Statement of Administration Policy: H.R. 2094 - Federal Deposit Insurance Improvement Act of 1991

(House)
(Gonzalez (D) Texas and Annunzio (D) Illinois)

The Administration continues to believe that comprehensive legislation is necessary to ensure the soundness and competitiveness of the U.S. banking system. The Administration will continue to work with Congress to produce comprehensive legislation this year.

The Administration strongly supports House passage of H.R. 2094, if amended by the Wylie-Neal and Gonzalez en bloc amendments. If the Wylie-Neal amendment is not adopted, the Administration will strongly oppose this legislation as failing to come to grips with the fundamental problems of the banking system.

The Administration strongly supports both the Wylie-Neal and Gonzalez en bloc amendments as improvements to H.R. 2094, and especially supports the Wylie-Neal amendment with its interstate branching provisions. On balance, both of these amendments will help to strengthen the banking system and enhance safety and soundness. However, both amendments also contain provisions that the Administration will seek to improve or delete before the bill becomes law.

The Wylie-Neal En Bloc Amendment

The Administration strongly supports the Wylie-Neal en bloc amendment, particularly the provisions of the amendment that would authorize interstate banking and branching. These provisions are essential to permit banking organizations to realize the benefits of geographic diversification and greater operational efficiency.

The Administration opposes and will seek changes in conference to the provisions of the Wylie-Neal amendment that would:

—   Impose extraordinarily high capital requirements on banks that engage in interstate activities.

—   Roll back existing bank authority to sell insurance products across State lines and from small towns, without affording national banks and their branches parity with State bank insurance powers in States where State banks are permitted to sell insurance.

The Gonzalez En Bloc Amendment

The Administration strongly supports the Gonzalez en bloc amendment, particularly the following provisions of the amendment:

—   Provisions that would provide greater flexibility to bank regulators to avoid the premature shutdown of a weak bank that has clear prospects for recovery.

—   Provisions from Title II of H.R. 6 that would improve regulation of foreign banks doing business in the U.S.

—   Provisions of Title V from H.R. 6 that would increase safety and soundness by limiting risky bank activities and reducing the scope of deposit insurance.

The Administration opposes and will seek changes in conference to the provisions of the Gonzalez en bloc amendment that would:

—   Impose onerous reporting requirements on organizations that branch interstate.

—   Require the Federal Deposit Insurance Corporation (FDIC) to begin a new housing subsidy program funded by banks.

—   Impair the FDIC's ability to sell failed banks by imposing health insurance obligations on buyers of such banks.

—   Deem the President to have designated the emergency loan guarantee for Rhode Island as an "emergency requirement." This provision violates last year's budget agreement.

—   Increase the deficit and require "pay-as-you-go" offsets of over $1 billion over four years (see below).

Scoring for Purposes of Pay-As-You-Go

— As Reported

OMB's preliminary estimate of H.R. 2094, as reported by the Banking Committee, is that its net effect for purposes of the "pay-as-you-go" provisions of the Omnibus Budget Reconciliation Act (OBRA) of 1990 would be zero. Final scoring of this legislation may deviate from this estimate. If H.R. 2094 were enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA. The cumulative effects of all enacted legislation on direct spending and receipts will be issued in monthly reports transmitted to Congress.

The reported bill's "too big to fail" provisions would decrease outlays, but it is not possible to estimate the size of the decrease. Similarly, estimates of the pay-as-you-go impact of the bill's provisions on pass-through insurance are not available at this time.

— Gonzalez Amendment

OMB's preliminary estimate of the pay-as-you-go effects of the Gonzalez en bloc amendment is presented in the table below. An attempt has been made to address these effects with language making the beginning of particular programs contingent upon the availability of funds. However, the particular language does not specify that funding for these new programs requires an additional congressional action (e.g., an appropriation).

A budget point of order applies in both the House and the Senate against any bill that is not fully offset under CBO scoring. If, contrary to the Administration's recommendation, the House waives any such point of order that applies against H.R. 2094, the effects of this legislation would be included in a look-back pay- as-you-go sequester report at the end of the congressional session.

ESTIMATES FOR PAY-AS-YOU-GO
($ in millions)