Johnson Sponsors Deposit Insurance Reform Legislation

Johnson Sponsors Deposit Insurance Reform Legislation

U.S. Senator Tim Johnson (D-SD) today joined with Senator Mike Enzi (R-WY) in introducing bipartisan, comprehensive deposit insurance reform legislation, The Safe and Fair Deposit Insurance Act of 2005.

"Deposit insurance provides the foundation for our banking system and gives people the confidence they need to invest in local institutions. " Johnson said. "We worked hard to create an approach to comprehensive reform that responds to the critical weakness in the system, while respecting the needs of the financial services community and ensuring that people across the country can keep their money safe and local."

The legislation would merge the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) into one fund that would insure all banks and savings and loan institutions. The bill would also significantly raise coverage levels for retirement accounts to $250,000, a level endorsed by FDIC Chairman Don Powell. Raising this coverage level will ensure that retirees will be able to keep their accounts safe and close to home.

Additional provisions in the legislation allow for indexation of both general and retirement account coverage every five years to remove the coverage issue from the political process, and to prevent further erosion of the value of coverage.

"Indexing is an absolutely critical component of this bill. First, we have a responsibility to create a predictable, non-political mechanism for deposit insurance coverage to keep pace with inflation," said Johnson. "We should take the coverage issue out of the political arena and create clear rules for how and when it is adjusted. Second, we have a responsibility to ensure that insurance protection does not continue to erode in the future. Comprehensive deposit insurance reform must not be allowed to pass without this simple, necessary protection."

The FDIC would be given the flexibility to manage the fund, and the discretion to set up an ongoing assessment credit system and mandatory rebate system.

"We have tried, and will succeed, in creating a much safer system than is currently in place," said Johnson. "I remain encouraged by the industry consensus around the need for reform. Our strong bipartisan approach will be key to passage of any meaningful deposit insurance reform legislation."

For the past four years, Johnson has been a staunch advocate, and the lead Democrat on deposit insurance reform. He first held hearings on the issue in 2001, when he was Chairman of the Senate Banking Committee's Subcommittee on Financial Institutions. Johnson has twice introduced bipartisan deposit insurance reform legislation -- S. 1945 in 2002, and S. 229 in 2003. He is pleased to be the lead Democratic sponsor of the Safe and Fair Deposit Insurance Act of 2005.

Johnson, a senior member of the Senate Banking Committee, worked closely with Senator Enzi and Senator Richard Shelby (R-AL), Chairman of the Senate Banking Committee, as well as FDIC Chairman, Don Powell, in crafting this strong, bipartisan legislation.

http://johnson.senate.gov/~johnson/releases/200507/2005729B22.html