ICBA - News - News Release - ICBA Says Don’t Levy Main Street to Pay for Wall Street
ICBA News Release Header


ICBA Says Don’t Levy Main Street to Pay for Wall Street

Washington, D.C. (March 19, 2009)—The Independent Community Bankers of America (ICBA) today called on Congress to take action to address systemic risks in the financial system and pass legislation to avoid unfair penalties on Main Street community banks.

“While community banks take deposits and make loans to help our nation’s communities survive the current economic downturn, they are being hit with unfair penalties as too-big-to-fail financial institutions get one bailout after another,” said Steve Verdier, ICBA senior vice president and director of congressional affairs, in his testimony to the Senate Committee on Banking, Housing and Urban Affairs’ Subcommittee on Financial Institutions. “ICBA looks forward to continuing to work with Congress to make the deposit insurance system more equitable to help our nation’s more than 8,000 community banks continue to serve Main Street America.”

ICBA is calling for systemic risk premiums to be levied against too-big-to-fail financial institutions to compensate taxpayers and the Federal Deposit Insurance Corporation (FDIC) for the risks these institutions pose. Verdier said that Congress should also direct the FDIC to make the assessment base more equitable. Community banks pay approximately 30 percent of FDIC premiums, although they hold about 20 percent of bank assets. They fund themselves 85-95 percent with domestic deposits, while banks with more than $10 billion in assets use domestic deposits for only 52 percent of their funding. So, while community banks pay assessments on nearly their entire balance sheets, large banks pay on only half. It would be fairer if the FDIC were to use assets minus tangible equity (to encourage higher levels of tangible equity).

ICBA also urged Congress to approve legislation to increase the FDIC’s borrowing authority, which would allow the agency to reduce a costly emergency special assessment that would unfairly target community banks.

Meanwhile, ICBA is recommending Congress support legislation to permanently increase deposit insurance coverage from $100,000 to $250,000 and provide unlimited coverage for transaction accounts, which is now temporarily provided under the FDIC’s Temporary Liquidity Guarantee Program (TLGP). These guarantees will continue to bolster depositor confidence and help community banks compete against too-big-to-fail banks and money market mutual funds. ICBA also supports legislation that would allow the FDIC to ensure bank holding companies with significant non-bank assets pay their fair share of any TLGP deficit.

ICBA appreciates the opportunity to testify today and looks forward to working with the Committee on these vital issues.

Read the full testimony at www.icba.org.