Academic journal article ABA Banking Journal

Options for Deposit Insurance Continue to Develop

Academic journal article ABA Banking Journal

Options for Deposit Insurance Continue to Develop

Article excerpt

As March came to a close the latest legislative proposal for deposit insurance reform was introduced, picking up ABA support instead of the opposition the association presented to an earlier bill. Meanwhile, FDIC continued with plans to gather industry input on reform, beginning with a CEO forum in April, with an eye towards producing a formal proposal in mid-July. Most observers don't expect final action from Congress on this issue this year.

ABA endorsed the Deposit Insurance Fairness and Economic Opportunity Act (H.R. 4082/S. 2293). The bill would cap the size of the deposit insurance funds; use excess funds to pay off banks' and thrifts' FICO obligations; and, having paid FICO off, rebate excess funds to insured institutions. The bill was introduced by Republican and Democrat members of both the House and Senate Banking Committees.

In mid-March the association had announced its opposition to H.R. 3899, a simpler bill that would merge the Bank Insurance Fund and the Savings Association Insurance Fund (effective Jan. 1, 2001). ABA did so on the grounds that the bill would unleash the merger without addressing other key deposit insurance issues. That bill is sponsored by Marge Roukema, chair of the Financial Institutions and Consumer Credit Subcommittee.

Banking legislation typically develops over several Congresses, so issues rarely die. FDIC itself plans to hold meetings with banking trade groups in April, as well as field meetings with bank CEOs.

Here are key aspects of the debate that will unfold:

* Increasing the $100,000 cap on deposit insurance and providing for full coverage for municipal deposits. …

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