Magazine article American Banker

Top Democrat Cries GOP 'Raid' on FDIC Reform

Magazine article American Banker

Top Democrat Cries GOP 'Raid' on FDIC Reform

Article excerpt

On the eve of the first scheduled vote on deposit insurance reform, Rep. John LaFalce of New York blasted proposed changes to the House bill as steps in the wrong direction.

Republican lawmakers had been mulling several revisions to make the bill more acceptable to large banks.

The ranking Democrat on the House Financial Services Committee ripped efforts at a last-minute Republican amendment as an "irresponsible raid on the insurance funds" that would enlarge the fund considerably by forcing the Federal Deposit Insurance Corp. to fundamentally alter how it accounts for certain reserves.

Meanwhile, word circulated Wednesday on Capitol Hill that Sen. Phil Gramm, R-Tex., was preparing to make more negative comments about reform legislation in the House and Senate. In particular, he was expected to say that the proposed increases in the deposit insurance coverage limit were unacceptable. A spokeswoman for the senator said he thought it was "important to minimize taxpayer exposure."

Rep. LaFalce, who also has expressed concerns about the higher coverage level, took issue with a provision that would require the FDIC to include its reserves for future bank failures when calculating the ratio of federal reserves to insured deposits. Currently these reserves are accounted for separately and not included in the ratio.

Under the proposed changes, a combined bank and thrift insurance fund's ratio would jump to 1.36% from 1.3% as calculated currently -- 1 basis point above where the legislation would mandate a rebate.

Sources speculated that Rep. LaFalce would attempt to keep fellow Democrats from supporting the bill during the vote today. Industry representatives who support the legislation were scrambling Wednesday to try to prevent that. Even if no Democrat on the subcommittee voted for the bill, it could still pass if the Republican majority supports it. …

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