[Congressional Record (Bound Edition), Volume 154 (2008), Part 11]
[Extensions of Remarks]
[Page 15743]
[From the U.S. Government Publishing Office, www.gpo.gov]




            INTRODUCTION OF THE FDIC FLEXIBILITY ACT OF 2008

                                 ______
                                 

                           HON. DAVID DREIER

                             of california

                    in the house of representatives

                         Tuesday, July 22, 2008

  Mr. DREIER. Madam Speaker, all of us are watching the news, concerned 
about the economy and our financial markets. The regulators of our 
financial services companies, the Federal Reserve, the SEC, and the 
banking regulators are all using the tools they have at their disposal 
to make sure small investors and depositors are as safe as possible in 
this environment.
  Among the most important duties that fall to our banking regulators 
is the protection of deposits. Average families and small business 
owners alike all depend on the Federal safety net to ensure that their 
savings are safe. Sometimes, ensuring the safety of those deposits 
requires regulators to step in when a bank or thrift becomes insolvent. 
For instance, in my own district, I have nearly 10,000 IndyMac 
depositors. The FDIC acted quickly to resolve this institution and is 
running it until that bank can either be returned to business as a safe 
institution, or its assets, including the deposits, can be transferred 
to a stronger financial institution that can meet the demands of its 
depositors.
  While Congress has taken steps over the past several years to ensure 
that the deposit insurance system is strong--and it is--the IndyMac 
situation demonstrates that every bank failure is different. Therefore, 
the regulators need as much flexibility as possible to ensure that they 
can respond to whatever the market throws at them.
  That is why today I am introducing the ``FDIC Flexibility Act of 
2008.'' After talking with the widely respected Bill Seidman, the 
chairman of the FDIC during much of the response to the savings and 
loan crisis, I believe that some well-intentioned provisions of the law 
may actually make the FDIC's job of resolving troubled institutions 
harder, not easier.
  The bill will repeal the ``low cost solution'' provisions which 
require the FDIC to always choose the solution with the lowest cost to 
the banking fund when resolving an institution. The problem is that 
what might be a low cost solution for a particular institution might 
not always be the best or fastest way to ensure that depositors have 
access to their funds. If depositors can't get access to their money, 
this can cause a crisis of confidence in the entire banking system, and 
put other institutions in jeopardy people start runs on banks.
  Sometimes, the best way to resolve an institution may not be the 
absolute cheapest--such as selling the failed institution to a stronger 
bank at a discount--but it will increase confidence and stability in 
the banking system as a whole, and reduce exposure over the long-term.
  I don't believe that this is the silver bullet to resolve every 
crisis we're facing, nor is it the only answer to the problems of 
resolving failed banks. But I think we need to have the discussion 
about what kinds of tools our regulators need, and with an advocate as 
widely respected as Chairman Seidman, this is a good place to start.

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