WASHINGTON - House Financial Services Committee Chairman Michael G. Oxley said Wednesday that deposit insurance reform would be a priority item for his committee as soon as late this month, but the bill he spotlighted was one the Federal Deposit Insurance Corp. chairman had criticized as too narrow.
Rep. Oxley said the financial institutions subcommittee would hold hearings on legislation introduced last week by fellow Ohio Republican Rep. Robert Ney, and added that he is awaiting recommendations by the FDIC that are expected to be released today.
"We are eager to begin hearings on Bob Ney's legislation on FDIC reform" after Congress returns April 24 from its upcoming spring recess, Rep. Oxley said at a government affairs conference of America's Community Bankers. "We fully expect the FDIC report, perhaps as early as this week, and we hope that will give us some guidance as to what we can accomplish this session of the Congress."
The ACB has been pushing Rep. Ney's bill, which would merge the Bank Insurance Fund and the Savings Association Insurance Fund, allow the FDIC to charge a special assessment on fast-growing institutions, and provide more flexibility when the ratio of federal reserves to insured deposits falls below the statutory minimum of 1.25%. Rep. Ney predicted Tuesday that the bill would clear the House Financial Services Committee by summer.
Rep. John LaFalce, the ranking Democrat on the committee, on Wednesday released his own deposit insurance bill that would merge the BIF and the SAIF.
But FDIC Chairman Donna Tanoue said at the conference that such bills are insufficient.
Though Ms. Tanoue supported some of the provisions of Rep. Ney's bill, she argued that reform requires legislation that ties coverage levels to inflation, refines the method for assessing premiums, and makes other changes.
The Ney bill "doesn't include risk-based premiums or rebates," Ms. Tanoue said. "We are very strong advocates of the comprehensive approach. We believe that is the approach that we need to strengthen the system for the future."
Ms. Tanoue also warned that dealing with the issues one at a time could cause problems.
"If you deal with these issues in a piecemeal fashion you can create other unintended and adverse consequences," she said in an interview later. "For example, if you didn't have a well-designed rebate system with a good risk-based premium system, then you will have problems."
Ms. Tanoue told the conference that the agency's recommendations would include eliminating the 1.25% reserve ratio in favor of a more flexible standard, instituting risk-based premiums across the entire industry, merging the bank and thrift funds, capping the reserve funds, and giving the industry rebates based on past contributions to the funds.
She added that the FDIC would propose indexing the $100,000 coverage per account to inflation, but said that the agency would not recommend a base year from which the index should start.
"If you liken deposit insurance to other important federal programs, like Social Security or Medicare, those programs are indexed to inflation, and we believe deposit insurance should be as well," Ms. Tanoue said. "But we are not going to take a position on 'If you index the coverage level, from what base level should you start?' We will leave that to the people on the Hill."
Ms. Tanoue also elaborated on the FDIC's rejection of an attempt by Comptroller of the Currency John D. Hawke Jr. and Office of Thrift Supervision Director Ellen Seidman to include a discussion of disparities between exam fees on state-chartered and federally chartered institutions in the deposit insurance reform recommendations.
"That issue relates primarily to supervision, not deposit insurance," Ms. Tanoue said. "Jerry and Ellen feel very strongly on that issue, but that issue involves four agencies," including the Federal Reserve Board. "It has to do with exam fees and supervision, and I don't feel that issue is central to the deposit insurance reform effort."
She said, however, that the agency would be open to discussing the issue in other venues.
Michele Heller contributed to this article.
