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Last update: 04/17/14

Deposit Insurance Reform Moves Forward in the House

WWR ARTICLE
MAY 17, 2002

 

BANKER UPDATE: DEPOSIT INSURANCE REFORM MOVES FORWARD IN THE HOUSE

On Thursday morning the ICBA was briefed by the top staff of the House Financial Services Committee on the timing and status of the pending deposit insurance reform bill.

The chief of staff of the House Financial Services Committee told us that the legislation would be on the House floor next week. He discussed the changes that Chairman Oxley (R-OH) would make to the bill, which was reported out of the committee by a 52-2 vote.

We asked the committee staff to thank Chairman Oxley and subcommittee Chairman Spencer Bachus (R-AL) for their enormous effort in moving this community bank-friendly legislation that will strengthen the FDIC and federal deposit insurance to the benefit of the consumer and saver.

You have already received our Banker Alert via fax and/or email describing what is in the bill that will be on the House floor next week-a bill the ICBA strongly supports.

The bill does allow for regular premiums on banks that will be offset initially by assessment credits and, in the future, by rebates when the fund exceeds a reserve ratio of 1.35%. Premiums on banks in the lowest risk category are capped at $.01 so long as the reserve ratio remains above 1.15%, the bottom end of the 1.15-1.40% range.

The Administration Position

During the just-concluded ICBA Spring Committee Meetings, Treasury Under Secretary Peter Fisher, who is an Administration point person on deposit insurance reform legislation, spoke to ICBA leadership bankers about financial literacy, predatory lending and deposit insurance reform.

After Mr. Fisher's speech, a community banker asked him a pertinent question. Noting that the U.S. Treasury (and the Federal Reserve) oppose both increasing coverage and indexation of the current coverage limit, the banker queried, "At what point do you stop the erosion [of the value of coverage]?" The under secretary's answer clearly implied that existing levels were still way too high, that increasing levels to $100,000 in 1980 was a mistake, and that an appropriate coverage level today would be about $60,000 (based on indexation of the original $5,000 in coverage in 1935).

Fortunately, this policy advice has not been followed by the House Financial Services Committee nor the growing list of cosponsors of the companion Johnson-Hagel bill in the Senate.






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