The House Financial Services Committee has approved H.R. 3717, the Deposit Insurance Reform Act of 2002, by an overwhelming bipartisan majority of 52-2. The legislation, sponsored Financial Institutions Subcommittee Chairman Spencer Bachus (AL), would reform the deposit insurance system and protect more of Americans? retirement savings.

"This reform legislation will better protect Americans? retirement accounts and increase the coverage level for regular deposits," Financial Services Committee Chairman Michael G. Oxley (OH) said. "I urge the Senate to follow our lead and pass this common sense, bipartisan legislation that will ensure the vitality of the American economy as it emerges from recession."

The bill would:

• Merge the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
• End the 23 basis point premium "rate cliff" that occurs when the reserve ratio of deposits insured to premiums held falls beneath 1.25 percent for more than one year.
• Create a reserve range within which the reserve ratio can float.
• Increase coverage limits for individual accounts to $130,000 and index future coverage limits to inflation.
• Double coverage limits for certain types of IRAs and 401(k)s.
• Increase coverage limits for municipal deposits.

"This important legislation advances the national priority of enhancing retirement security for all Americans," Bachus said. "With the stock market volatility that we have seen in recent years, senior citizens and those planning for retirement need a conservative, convenient, 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."

The Committee accepted several amendments to the legislation, including:

• An amendment offered by Rep. John LaFalce (NY) that would establish a time frame for the restoration of funds to the Deposit Insurance Fund.
• An amendment offered by Rep. Richard H. Baker (LA) that would allow the FDIC to use the Personal Consumption Expenditure Chain-Type Index in determining inflationary indexing increases for the fund. The amendment also requires publication of the new coverage amount in the Federal Register as well as a report to Congress.
• An amendment offered by Rep. Bob Ney (OH) that would give the FDIC more flexibility in determining which individual institutions are assessed special premiums when their deposit base increases faster than the industry average.

Source: House Financial Services Committee