Relating to Consideration of S. 1932, Deficit Reduction Act of 2005

RELATING TO CONSIDERATION OF S. 1932, DEFICIT REDUCTION ACT OF 2005 -- (House of Representatives - February 01, 2006)

Mr. BACHUS. Mr. Speaker, I rise in strong support of the Deposit Insurance Reform legislation included in S. 1932, the Deficit Reduction Act of 2005.

I want to begin by thanking Financial Services Committee Chairman OXLEY for his relentless efforts on moving this deposit insurance reform legislation. He has shown tremendous leadership in steering this complex bill through the legislative process, and I am deeply grateful that he gave me the opportunity to work on this landmark piece of legislation. I also want to thank the Ranking Member of the Committee, Mr. FRANK, for his support. This was truly a bipartisan effort, and I believe we have a better legislative product because of that. In addition, I want to express my deep appreciation for Senator SHELBY's work on increasing coverage for retirement accounts to $250,000.

Deposit insurance reform has been thoroughly discussed and debated over several years. During both the 107th (H.R. 3717) and 108th (H.R. 522) Congress, I introduced comprehensive deposit insurance reform legislation. The legislation was a byproduct of recommendations made by the FDIC in early 2001, a series of hearings held in my Subcommittee on proposed reforms to the Federal deposit insurance system, and broad-based bipartisan cooperation. H.R. 3717 passed the House in the 107th Congress by a vote of 408-18, and H.R. 522 passed the House in the 108th Congress by a vote of 411-11. During this Congress, Congresswoman HOOLEY and I introduced this same legislation--H.R. 1185--with Chairman OXLEY and Ranking Member FRANK. On May 4, 2005, H.R. 1185 passed the House by a vote of 413 to 10. The legislation is supported by the American Association of Retired Persons (AARP) as well as all of the banking and credit union trade associations.

Federal deposit insurance has been a hallmark of our nation's banking system for more than 70 years. The reforms made by this legislation will ensure that this system that has served America's savers and depositors so well for so long will continue to do so for future generations.

What does the legislation do? First, it merges the separate insurance funds that currently apply to deposits held by banks on the one hand and savings associations on the other, creating a stronger and more stable fund that will benefit banks and thrifts alike.

Second, the bill makes a number of changes designed to address the ``pro-cyclical'' bias of the current system, which results in sharply higher premiums being assessed at ``down'' points in the business cycle, when banks can least afford to pay them and when funds are most needed for lending to jumpstart economic growth. By giving the FDIC greater discretion to manage the insurance funds based on industry conditions and economic trends, the legislation will ease volatility in the banking system and facilitate recovery from economic downturns.

Third, the legislation makes monumental changes to law with regard to deposit insurance coverage levels. The system has gone 25 years without such an adjustment--the longest period in its history--and the increases provided for in the legislation are critical if deposit insurance is to maintain its relevance. The legislation establishes a permanent indexation system to ensure that coverage levels keep pace with inflation by indexing coverage from its current level of $100,000 every five years. The indexation, which begins in 2010, applies to all accounts, including retirement and municipal accounts. Without these changes, deposit insurance will wither on the vine, which is an unacceptable outcome for the millions of Americans who depend upon it to protect their savings.

The legislation also immediately increases deposit insurance coverage available to retirement accounts, including IRAs and 401ks, from its current level of $100,000 to $250,000. Particularly in light of volatility on Wall Street and other developments that have shaken confidence in the markets in recent years, senior citizens and those planning for retirement need a convenient, conservative, and secure place for their retirement savings. With the higher coverage levels provided for in this bill, the American banking system will give seniors that safe haven. That is why the AARP has enthusiastically endorsed the coverage increases in this bill.

All of us have heard from community bankers in our districts about the challenges they face in competing for deposits with large money-center banks that are perceived by the market--rightly or wrongly--as being ``too big to fail.'' By strengthening the deposit insurance system, the conference report will help small, neighborhood-based financial institutions across the country, particularly in rural America, continue to play an important role in financing economic development. The deposits that community banks are able to attract through the Federal deposit insurance guarantee are cycled back into local communities in the form of consumer and small business loans, community development projects, and home mortgages. If this source of funding dries up, it will have devastating consequences for the economic vitality of small-town America.

I want to again commend Chairman OXLEY for the tremendous leadership he has shown in steering this complex bill through the legislative process. I also want to thank Ranking Member FRANK, Congresswoman HOOLEY, Senator SHELBY, Senator SARBANES, Senator ENZI, Senator CRAPO, Senator ENZI, and Senator JOHNSON for all of their work on this legislation.

Let me also take this opportunity to thank the staff members on the House Financial Services Committee who worked on this legislation. Both Chairman OXLEY and Ranking Member FRANK are to be commended for assembling such a talented group of staff to work on Deposit Insurance Reform legislation. On the majority side, I would like to thank Bob Foster, Carter McDowell, Peggy Peterson, Tom Duncan, Peter Barrett and Dina Ellis who serves as my designee on the Committee. I want to give a special thanks to Jim Clinger who recently left the Committee to work at the Department of Justice. Without Jim's hard work, dedication and knowledge we would not be here today, and I am grateful for all of his efforts. I would also like to thank Larry Lavender, Warren Tryon and Kim Olive of my staff for their work on this issue. On the minority staff, I would like to thank the following staff members: Jeanne Roslanowick, Jaime Lizarraga, Erika Jeffers, Ken Swab and Matt Schumaker of Congresswoman HOOLEY's staff.

In closing, Mr. Speaker, let me just say that this legislation will promote the stability and soundness of the banking system. It will also provide assurance to working families, retirees, and others who place their hard-earned savings in U.S. banks, thrifts, and credit unions that their FDIC-insured deposits are safe and secure.

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