparagraph (A) or (B) of this paragraph) 
     and inserting ``Deposit Insurance Fund'';
       (D) by striking the subsection heading and inserting the 
     following:
       ``(d) Borrowing for the Deposit Insurance Fund From Insured 
     Depository Institutions.--'';
       (E) in paragraph (3), in the paragraph heading, by striking 
     ``bif'' and inserting ``the deposit insurance fund''; and
       (F) in paragraph (5), in the paragraph heading, by striking 
     ``bif members'' and inserting ``insured depository 
     institutions'';
       (24) in section 14 (12 U.S.C. 1824), by adding at the end 
     the following new subsection:
       ``(e) Borrowing for the Deposit Insurance Fund From Federal 
     Home Loan Banks.--
       ``(1) In general.--The Corporation may borrow from the 
     Federal home loan banks, with the concurrence of the Federal 
     Housing Finance Board, such funds as the Corporation 
     considers necessary for the use of the Deposit Insurance 
     Fund.
       ``(2) Terms and conditions.--Any loan from any Federal home 
     loan bank under paragraph (1) to the Deposit Insurance Fund 
     shall--
       ``(A) bear a rate of interest of not less than the current 
     marginal cost of funds to that bank, taking into account the 
     maturities involved;
       ``(B) be adequately secured, as determined by the Federal 
     Housing Finance Board;
       ``(C) be a direct liability of the Deposit Insurance Fund; 
     and
       ``(D) be subject to the limitations of section 15(c).'';
       (25) in section 15(c)(5) (12 U.S.C. 1825(c)(5))--
       (A) by striking ``the Bank Insurance Fund or Savings 
     Association Insurance Fund, respectively'' each place that 
     term appears and inserting ``the Deposit Insurance Fund''; 
     and
       (B) in subparagraph (B), by striking ``the Bank Insurance 
     Fund or the Savings Association Insurance Fund, 
     respectively'' and inserting ``the Deposit Insurance Fund'';
       (26) in section 17(a) (12 U.S.C. 1827(a))--
       (A) in the subsection heading, by striking ``BIF, SAIF,'' 
     and inserting ``the Deposit Insurance Fund''; and
       (B) in paragraph (1)--
       (i) by striking ``the Bank Insurance Fund, the Savings 
     Association Insurance Fund,'' each place that term appears 
     and inserting ``the Deposit Insurance Fund''; and
       (ii) in subparagraph (D), by striking ``each insurance 
     fund'' and inserting ``the Deposit Insurance Fund'';
       (27) in section 17(d) (12 U.S.C. 1827(d)), by striking ``, 
     the Bank Insurance Fund, the Savings Association Insurance 
     Fund,'' each place that term appears and inserting ``the 
     Deposit Insurance Fund'';
       (28) in section 18(m)(3) (12 U.S.C. 1828(m)(3))--
       (A) by striking ``Savings Association Insurance Fund'' in 
     the 1st sentence of subparagraph (A) and inserting ``Deposit 
     Insurance Fund'';
       (B) by striking ``Savings Association Insurance Fund 
     member'' in the last sentence of subparagraph (A) and 
     inserting ``savings association''; and
       (C) by striking ``Savings Association Insurance Fund or the 
     Bank Insurance Fund'' in subparagraph (C) and inserting 
     ``Deposit Insurance Fund'';
       (29) in section 18(o) (12 U.S.C. 1828(o)), by striking 
     ``deposit insurance funds'' and ``deposit insurance fund'' 
     each place those terms appear and inserting ``Deposit 
     Insurance Fund'';
       (30) in section 18(p) (12 U.S.C. 1828(p)), by striking 
     ``deposit insurance funds'' and inserting ``Deposit Insurance 
     Fund'';
       (31) in section 24 (12 U.S.C. 1831a)--
       (A) in subsections (a)(1) and (d)(1)(A), by striking 
     ``appropriate deposit insurance fund'' each place that term 
     appears and inserting ``Deposit Insurance Fund'';
       (B) in subsection (e)(2)(A), by striking ``risk to'' and 
     all that follows through the period and inserting ``risk to 
     the Deposit Insurance Fund.''; and
       (C) in subsections (e)(2)(B)(ii) and (f)(6)(B), by striking 
     ``the insurance fund of which such bank is a member'' each 
     place that term appears and inserting ``the Deposit Insurance 
     Fund'';
       (32) in section 28 (12 U.S.C. 1831e), by striking 
     ``affected deposit insurance fund'' each place that term 
     appears and inserting ``Deposit Insurance Fund'';
       (33) by striking section 31 (12 U.S.C. 1831h);
       (34) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)), by 
     striking ``affected deposit insurance fund'' and inserting 
     ``Deposit Insurance Fund'';
       (35) in section 37(a)(1)(C) (12 U.S.C. 1831n(a)(1)(C)), by 
     striking ``insurance funds'' and inserting ``Deposit 
     Insurance Fund'';
       (36) in section 38 (12 U.S.C. 1831o), by striking ``the 
     deposit insurance fund'' each place that term appears and 
     inserting ``the Deposit Insurance Fund'';
       (37) in section 38(a) (12 U.S.C. 1831o(a)), in the 
     subsection heading, by striking ``Funds'' and inserting 
     ``Fund'';
       (38) in section 38(k) (12 U.S.C. 1831o(k))--
       (A) in paragraph (1), by striking ``a deposit insurance 
     fund'' and inserting ``the Deposit Insurance Fund'';
       (B) in paragraph (2), by striking ``A deposit insurance 
     fund'' and inserting ``The Deposit Insurance Fund''; and
       (C) in paragraphs (2)(A) and (3)(B), by striking ``the 
     deposit insurance fund's outlays'' each place that term 
     appears and inserting ``the outlays of the Deposit Insurance 
     Fund''; and
       (39) in section 38(o) (12 U.S.C. 1831o(o))--
       (A) by striking ``Associations.--'' and all that follows 
     through ``Subsections (e)(2)'' and inserting 
     ``Associations.--Subsections (e)(2)'';
       (B) by redesignating subparagraphs (A), (B), and (C) as 
     paragraphs (1), (2), and (3), respectively, and moving the 
     margins 2 ems to the left; and
       (C) in paragraph (1) (as so redesignated), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively, and moving the margins 2 ems to the left.
       (b) Effective Date.--This section and the amendments made 
     by this section shall take effect on the first day of the 
     first calendar quarter that begins after the end of the 90-
     day period beginning on the date of the enactment of this 
     Act.

     SEC. 13. OTHER TECHNICAL AND CONFORMING AMENDMENTS RELATING 
                   TO THE MERGER OF THE BIF AND SAIF.

       (a) Section 5136 of the Revised Statutes.--The paragraph 
     designated the ``Eleventh'' of section 5136 of the Revised 
     Statutes of the United States (12 U.S.C. 24) is amended in 
     the 5th sentence, by striking ``affected deposit insurance 
     fund'' and inserting ``Deposit Insurance Fund''.
       (b) Investments Promoting Public Welfare; Limitations on 
     Aggregate Investments.--The 23d undesignated paragraph of 
     section 9 of the Federal Reserve Act (12 U.S.C. 338a) is 
     amended in the 4th sentence, by striking ``affected deposit 
     insurance fund'' and inserting ``Deposit Insurance Fund''.
       (c) Advances to Critically Undercapitalized Depository 
     Institutions.--Section 10B(b)(3)(A)(ii) of the Federal 
     Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by 
     striking ``any deposit insurance fund in'' and inserting 
     ``the Deposit Insurance Fund of''.
       (d) Amendments to the Balanced Budget and Emergency Deficit 
     Control Act of 1985.--Section 255(g)(1)(A) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
     905(g)(1)(A)) is amended--
       (1) by striking ``Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (2) by striking ``Federal Deposit Insurance Corporation, 
     Savings Association Insurance Fund (51-4066-0-3-373);''.
       (e) Amendments to the Federal Home Loan Bank Act.--The 
     Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is 
     amended--
       (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'';

[[Page 8092]]

       (6) in section 21A(n)(6)(E)(iv) (12 U.S.C. 
     1441(n)(6)(E)(iv)), by striking ``Federal deposit insurance 
     funds'' and inserting ``the Deposit Insurance Fund'';
       (7) in section 21B(e) (12 U.S.C. 1441b(e))--
       (A) in paragraph (5), by inserting ``as of the date of 
     funding'' after ``Savings Association Insurance Fund 
     members'' each place that term appears; and
       (B) by striking paragraphs (7) and (8); and
       (8) in section 21B(k) (12 U.S.C. 1441b(k))--
       (A) by inserting before the colon ``, the following 
     definitions shall apply'';
       (B) by striking paragraph (8); and
       (C) by redesignating paragraphs (9) and (10) as paragraphs 
     (8) and (9), respectively.
       (f) Amendments to the Home Owners' Loan Act.--The Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended--
       (1) in section 5 (12 U.S.C. 1464)--
       (A) in subsection (c)(5)(A), by striking ``that is a member 
     of the Bank Insurance Fund'';
       (B) in subsection (c)(6), by striking ``As used in this 
     subsection--'' and inserting ``For purposes of this 
     subsection, the following definitions shall apply:'';
       (C) in subsection (o)(1), by striking ``that is a Bank 
     Insurance Fund member'';
       (D) in subsection (o)(2)(A), by striking ``a Bank Insurance 
     Fund member until such time as it changes its status to a 
     Savings Association Insurance Fund member'' and inserting 
     ``insured by the Deposit Insurance Fund'';
       (E) in subsection (t)(5)(D)(iii)(II), by striking 
     ``affected deposit insurance fund'' and inserting ``Deposit 
     Insurance Fund'';
       (F) in subsection (t)(7)(C)(i)(I), by striking ``affected 
     deposit insurance fund'' and inserting ``Deposit Insurance 
     Fund''; and
       (G) in subsection (v)(2)(A)(i), by striking ``the Savings 
     Association Insurance Fund'' and inserting ``or the Deposit 
     Insurance Fund''; and
       (2) in section 10 (12 U.S.C. 1467a)--
       (A) in subsection (c)(6)(D), by striking ``this title'' and 
     inserting ``this Act'';
       (B) in subsection (e)(1)(B), by striking ``Savings 
     Association Insurance Fund or Bank Insurance Fund'' and 
     inserting ``Deposit Insurance Fund'';
       (C) in subsection (e)(2), by striking ``Savings Association 
     Insurance Fund or the Bank Insurance Fund'' and inserting 
     ``Deposit Insurance Fund'';
       (D) in subsection (e)(4)(B), by striking ``subsection (1)'' 
     and inserting ``subsection (l)'';
       (E) in subsection (g)(3)(A), by striking ``(5) of this 
     section'' and inserting ``(5) of this subsection'';
       (F) in subsection (i), by redesignating paragraph (5) as 
     paragraph (4);
       (G) in subsection (m)(3), by striking subparagraph (E) and 
     by redesignating subparagraphs (F), (G), and (H) as 
     subparagraphs (E), (F), and (G), respectively;
       (H) in subsection (m)(7)(A), by striking ``during period'' 
     and inserting ``during the period''; and
       (I) in subsection (o)(3)(D), by striking ``sections 5(s) 
     and (t) of this Act'' and inserting ``subsections (s) and (t) 
     of section 5''.
       (g) Amendments to the National Housing Act.--The National 
     Housing Act (12 U.S.C. 1701 et seq.) is amended--
       (1) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by 
     striking ``Bank Insurance Fund for banks or through the 
     Savings Association Insurance Fund for savings associations'' 
     and inserting ``Deposit Insurance Fund''; and
       (2) in section 536(b)(1)(B)(ii) (12 U.S.C. 1735f-
     14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for banks 
     and through the Savings Association Insurance Fund for 
     savings associations'' and inserting ``Deposit Insurance 
     Fund''.
       (h) Amendments to the Financial Institutions Reform, 
     Recovery, and Enforcement Act of 1989.--The Financial 
     Institutions Reform, Recovery, and Enforcement Act of 1989 
     (12 U.S.C. 1811 note) is amended--
       (1) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by 
     inserting ``and after the merger of such funds, the Deposit 
     Insurance Fund,'' after ``the Savings Association Insurance 
     Fund,''; and
       (2) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by 
     striking ``Bank Insurance Fund, the Savings Association 
     Insurance Fund,'' and inserting ``Deposit Insurance Fund''.
       (i) Amendment to the Bank Holding Company Act of 1956.--The 
     Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended--
       (1) in section 2(j)(2) (12 U.S.C. 1841(j)(2)), by striking 
     ``Savings Association Insurance Fund'' and inserting 
     ``Deposit Insurance Fund''; and
       (2) in section 3(d)(1)(D)(iii) (12 U.S.C. 
     1842(d)(1)(D)(iii)), by striking ``appropriate deposit 
     insurance fund'' and inserting ``Deposit Insurance Fund''.
       (j) Amendments to the Gramm-Leach-Bliley Act.--Section 114 
     of the Gramm-Leach-Bliley Act (12 U.S.C. 1828a) is amended by 
     striking ``any Federal deposit insurance fund'' in subsection 
     (a)(1)(B), paragraphs (2)(B) and (4)(B) of subsection (b), 
     and subsection (c)(1)(B), each place that term appears and 
     inserting ``the Deposit Insurance Fund''.
       (k) Effective Date.--This section and the amendments made 
     by this section shall take effect on the first day of the 
     first calendar quarter that begins after the end of the 90-
     day period beginning on the date of the enactment of this 
     Act.

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


                   Amendment No. 1 Offered by Mr. Ose

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

       Amendment No. 1 offered by Mr. Ose:

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

  The CHAIRMAN. Pursuant to the order of the House of Tuesday, April 1, 
the gentleman from California (Mr. Ose) and a Member opposed each will 
control 10 minutes.
  The Chair recognizes the gentleman from California (Mr. Ose).
  Mr. FRANK of Massachusetts. Mr. Chairman, did any Member claim the 
opposing time?
  The CHAIRMAN. Does any Member claim the time in opposition?
  Mr. BACHUS. Mr. Chairman, I was standing to claim the time in 
opposition.
  The CHAIRMAN. The gentleman from Alabama (Mr. Bachus) will be 
recognized in opposition.
  The gentleman from California (Mr. Ose) is recognized.
  Mr. OSE. Mr. Chairman, I yield myself 5 minutes.
  Mr. Chairman, I fully support many of the reforms in H.R. 522 but 
must, once again, raise some concern with one particular section that 
would not only cause harm but could ensure that the other reforms are 
once again delayed by the other body or by the administration. That 
issue is the increase in coverage amounts.
  I am pleased to see my friend, the gentlewoman from New York (Mrs. 
Maloney), a fellow member of Committee on Financial Services, here on 
the floor today who is joining me in offering this amendment.
  This simple amendment returns the base coverage level for insurance 
on deposits to the current $100,000 level. It removes provisions 
increasing coverage to $130,000, as well as provisions to automatically 
increase coverage through inflation adjustments. This is the only 
change it makes.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
  I speak in opposition to this amendment. One of the statements by the 
proponent of this amendment has been that the former increase in 
coverage was the primary reason for the savings and loan crisis, and 
let me say in that regard that the cause of the savings and loan 
collapse, crisis in this country, has been well examined and well 
documented. The FDIC, in fact, issued a report called ``History of the 
Eighties, Lessons for the Future and Examination of the Banking Crisis 
of the 1980s.''
  Here is their reasoning. The rise in the number of bank failures in 
the 1980s had no single cause or short list of causes. Rather, it 
resulted from a concurrence of various forces working together to 
produce a decade of banking crises.
  First, broad national forces, economic, financial, legislative and 
regulatory established the preconditions for the increased number of 
bank failures. Second, a series of severe regional and sectional 
recessions hit banks in a number of banking markets and led to the 
majority of the failures. Third,

[[Page 8093]]

some of the banks in these markets assumed excessive risk and were 
insufficiently restrained by supervisory authorities with the result 
that they failed in disproportionate numbers.
  As a result of that, Mr. Chairman, we have made several changes in 
the law in this body in an attempt, and I think a successful attempt 
thus far, to make these institutions subject to more oversight and to 
stronger capital requirements.
  One Member of our body's father served as the FBI director during the 
savings and loan crisis. He was asked in a congressional hearing for 
his comment on the savings and loan crisis, and he said that criminal 
activity, fraud and looting were the primary causes of the crisis. In 
fact, the committee staff has made a fairly exhaustive study of the 
various articles written concerning the collapse of the savings and 
loans, and these were the reasons given at the time.
  My colleagues can see we have a basic laundry list of reasons, but 
there is actually evidence that the increase in coverage at the time 
gave savers some degree of security and actually prevented a panic at 
many institutions, and some of that body of evidence supports that it 
actually helped in a contagion of that crisis.
  Mr. Chairman, the final argument is a moral-hazard argument. The 
offerer of this amendment has argued that increasing coverage will 
create a greater moral hazard in the system; but then, surprisingly, 
his amendment does not raise the level from $100,000 to $130,000. It 
does away with that, but then he raises retirement accounts to 
$260,000, and he raises municipal deposits; and by doing that, they 
have managed in the subcommittee to basically arouse everyone's 
opposition to the amendment because if we raise the coverage for 
retirements in municipal deposits, then one is, in fact, arguing 
against the reason for offering his own amendment.
  I will close simply by saying that this moral-hazard argument has 
been looked at by the FDIC. They asked two respected economists to make 
a report, and they were Federal Reserve Governor Alan Blinder, and this 
is what he said. The point is made that if the FDIC is given the 
authority to charge risk-based premiums, and that is what H.R. 522 
does, then ``most objections based on moral hazard should evaporate.'' 
He goes on to state, ``In a world of properly priced deposit insurance, 
it seems more appropriate to ask the opposite question: Why have any 
coverage limits at all?''
  In fact, I think that ought to be the question we are debating: Why 
have any coverage limits at all? Even the CBO says that this bill will 
result in an increase of insured deposits in our institutions. Is that 
not something that we have all argued for? Do we not want an increase 
in the deposits in our financial institutions? Does that not strengthen 
our economy? Is that not good for America? They say that some 
institutions will fail and some people in that institution will lose 
200 or $220,000 worth of retirement funds. Do we not want them to have 
federally insured coverage? Do we want them to lose this money? I do 
not think so.
  Finally, do we believe in insurance? I think that is the essence of 
this whole argument. I mean, do we believe in insurance? Do we believe 
in insuring for losses? If we do, and I for one think that insurance is 
a good thing, I believe that insurance is a prudent thing, and I 
believe that in order for our Federal deposit insurance system to 
survive and have any relevance then that insurance protection, which I 
believe in, I believe in insuring against risk, I believe it is a 
prudent thing to do, then why would we want the Federal deposit 
insurance system to wither on the vine?

                              {time}  1130

  Why would we not want it to stay current with inflationary rates and 
per capita income? And the only way to do that is to vote ``yes'' on 
this bill. A vote against this bill basically would be like going back 
to 1980 and reducing the coverage from $100,000 to $30,000 if you went 
on per capita income, or $47,000 if you went on inflation.
  How many in our body would do that? How many in our body would vote 
today to take those levels back to the 1980 level? I do not think any 
of us would. A few of us would because, as the gentleman from 
California (Mr. Rohrabacher) says, I do not believe in Federal deposit 
insurance. I do not believe in the Federal Government supplying 
insurance. Well, it is the depositors, for one thing. The Federal 
Government does not. If he would look, he would see it is the banks 
through their premiums.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
  Mr. BACHUS. I yield to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Chairman, I thank the gentleman for 
yielding to me. I did not want time to expire while discussing the 
absent gentleman from California, and I did want to make sure I had a 
chance to express my opposition to this amendment.
  I think the committee product is a reasonable approach and so I hope 
the amendment is defeated. And, once again, I thank the gentleman for 
yielding to me
  Mr. BACHUS. Mr. Chairman, I reserve the balance of my time.
  Mr. OSE. Mr. Chairman, could you tell me how much time remains on 
each side?
  The CHAIRMAN. The gentleman from California (Mr. Ose) has 9 minutes 
remaining.
  Mr. OSE. Mr. Chairman, I want to make sure we are talking about the 
right amendment. It is amendment No. 1, which only deals with the level 
of insurance and the question of indexing. It does not deal with 
retirement accounts or municipal deposits. Am I correct in that, Mr. 
Chairman?
  The CHAIRMAN. The Chair cannot interpret the amendment. The gentleman 
may proceed.
  Mr. OSE. Mr. Chairman, I yield 5 minutes to the gentlewoman from New 
York (Mrs. Maloney).
  Mrs. MALONEY. Mr. Chairman, I thank the gentleman for yielding me 
this time and for his leadership, and I rise in support of the Ose-
Maloney amendment, a compromise approach to deposit insurance coverage 
that holds standard account coverage at $100,000 while offering 
increased protection for retirees.
  Mr. Chairman, as a whole, this is an outstanding bill. As an original 
cosponsor of H.R. 522, I am supportive of the overwhelming majority of 
provisions in the legislation. It is long past time to merge the BIF 
and SAIF insurance funds. Additionally, eliminating the 23 basis point 
cliff and providing a new premium system that takes into account the 
past contributions of institutions are major steps forward.
  The bill includes a mechanism for determining credit for past 
contributions to the insurance funds that is based on an amendment I 
cosponsored along with the gentleman from Nebraska (Mr. Bereuter) last 
session. This is a critically important provision as a matter of 
fairness to institutions that recapitalized the funds, and I thank the 
gentleman from Alabama (Mr. Bachus) for including this balanced 
amendment in the legislation.
  Despite these many positives, I believe the immediate 30 percent 
increase in insurance coverage in the bill is a serious mistake. This 
coverage increase to $130,000 is opposed by all the Federal financial 
service regulators, including Alan Greenspan, Treasury Secretary Peter 
Fischer, OCC Comptroller John Hawke and OTS Director James Gilleran.
  Proponents of increased coverage argue that it poses no new risk to 
the insurance system, but the regulators who oppose this increase are 
the very officials whose job it is to protect the safety and soundness 
of the financial system. The unanimity of regulator opposition to 
increased coverage is an extremely powerful message.
  Another argument put forth by proponents of coverage increases is 
that inflation has eroded deposit insurance. I do not believe this 
argument matches the actual situation of the banking industry. The fact 
is that only 2 percent of insured accounts have more than $100,000 
according to a study by the Federal Reserve. The same Fed study put the 
average account balance at merely $6,000. Any way you look at it the 
increase in coverage will benefit very, very few depositors.

[[Page 8094]]

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

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

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


              merging the bank and thrift insurance funds

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


             Flexibility in the Management of FDIC Reserves

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


                     Full Risk-Based Shared Funding

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

[[Page 8095]]

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


                   Deposit Insurance Coverage Limits

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

              Higher Coverage Limits Not Sought by Savers

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

                  Coverage Limits and Bank Competition

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

      Higher Coverage Limits for Municipal Funds Erode Discipline

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


                               conclusion

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

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

[[Page 8096]]

  Mr. Chairman, that is the beauty of this system. That is the strength 
of the system. And, in fact, it is the strongest argument that we do 
not need to increase limits. This proposal to increase to $130,000 is a 
solution in search of a problem.
  I urge this body to make an ``aye'' vote on my amendment. And, Mr. 
Chairman, I want to submit for the Record the Statement of 
Administration Position as provided by the Office of Management and 
Budget and the Statement of Federal Reserve Board Chairman Alan 
Greenspan.

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

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


                         Pay-As-You-Go-Scoring

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


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

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


                benefits and costs of deposit insurance

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

[[Page 8097]]

     misallocates resources and creates larger long-term financial 
     imbalances that increase the need for government supervision 
     to protect the taxpayers' interests. Deposit insurance 
     reforms must balance these tradeoffs. Moreover, any reforms 
     should be aimed primarily at protecting the interest of the 
     economy overall and not just the profits or market shares of 
     particular businesses.
       The Federal Reserve Board believes that deposit insurance 
     reforms should be designed to preserve the benefits of 
     heightened financial stability and the protection of small 
     depositors without a further increase in moral hazard or 
     reduction in market discipline. In addition, we urge that the 
     implementing details be kept as straightforward as possible 
     to minimize the risk of unintended consequences that comes 
     with complexity.

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

                              {time}  1145

  The SPEAKER pro tempore (Mr. Aderholt). The question is on the 
engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, this 15-
minute vote on the passage of H.R. 522 will be followed by a 5-minute 
vote on ordering the previous question on H. Res. 168, as well as on 
any other electronic vote that may be ordered on adoption of H. Res. 
168.
  The vote was taken by electronic device, and there were--yeas 411, 
nays 11, not voting 12, as follows:

                             [Roll No. 98]

                               YEAS--411

     Abercrombie
     Ackerman
     Aderholt
     Akin
     Alexander
     Allen
     Andrews
     Baca
     Bachus
     Baird
     Baker
     Baldwin
     Ballance
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Becerra
     Bell
     Bereuter
     Berkley
     Berman
     Berry
     Biggert
     Bilirakis
     Bishop (GA)
     Bishop (NY)
     Bishop (UT)
     Blackburn
     Blumenauer
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boswell
     Boyd
     Bradley (NH)
     Brady (PA)
     Brady (TX)
     Brown (OH)
     Brown (SC)
     Brown, Corrine
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Carter
     Case
     Castle
     Chabot
     Chocola
     Clay
     Clyburn
     Coble
     Cole
     Collins
     Conyers
     Costello
     Cox
     Cramer
     Crane
     Crenshaw
     Crowley
     Cubin
     Culberson
     Cummings
     Cunningham
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeGette
     Delahunt
     DeLauro
     DeLay
     DeMint
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Emanuel
     Emerson
     Engel
     English
     Eshoo
     Etheridge
     Evans
     Everett
     Farr
     Fattah
     Feeney
     Ferguson
     Filner
     Fletcher
     Foley
     Forbes
     Ford
     Fossella
     Frank (MA)
     Franks (AZ)
     Frelinghuysen
     Frost
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gonzalez
     Goode
     Goodlatte
     Gordon
     Goss
     Granger
     Graves
     Green (TX)
     Green (WI)
     Greenwood
     Grijalva
     Gutierrez
     Gutknecht
     Hall
     Harman
     Harris
     Hart
     Hastings (FL)
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hill
     Hinchey
     Hinojosa
     Hobson
     Hoeffel
     Hoekstra
     Holden
     Holt
     Honda
     Hooley (OR)
     Hostettler
     Houghton
     Hoyer
     Hulshof
     Hunter
     Inslee
     Isakson
     Israel
     Issa
     Istook
     Jackson (IL)
     Jackson-Lee (TX)
     Janklow
     Jefferson
     Jenkins
     John
     Johnson (CT)
     Johnson (IL)
     Johnson, E. B.
     Johnson, Sam
     Jones (OH)
     Kanjorski
     Kaptur
     Keller
     Kelly
     Kennedy (MN)
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
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     Latham
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     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Mica
     Michaud
     Millender-McDonald
     Miller (FL)
     Miller (MI)
     Miller (NC)
     Miller, Gary
     Miller, George
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Murtha
     Musgrave
     Myrick
     Nadler
     Napolitano
     Neal (MA)
     Nethercutt
     Ney

[[Page 8098]]


     Northup
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     Nunes
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     Otter
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     Petri
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     Rogers (KY)
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     Ross
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     Ryan (OH)
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     Ryun (KS)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
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     Weller
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     Whitfield
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     Wilson (NM)
     Wilson (SC)
     Wolf
     Woolsey
     Wu
     Young (AK)
     Young (FL)

                                NAYS--11

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

                             NOT VOTING--12

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


                Announcement by the Speaker Pro Tempore

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

                              {time}  1205

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

                          ____________________