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Deep Waters

APRIL 19, 2002



When the Financial Institutions subcommittee marked up the deposit insurance reform bill on March 7, subcommittee chairman Spencer Bachus (R-AL) accepted an amendment proposed by Rep. Maxine Waters (D-CA). The Waters amendment provides a 50% discount on premiums attributable to deposits in lifeline banking accounts. Waters' language previously was adopted as part of FDICIA in 1991, but was never funded.

Since it was in the bill, opponents of the Waters language, led by the ABA, sought an amendment to strike the language in full committee markup. A freshman Republican member of the committee, Rep. Eric Cantor (R-VA), was approached by the Virginia Bankers Association and agreed to carry the amendment. The ICBA leadership discussed this amendment with Rep. Cantor and told him that we could not support his amendment.

Why? First, because we were following the lead of Chairman Spencer Bachus, a committed long-standing friend of community banking. Second, because the Waters amendment did not require bankers to offer any account they didn't want to offer. It did not interfere with bankers' freedom to offer or price products. We told Chairman Bachus and Rep. Waters that we would not support the Cantor amendment.

During debate over the Cantor amendment, Chairman Bachus, who opposed the amendment, said lifeline accounts typically are low-deposit accounts, so the impact on the reserve ratio would be "infinitesimal." FDIC Chairman Don Powell agreed, stating in a letter to lawmakers dated April 15 that the "impact on deposit insurance funds is likely to be negligible."

Bachus noted that seven states already require banks to offer lifeline banking accounts-New York, New Jersey, Illinois, Minnesota, Rhode Island, Massachusetts and Vermont.

The defeat of the Cantor amendment was critical to hold Democrat support for the bill, a key factor since the Senate is Democratically-controlled.