ICBA-Supported Deposit Insurance Reform Passes House 411-11
The House of Representatives approved the ICBA-supported Federal Deposit Insurance Reform Act, H.R. 522 by a vote of 411-11, an awesome display of congressional support that even exceeded last year's overwhelming 408-18 tally. An amendment offered by Reps. Doug Ose (R-CA) and Carolyn Maloney (D-NY) to scale back basic coverage levels to $100,000 was defeated by a voice vote.
This tremendous victory could not have been achieved without the strong grass roots support of community bankers across the nation who lobbied their House members in support of this bill. Congratulations and thank you! We also owe a special debt of gratitude to Reps. Spencer Bachus (R-AL) and Barney Frank (D-MA), who managed the bill on the House floor, and full committee chairman Mike Oxley (R-OH), who spearheaded the bill through the Financial Services Committee.
Among other features, H.R. 522:
- Increases coverage limits for individual accounts to $130,000 and indexes future coverage limits to inflation.
- Doubles coverage limits to $260,000 for certain types of IRAs and 401(k)s.
- Increases coverage limits for municipal deposits. Coverage is 80% above $130,000, up to a cap of $2 million per depositor.
- Ends the 23 basis point premium "cliff" that occurs when the FDIC fund's reserve ratio is expected to remain below 1.25 percent for more than one year.
- Creates a range within which the reserve ratio can float.
- Addresses the "free rider" problem through a system of "transitional premium credits," and "premium rebates" when the fund gets too high, based on past premiums paid.
- Gives the FDIC more flexibility in setting risk-based premiums.
- Merges the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
Now, on to the Senate. S. 229, a bill very similar to the House bill introduced earlier this year by Senators Hagel (R-NE), Johnson (D-SD), Enzi (R-WY) and Reed (D-RI), among others, is an excellent bill that deserves prompt Senate consideration. Senate Banking Committee chairman Richard Shelby (R-AL) has expressed basic support for deposit insurance reform, although he opposes raising FDIC coverage levels. The tremendous vote in the House should send a strong and unambiguous message to the Senate.