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<p>WASHINGTON-While credit unions have not been lobbying for the deposit insurance reform legislation (H.R. 3717), they have been looking for parity in its language. Under the bill passed by the House two weeks ago, credit unions would receive parity over the deposit insurance coverage issue, but many still cannot receive municipal deposits, the coverage of which would be raised to $2 million if the bill becomes law. However, at that same time, the Office of Management and Budget (OMB) issued a statement in support of the reforms to the Federal Deposit Insurance Corp.’s (FDIC’s) operations, but expressed the administration’s strong opposition to the increase in deposit insurance coverage. Though the House passed the legislation by a bipartisan 408 to 18 vote, it is unlikely to get any play in the Senate. Senate Banking Committee Chairman Paul Sarbanes recently spoke on what he planned to bring before the committee in the remainder of the 107th Congress and deposit insurance reform was not one of the items. However, word on the Hill is that Senator Tim Johnson (D-S.D.), who introduced the bill in the Senate, might bring the bill up in the Banking Committee’s Subcommittee on Financial Institutions, which he chairs, in an attempt to create momentum for the legislation. “I congratulate the House, and look forward to prompt action in the Senate and enactment of deposit insurance reform this year,” Don Powell, FDIC chairman, commented following the bill’s passage in the House. However, the administration took quite a different point of view in a prepared statement from OMB. “The administration supports those provisions of H.R. 3717 that would improve the deposit insurance system’s operation and fairness.The administration, however, strongly opposed those provisions of H.R. 3717 that would raise deposit insurance coverage limits. The interests of depositors will not be served by an increase in deposit insurance coverage limits,” it read. The statement pointed to Congressional Budget Office (CBO) and OMB estimates that found banks, thrifts, and credit unions would need to pay at least $3.5 billion in higher inasurance assessments. OMB also noted that the FDIC reorganization would save taxpayers more than $700 million over ten years, according to CBO. Other than the actual coverage level, another provision has caught the attention of credit union lobbyists. A provision was added to the bill on the House floor, which prohibits states from denying banks and thrifts the ability to receive municipal deposits. The section was added to please the New York delegation because only banks in New York can accept municipal deposits. Credit unions in New York and other states are not permitted to receive them, but lobbyists are working on obtaining parity in this provision. “We’ve been talking with committee staff and members, that if such a step was going to be made to address the issue in New York, that a step is made to address the issue for credit unions that are facing the issue everywhere, including New York,” NAFCU Director of Legislative and Political Affairs Brad Thaler elaborated. “For those credit unions that take municipal deposits they are crucially important. For those, which is the large majority, who do not have municipal deposits, it’s not,” NAFCU Communications Manager John Zimmerman explained. “However, in any exercise of power, NAFCU would rather a credit union have the opportunity to exercise that power regardless if they do or not.” Generally, H.R. 3717 serves to merge the Bank and Savings Association Insurance Funds; create a range for the reserve ratio, rather than 1.25% and allow the FDIC to decide on an appropriate premium; increase most account coverage to $130,000, except for retirement accounts that were increased to double the regular coverage, now $260,000 for IRA’s; and increase the coverage limit for municipal deposits. [email protected]</p>

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