Helping Families Save Their Homes Act Of 2009

Floor Speech

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Mr. CRAPO. Madam President, I am coming to the floor to thank Chairman Dodd for working with us on some important pieces of this legislation. Included in this legislation is the increased borrowing authority for both the FDIC and the NCUA, so they can immediately access the necessary resources to resolve failing banks and credit unions and provide timely protection for insured depositors. Earlier this year, Senator Dodd and I joined in introducing legislation that would increase the borrowing authority of the FDIC, and since that time we have expanded that legislation to provide parallel authority for the NCUA, for credit unions, and to include an assumption in the budget resolution about the need to pass legislation to ensure adequate resources are available to the FDIC and the NCUA.

This legislation is similar to what is included in the Dodd-Shelby substitute that was passed by the Banking Committee on a voice vote in an amendment to the credit card legislation we will be looking at later on.

I come to the floor simply to make note of how important it is that we continue to pursue this legislation and to thank Senator Dodd for working so closely with me to make sure it happens. When you look at today's economic climate and the threats facing us in the financial industry, we have to provide the necessary tools to our financial institution regulators so they can protect us as best they can. One important piece--and I am glad to say one of those pieces about which there is very little controversy--is the need to make sure we strengthen the FDIC and NCUA to make sure they can undertake their statutory responsibilities in the context of failing institutions.

I would be remiss if I didn't say I wish to be sure that both the FDIC and NCUA are very careful in the exercise of these authorities, to make sure they do not do more harm than good and harm institutions that could otherwise have survived, by stepping in. But when the true need comes, they need to have the authority.

This language deals with significant reforms that need to be undertaken, and undertaken as soon as possible, so our regional banks do not face very significantly increased levies and requirements for funding the FDIC and NCUA operations.

It would permanently increase the Federal Deposit Insurance Corporation's borrowing authority from their current level of $30 billion to $100 billion, with additional authority, that is temporary, to allow them to get up to $500 billion in the case of emergency circumstances.

It would permanently increase the borrowing authority of the NCUA from the current $100 million, with authority for a temporary increase up to $30 billion. The temporary authority for both the FDIC and the NCUA could only be used if determined necessary in the FDIC Board of Directors' written recommendation and support of two-thirds vote; the Board of Governors for the Federal Reserve system, with written recommendations and support of two-thirds vote; and the Secretary of the Treasury, in consultation with the President.

The FDIC and NCUA need to have access to sufficient resources to deal with the potential costs for seizing failing institutions we are facing in our country right now. Assets in the banking industry have increased since 1991 from $4.5 trillion to $13.6 trillion at the same time that no increases in this borrowing authority have been authorized. The assets in the credit union industry have also significantly increased since their borrowing authority levels were established.

It is important to note that this borrowing authority is not coming from taxpayer dollars. The levies and the assessments that are made on the participants in the financial industry themselves, the depository institutions, are the source of the dollars that would cover this loan authority. I think most people understand, but what happens in the case of a failing institution is the FDIC steps in immediately and protects all depositors so the depositors can have that assurance of the Federal guarantee of their deposits in these depository-protected institutions. Then the FDIC basically works out the resolution of the remaining assets of the failed institution and the banking institution itself. Other depositors, through their assessments, pay for the cost of the operation of this program. We are simply increasing the borrowing authority to make sure the FDIC and the NCUA have the resources necessary to deal with these very difficult and challenging times.

In addition, the borrowing authority would allow the FDIC and the NCUA to lower their recent special assessments that went out to the banking and credit industry. In other words, this would allow us to kind of smooth out that process by which the depository institutions themselves fund this process and not create huge liquidity and financial pressures on the banks that are not facing the potential of any kind of FDIC intervention but which are being looked to to bear the cost of these problems as we move forward.

The language ensures that the FDIC and the NCUA have the resources necessary to address future contingencies and to fulfill the Government's commitment to protect America's depositories.

As I said at the outset, I wish to be sure the NCUA and the FDIC are very careful in the utilization of the authorities we have given them. There are some concerns already being raised about the fact that perhaps the stress test and some of the other analysis that is being put into place and the evaluation of the solvency of our banks need to be fine-tuned so we do not unnecessarily utilize these authorities where a better resolution, better activities can be pursued. But when it does become necessary, we need to be sure our depositors are protected. Once again, I thank Senator Dodd for his strong support and work on this issue.

There is another issue I have been working on with Senator Dodd. I wish to make it clear that the frustration I am going to share right now is not directed at him because he has been working very hard to address this same issue and trying to resolve it. But I do believe it needs to be said that there is another piece of the issue we must resolve.

Earlier, on previous legislation, language was included dealing with depository institutions that gave the FTC much broader jurisdiction than it should have had with regard to depository institutions. The language was intended to give broader jurisdiction and clarification of jurisdiction to the FTC's regulation of other, nondepository institutions, but the way the
wording in the bill was written it included depository institutions--wrongly.

We identified that issue at the time. We stood on this floor, a number of us Senators stood on this floor and pointed out that was not intended by the bill and that we would correct it. In fact, we said we would correct it at the first available opportunity. Now we are seeing opportunities arrive, and we cannot reach a conclusion with regard to the necessary correction of the legislation that gives unnecessary and confusing dual jurisdiction to the FTC now over depository institutions, which was not intended by this Congress and which will not be helpful, in terms of creating a duplicate regulatory system with which our regulatory institutions must deal.

Again, I stand and call for us to do what we agreed to do, which is to fix the FTC issue and make sure we carefully clarify the jurisdiction of the appropriate committees and the jurisdiction of the appropriate regulators over depository institutions.

I yield the floor.

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