Municipal Deposit Insurance Protection Act of 2005

Mr. Chairman, I yield such time as he may consume to the gentleman from Ohio (Mr. Gillmor).

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, there are several things about this bill that I am not sure have been discussed or are as widely known by the Members, but the first thing I would say is that the legislation is supported by all the federal bank regulators. It is also supported by all the industry groups. And it does several things. It addresses inefficiencies in the present system and deficiencies in the present system.

As far as deficiencies in the present system, one of the greatest is the fact that we have two different funds. The Savings Association Insurance Fund and the Bank Insurance Fund. All the Federal regulators have recommended combining those funds from the administrative cost savings and also because we do not want a situation where some of our institutions are paying certain basis points where others are not. We want more equity there so it gives no advantage for our thrifts over our banks or our banks over our thrifts.

Another problem we have had increasingly is the problem of free riders. Since 1996, there have been no assessments of the banks for the Federal insurance, and as a result of that, we have had several large brokerage firms which have never paid into the fund, and what they are doing is setting up affiliate banks, six or eight or nine affiliate banks, and they are advertising $800,000 or $900,000 worth of federally insured deposits. In other words, people can deposit $800,000 or $900,000 into to their fund, and it is federally insured. This really is an inequity because they have never paid into the system and they are offering that something that smaller banks and other banks that do not set up these affiliates or string of affiliates and can only offer $100,000 of coverage; and, in fact, those banks or thrifts that are only offering $100,000 worth of coverage are actually paying and have paid for coverage for some of the large brokerage firms.

And the Federal Reserve, the FDIC, and the industry have said that this ought to be corrected, and we do that in this bill. We do that in two ways. One is by requiring that everyone pay a minimum amount; number two, we increase the coverage; and number three, we allow more flexibility in when the premiums are charged. Right now when the bank reserves fall below 1.25 percent, the Federal Reserve actually has to start charging a premium, and then if the situation is not rectified within a year, they have to then start charging 23 basis points, and they have little discretion in this matter. The bank regulators and the industry have recommended that what we do as opposed to having a hard number that we give a range, or a discretionary range, and we have done that at 1.15 to 1.4.

What this allows to happen is, if we think about it, there are no premiums being charged, and then all of a sudden we go into a recession and we start charging a premium, or 23 basis points, it actually can worsen the recession, and at the time when banks ought to be lending money, suddenly they are having to pay these premiums. The time to fund the insurance program and the insurance reserve is in good times.

So what we have done in this bill is allow them to build up a reserve in the good times, and then when we come into a recessionary period and bank reserves start dropping, they have some discretion in not instituting a 23-basis-point charge on the banks. And policymakers and all the Federal bank regulators believe that this will not only strengthen the funds, but it will take away a bias against a down cycle that could actually make a down economic cycle worse.

One of the things that is being debated, and the gentleman I am going to yield to next is going to be in opposition to the coverage increase, is the coverage increase. When we consider increasing the coverage, there have been two arguments against that. One was a ``moral hazard'' argument. The FDIC, in response to some people saying that if we raise the coverage, it will be a moral hazard, actually commissioned a study and appointed the vice chairman of the Federal Reserve, Alan Blinder, as the chairman of that study commission, and they came back and said because these are risk-based premiums, there is absolutely no validity to the moral hazard argument.

If we think about it this way, what this is, is an insurance, and bank depositors pay a premium on their deposits for insurance coverage. And to argue that if that coverage is increased from $100,000 to $130,000 suddenly would cause reckless behavior, it would almost be like arguing that if I had automobile insurance and I had $100,000 worth of automobile insurance on my automobile, and I raised that to $200,000 of insurance coverage that I would suddenly start driving more recklessly or be more prone to have accidents, and we know that when people insure, whether it is a deposit, an automobile, or a home, they are not any more apt to act in a reckless nature. So that argument has been shot down pretty uniformly.

A second argument against it is that we do not need to increase it. But one of our last bank failures was a bank in Chicago, a medium-sized bank. And what we found, because we had not raised the coverage levels above $100,000 since 1980, we found over 700 customers of that bank lost a substantial amount of their deposits, and the reason they did that, if we think about what depositors do, we had several hundred of them that had an IRA account with that bank, and they had an IRA that was over $100,000, and they basically lost everything above $100,000. And one lady that was quoted in the Chicago Tribune said, The loss I sustained is going to be the difference between my having a retirement where I will not have to struggle, and now, basically having a bare bones retirement where I will have to struggle to make ends meet.

We have another situation that we talked about in committee, and that was the fact that today many people are selling and buying houses, and when they do, they put the proceeds of that sale or the purchase price for that sale in a bank account. In 1980 the average price of a home was around $100,000. Today it is several times that amount. So imagine that if one is closing on a house, they sell their house, they get a $400,000 or $300,000 check or even a $200,000 check for that house, and most Americans put their savings in a house, they go down to their bank and they deposit that check and the bank happens to fail.

And every once in a while, a bank does fail like the one in Chicago. In that case, they had 12 people that had deposited the proceeds from the sale of their homes in the weeks before and they lost all of that money above $100,000. Some would say and some have said in opposing coverage increase that what Americans ought to do is when they sell a home, if they sell a home for $300,000, they ought to ask the closing attorney to write three $100,000 checks and they ought to deposit that in three different banks, or, if they are going to purchase a house, they ought to go to three different institutions and deposit that money in three different institutions, and then when they show up at the closing, they ought to write three different checks.

We know as a practical matter, Mr. Chairman, that people are not going to do that, and we should not ask them to do that. What we ought to do is raise coverage levels to reflect realities today.

The last time that coverage was increased in 1980, if we increased it for inflation today, it would be well over $180,000. Instead, we are only increasing it to $100,000 as a compromise. If we went back to not 1980 but we went back to 1974, which was the time before that that it was increased $40,000, and if we had adjusted it in 1980, it would be over $200,000. If we disregarded that increase and went back to 1974, it would be $180,000. So we are actually playing catchup here, and we have used that smaller number in an attempt to compromise with those who objected to increasing it at all.

I will say this: This bill passed with 111 votes the first time it was up, I think, but, anyway, I will get those statistics later, but I think it had 18 ``no'' votes the first time, 11 ``no'' votes the second time.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 5 minutes to the gentleman from California (Mr. Rohrabacher), who is in opposition to the bill.

Mr. Chairman, I yield myself all remaining time.

There are several things I think we need to say to correct the record. One was it was said by the gentleman in opposition that this was taxpayer guaranteed; and, in fact, these deposits are insured not by the taxpayer, but by the BIF and SAIF funds; and it is the depository that insures his own accounts. And for the taxpayer to pay one red cent, all assets of every federally insured financial institution would have to be exhausted before the taxpayer would have to pay one cent. In other words, all the assets of all of the federally insured banks and savings associations would have to be paid.

And in that regard, I am sure the gentleman from California would agree that if that moment ever came, we would be, we would probably be in dire straights, and I certainly never anticipate that happening. It has never happened in the history of our country. The savings and loans were exhausted, not the banks. The BIF account has never been exhausted; the savings and loan account thing was exhausted because of failures of savings and loans.

And if we say, as the gentleman said, that the reason why all the savings and loans failed is because we increased coverage from $100,000 to $130,000, we did that for the banks and the credit unions at the same time. No credit unions failed; very few banks failed. In some States, no institutions failed, where in States like California, Texas, where you had weak regulation, weak oversight, several failed; or you had the oil patch in Texas where many of them failed.

In fact, the cost to the taxpayer would have been greater had the first $100,000 of accounts not been insured. It would have been a much greater loss. Thank goodness the first $100,000 of accounts were insured. If we had another failure today, $130,000 would be insured, and we would have insurance for it. So to say that insurance coverage is taxpayer funded, the taxpayer is not funding this. If the taxpayer were funding it, his analogy would be right.

And the last thing that he says, and he has said this, is that this was the cause of the savings and loans to fail. This has been looked at by this Congress, it has been looked at by the FDIC, it has been looked at by the Federal Reserve and, actually, I am going to introduce this. This is about 20 different reasons that government reports have causes for the failures of the S&Ls; and on that list of 20, nowhere does it say because of an increase in coverage. In fact, the FBI submitted what they thought were the reasons, the FDIC submitted what they thought were the reasons, all the bank regulators, and nowhere on any of those lists do we find increase in coverage. In fact, what you do find is one study showed that taxpayer exposure was less because the funds were insured up to $100,000.

Mr. Chairman, I will just simply close by saying that all the Federal bank regulators say that this legislation will strengthen and reform our Federal guarantee program for bank deposits and by saying that today, if you sell a house for $120,000 or $140,000 or $160,000 or $200,000 and you deposit the proceeds in your bank account, you are probably not a rich person by definition. If you decide to buy a house and you put $150,000 in the bank or transfer it or get a loan from a bank and you deposit it in your account, you lose that, you certainly would not be defined as rich. And if you have a 401(k) and you happen to have over $100,000 in it, that does not make you a rich person. In fact, that represents, for many people, their entire savings is a 401(k); and, increasingly, those accounts are running over $100,000.

That is why the AARP and the Securities Investment Institute both endorsed this legislation.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I had one glaring oversight in this entire debate concerning the bill. And that is the fact that the gentlewoman from Oregon (Ms. Hooley) who really played a monumental part in this legislation over the past 2 or 3 years and actually was the original cosponsor of this legislation has not been recognized.

I would like to commend her for her fine work on this bill. And I guess it is

a credit to her and her personality, despite that oversight she did not call attention to my omission. And so I commend the gentlewoman from Oregon (Ms. Hooley). She is an outstanding Member of this body. And in this legislation, she deserves a lot of credit for its passage and its support.

Mr. Chairman, I move to strike the requisite number of words.

Mr. Chairman, one thing the gentleman from California (Mr. Rohrabacher) mentioned and I would like

to say in his defense: he has triplets at home, so I think we ought to have a lot of patience for the gentleman. They are very young. One- year-old triplets.

I yield to the gentleman from Massachusetts.

Second, the gentleman did mention the fact that we do have a provision in here covering municipal deposits or government deposits and that is for $2 million. The reason we did that is not to protect the big guy or the rich guy.

The reason we did that is from time to time a school system or a city or a county or a governmental retirement system will put $2 million or $1.5 million in a bank and it is really not practical for them to go around and put $100,000 in each bank. And that is basically as a result of the American Association of School Boards and others saying not only do we want to deposit more than that, but in several States, particularly the Farm Belt, there is only one hometown institution. And the school board or the government or the city or the fire district wants to deposit their money in their own hometown. And that is to allow that.

I yield to the gentleman from Ohio.

Mr. Chairman, I have two counties, one is Bibb County, one is Shelby County. The school board in those counties is forced to take about 96 percent of their money and deposit it out of county because there are only two hometown institutions, and they would like to deposit in those, as long as those are rated A institutions, and again I say that they are paying a premium on their deposits for this coverage.

The second thing I would say is if the gentleman will go back to 1980, what you had is we deregulated the savings and loans. We made tremendous changes in their mission. And at that time they had 30-year mortgages. They had loaned out money at 4 percent, 4.5 percent, 5 percent. From 1979 to 1981, the interest rates increased, the Federal Reserve continued to increase the interest rate because of inflation, which the gentleman from Massachusetts (Mr. Frank) mentioned, and they drove the interest rate up above 20 percent. The prime rate was 21 percent.

So the savings and loans were having to borrow money at 21 percent and had loaned it out at 4 and 5 percent; and predictably, particularly in Texas where the price of oil fell, the savings and loans in Texas started failing one right after the other. And as I said earlier, if it were this increase from 40 to 100,000, you would have expected to see it show up in the banks; you would expect it to show up throughout the Nation.

I do not think the people in Texas where most of the first failures occurred, Louisiana, I do not think they were engaged in any more fraudulent conduct or reckless behavior except that what they were doing, that was a boom economy in Texas and property values shot up, and there was a bubble and they came back down.

But during all of that, the bank fund did not fail. And as I have said before, before one dollar of taxpayer money comes out of this account, it requires the funds to be exhausted. It, second, requires the banks, their assets to be liquidated, and only at that point would the taxpayer step in. That would be a heck of a depression. And I think that would be a depression made only worse if school boards, governments lost their deposits, if people lost their 401(k)s, if they lost any of their savings above $100,000, businesses who had accounts. And some of those might be rich people, the guy that owns the small business and has $400,000 or $600,000 deposited or a contracting company that has just been paid on a contract.

I think it would make the recession or depression or economic shock that much worse. I believe that this legislation is sound legislation and should be supported.

Mr. Chairman, I yield myself such time as I may consume.

I rise in strong support of the Federal Deposit Insurance Reform Act of 2005. This is a strong bipartisan effort. I commend the leadership of Chairman Oxley and Ranking Member Frank, as well as Subcommittee Chair Bachus and Ranking Member Sanders. This will be, hopefully, the third time that this Congress has passed this legislation. It has enjoyed broad bipartisan support.

Federal deposit insurance, established during the Great Depression to restore confidence in the Nation's troubled banking system, has served our country well; but no system is perfect, and Congress has periodically revised our deposit insurance laws in response to changing economic and industry conditions. There is a growing consensus triggered in part by recommendations by the Federal Deposit Insurance Corporation, FDIC, that deposit insurance is overdue for needed structural reform.

H.R. 1185 would merge the Bank Insurance Fund, BIF, and the Savings Association Insurance Fund, SAIF, into a single fund covering all banks and thrifts; increase per-account coverage levels from $100,000 to $130,000; and adjust that coverage for inflation every 5 years beginning in 2007; and double the $130,000 coverage amount in the case of certain retirement accounts, including IRAs and 401(k)s. Providing $260,000 in deposit insurance coverage for retirement accounts is critically important in an era when many Americans have accumulated retirement nest eggs that far exceed $100,000, and when, according to FDIC estimates, there is more than $200 billion in IRA accounts alone in this Nation's banking system.

Several high-profile bank failures in recent years have given many Americans a rude awakening as they discover that amounts in their retirement accounts above the $100,000 coverage limit are uninsured.

The bill also raises coverage levels on in-state, municipal or public deposits. This will have the effect of encouraging local government agencies to keep more of their deposits in the local communities where the funds were generated, thus promoting economic growth in those areas.

Finally, the bill fully implements a provision enacted more than a decade ago to give banks a discount on their deposit insurance premiums for deposits attributable to so-called basic banking accounts which provide a financial lifeline for low-income families that are currently without bank coverage.

This has strong bipartisan support. This legislation passed this body last year with a vote of 411 to 11, and this year's effort likewise enjoys very strong bipartisan support.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield such time as he may consume to the gentleman from New York (Mr. Meeks).

Mr. Chairman, I thank the gentleman for yielding the time and for his leadership as a whole.

Mr. Chairman, I am very supportive of this outstanding bipartisan bill. I am supportive of the overwhelming majority of the provisions in it. It is long past due to merge the BIF and SAIF insurance funds, and additionally, eliminating the 23 basis point clip, and providing a new premium system that takes into account the past contributions of institutions are major steps forward.

The bill includes a mechanism for determining credits for past contributions to the insurance funds that is based on an amendment that I cosponsored with former Representative Bereuter. This is a very, very important provision as a matter of fairness to institutions that recapitalized the funds, and I thank very much the gentleman from Alabama (Mr. Bachus) for including this balanced and important amendment in the base legislation.

Despite the many very positive parts of this bill, I believe the immediate 30 percent increase in insurance coverage in the bill is a serious mistake. This coverage increase to $130,000 is opposed by many Federal financial service regulators, including Alan Greenspan. I would like to place in the Record his comments in opposition, and state that I support the bill overwhelming, but this provision I am opposed to.

I thank the leadership and the ranking member for working in a balanced way to move this important legislation forward.

Mr. Chairman, I offer an amendment.

Mr. Chairman, first of all, I would like to thank the gentleman from Massachusetts (Mr. Frank) our ranking member, and the gentleman from Ohio (Mr. Oxley), our chairman, for working in a bipartisan way for truly the grand goal of safety and soundness in our financial systems and keeping them competitive in the world financial market.

My amendment is one that I am going to offer and withdraw, because the chairman has generously offered to work with me in committee under a separate introduced bill to pass the intent of this. And what my amendment would do is that it would prevent banks from charging customers bounced check fees when the money is already there in the bank, and when it is simply a matter of which journal entry the bank makes first.

We did have a hearing on this earlier in the Committee on Financial Services. And some of the banks' representatives testified that many banks do this already. So this amendment would simply require all banks to do so consistently and prevent abuses.

In other words, if money is there, but it has been deposited, then you cannot withdraw that money, the deposited money should be credited before the money is withdrawn from the bank.

My amendment would also prevent banks from charging customers for overdraft protection when the customer has not requested this service. Again, this is simple and fair and straightforward. And sometimes, in some cases in some banks, the overdraft protection costs more than the overdraft penalty.

So it would really prevent hidden charges and fees for services customers have not even asked for, in this case, financial institutions. So I have been assured that by the parliamentarian that my amendment would be immune from a point of order. The Committee on Rules accepted it.

But I will be withdrawing it with the consideration of the chairman to fully discuss this in committee, and I yield to the gentleman from Ohio (Mr. Oxley) our chairman, and I thank you for working in a bipartisan way on this and so many other issues.

I yield to the gentleman from Ohio.

I yield to the gentleman from Massachusetts.

Mr. Chairman, I ask unanimous consent to withdraw the amendment.

Mr. Chairman, I rise in support of the amendment.

I believe the immediate 30 percent increase in insurance coverage in the bill is a serious mistake. The coverage increase to $130,000 is opposed by most of the Federal financial service regulators.

Proponents of the increased coverage argue that it poses no risk to the insurance system, but the regulators who oppose this increase are the very officials whose job it is to protect the safety and soundness of the financial system. The almost unanimous opposition to increased coverage by the regulators is a very powerful message.

I would like to really quote some of these regulators. Alan Greenspan has come out very strongly opposed to it. He said, ``It is unlikely that increased coverage, even by indexing, would add to the stability of the banking system today.''

The Undersecretary of the Treasury for Domestic Monetary Policy, Peter Fisher, said, ``Increasing the overall coverage limit would weaken market discipline and further increase the level of risk to the FDIC and to taxpayers.''

Mr. Chairman, I would like to put in the Record quotes from the Comptroller of the Currency, the Director of the Office of Thrift Supervision, and the Congressional Budget Office, all raising questions and in opposition to this raise.

Another argument put forth by proponents of coverage increases is that inflation has eroded deposit insurance. I do not believe that this argument matches the actual situation of the banking industry. The fact is that only 2 percent of insured accounts have more than $100,000 according to the Federal Reserve.

Mr. Chairman, at the appropriate time I would like to place this study into the Record.

The same Federal Reserve study put the average account balance at $6,000 across America. Any way you look at it, the increase in coverage will benefit very few depositors.

Proponents of increasing coverage also contend that because insurance premiums are paid by banks, increasing coverage does not cost taxpayers. While I concede the point, I think we also have to remember that behind the Federal deposit insurance funds is the full faith and credit of the United States Government.

Since I joined the Committee on Financial Services in 1993 at the close of the S&L crisis, I have been committed as all of my colleagues are on both sides of the aisle to protecting the safety and soundness of the banking system.

While I concede and agree with my colleagues that the causes of the S&L failures were many, the fact is that standing behind the insurance system are our constituent taxpayers. The bailout we voted for was constituent taxpayer dollars to bail out the S&L.

No matter what the reasons are for a future bank failure or a string of failures, there could be many reasons for them, by raising the insurance coverage, we increase the potential liability of the government and, thereby, the American taxpayer.

I also believe that raising the coverage may encourage the concept of moral hazard. Institutions will be encouraged to engage in riskier behavior to boost earnings if they know that failure is ensured by the Federal Government.

I would also like to place in the Record a letter to Members of Congress from The Financial Services Roundtable, which very strongly supports the underlying bill, which is a

fine piece of work that has passed this body two times previously, but also raises many concerns about raising the limit to $130,000.

The material that I referred to previously I will insert into the Record at this point.

The Financial Services Roundtable,

Washington, DC, April 22, 2005.

Hon. Barney Frank,

House of Representatives,

Washington, DC.

Dear Barney: I would like to commend you on your leadership

and continued efforts on deposit insurance reform. An

effective deposit insurance system is critical to the economy

and maintaining public confidence in the U.S. banking system.

The Roundtable is committed to working with the Financial

Services Committee to develop reasonable, responsible deposit

insurance reform legislation that the Roundtable and the

industry can support.

The Roundtable supports the passage of H.R. 1185, the

``Federal Deposit Insurance Reform Act of 2005.'' We also

support the adoption of the ``Managers Amendment.''

The Financial Services Roundtable, a national association

representing 100 of the largest integrated financial services

companies that together constitute nearly 70 percent of the

deposit insurance assessment base, believe that H.R. 1185

will help assure a sound deposit insurance system. In

particular, we believe a major improvement to the bill was a

provision that stated no insured depository institution shall

be barred from the lowest-risk category solely because of

size.

Further, the Roundtable supports: Merging the Bank

Insurance Fund (``BIF'') and the Savings Association

Insurance Fund (``SAIF''). A combined BIF/SAIF would be

stronger and more resilient. The provision in your bill that

caps the FDIC's assessment authority at 1 basis point for

those institutions in the lowest-risk category. The bill's

study of the effectiveness of the prompt corrective action

program, and a strong system of credits and rebates such as

you have in your legislation.

We remain concerned about provisions in the bill that would

increase deposit insurance coverage limits. Our members

believe that raising coverage limits could weaken market

discipline and increase risk to the FDIC, all insured

institutions, and ultimately American taxpayers. Federal

Reserve Board Chairman Alan Greenspan has stated there is no

evidence that an increase in coverage levels would promote

competition or materially improve the ability of financial

institutions to obtain funds. As Chairman Greenspan noted,

the evidence in recent years shows that financial

institutions of all sizes have not experienced difficulty

in obtaining funding from insured or uninsured deposits.

For those customers with substantial deposits, ample

opportunities exist to obtain FDIC coverage equal to

several multiples of $100,000. Since the FDIC is in good

shape financially, there is no need to grant the FDIC

additional authority to levy deposit insurance premiums.

Thank you again for your leadership on deposit insurance

reform and your consideration of the Roundtable's views on

this important matter. We look forward to working with you as

this legislation moves through the legislative process. If

you or your staff have any questions or would like to discuss

these issues further, please call Irving Daniels or me at

(202) 289-4322.

Best regards,

Steve Bartlett,

President and CEO.

Mr. Chairman, I yield myself such time as I may consume.

The gentleman makes a valid point that we have a lot of obese children. I think it is actually more like 40 percent in some recent studies I have seen. This is a terrible problem, but I urge the Members to defeat this amendment. It was defeated by voice vote last year, and it should be defeated again this year.

The gentleman from California (Mr. Filner) also talks about the accountability of the food industry; but this amendment tells parents that if they are not responsible for their children's eating, they can become millionaires. This amendment manages to exploit children and discourages parents from exercising parental responsibility all at the same time. It literally would hold food companies liable when parents buy their kids a six-pack of kid meals every day for 8 years. Adopting this amendment would turn the Personal Responsibility in Food Consumption Act into the Parent Irresponsibility Act.

Even the ultra-liberal Los Angeles Times has stated this is wrong, saying in an editorial: ``If kids are chowing down to excess on junk food, aren't their parents responsible for cracking down? And if parents and other grown-ups overindulge, isn't it their problem, not that of the purveyors of fast food? Why boost their food bills because of illegal jousting? People shouldn't get stuffed, but this line of litigation should.''

Even our best obesity doctors realize that this amendment is another sad assault on the concept of parental responsibility. As Dr. Jana Klauer, a fellow at the New York City Obesity Research Center of St. Luke's Roosevelt Hospital has said, ``I just wonder where were the parents when kids were having these McDonald's breakfasts every morning. Were they incapable of pouring a bowl of cereal and some milk?''

Let us do what we did last year and defeat this parental irresponsibility amendment by voice vote.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, I urge my colleagues to defeat this amendment. There is a problem in America. There is no question but that there is a problem. We do not solve that problem by shifting responsibility to corporations. It would be good if corporations did perfect things, but we live in an imperfect world where parents have the ability to turn off the television, parents have the ability to teach their children what to eat and how to eat well. And, interestingly, food that is better for you actually costs less.

Parents have the ability to deal with these issues in ways that this Congress and industry cannot do. I urge my colleagues to reject this amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

This gutting amendment was defeated on the House floor last year by a vote of 241 to 177, and it should be defeated again this year.

Lawsuits relating to obesity and weight gain are wrong no matter who brings them. If private claims are frivolous and should be blocked, then we should not encourage States to bring them either. This bill only applies to lawsuits arising out of or related to obesity and weight gain.

State consumer protection statutes are not intended to cover these kinds of claims. In fact, not a single State consumer protection law allows a State agency to sue for damages because someone got fat from eating too much. However, because the amendment implies State consumer protection laws do allow lawsuits in which the claim is obesity or weight gain, courts may well read it to grant all State agencies new powers to use their State consumer protection laws to seek damages against the food industry for obesity-related claims. That is directly contrary to the purpose of this bill. It would not be right to allow States to use their consumer protection laws in ways they cannot use them now, namely, to sue the food industry for obesity-related claims. Consequently, this amendment should be defeated.

In any case, section 4(5)(b) of H.R. 544 makes it clear that obesity- related lawsuits can be brought by anyone who can prove he suffered harm as a result of a violation of State or Federal law, including laws that prohibit deceptive or misleading advertising, by showing he individually and justifiably relied on such deceptive or misleading advertising and that such reliance was the proximate cause of the injury.

So the bill itself already allows lawsuits against bad actors while preserving the concept of personal responsibility. The amendment does not do that, it should be defeated, and I urge my colleagues to vote against this amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, in closing, let me just say that we have consumer protection laws. This bill is not intended to expand those laws. It is not intended to put restaurants out of business. It is not intended to shift responsibility from individuals and from parents. It is about personal responsibility, and I urge opposition to this amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the amendment is substantially the same as the amendment offered by the gentlewoman from Texas (Ms. Jackson-Lee), which was defeated on the House floor last year by a vote of 166 to 250, and it should be defeated again this year.

This amendment must be defeated because it would gut the bill. This amendment, if adopted, would allow anyone to eat as many health bars and drink as many diet shakes as they wanted and then sue the makers of the health bars and the diet shakes for millions of dollars for making them fat when the health bar and diet shake manufacturers had done absolutely nothing wrong.

The term ``dietary supplement,'' as defined in 21 U.S.C. can include just about any food imaginable. It is defined in 21 U.S.C. 321(ff) as ``a product intended to supplement the diet that bears or contains one or more of the following ingredients,'' including ``a vitamin or mineral.'' Do we really want to encourage lawsuits by people who get fat because they choose to eat too much food that happens to meet this definition? Of course not. And that is why this amendment must be defeated.

The same concept of personal responsibility should apply to anyone who chooses to eat too many health bars or diet shakes, or other similar products, just as it should be applied to anyone else.

If you want to destroy every company that sells products that help keep our waistlines trim by allowing them to be sued out of existence, then vote for this amendment. But if you want to help combat the obesity problem in America, vote down this gutting amendment and preserve the concept of personal responsibility.

Allowing the types of lawsuits this amendment would allow flatly contradicts the advice of our Nation's leading nutritionists. Listen to the insightful words of Dr. Gerard Musante, a clinical psychologist with training at Duke University Medical Center, who has worked for more than 30 years with thousands of obese people. He is the founder of Structure House, a residential weight-loss facility in Durham, North Carolina. He said the following at a Senate hearing on this legislation:

``Lawsuits are pointing fingers at the food industry in an attempt to curb the Nation's obesity epidemic. These lawsuits do nothing but enable consumers to feel powerless in a battle for maintaining one's own personal health. The truth is, we as consumers have control over the food choices we make, and we must issue our better judgment when making these decisions. Negative life-style choices cause obesity, not a trip to the fast food restaurant or a cookie high in trans fat.

``Through working with obese patients, I have learned that the worst thing one can do is blame an outside force to get themselves `off the hook,' to say it is not their fault and that they are a victim. Congress has rightly recognized the danger of allowing Americans to continue blaming others for the obesity epidemic. It is imperative that we prevent lawsuits from being filed against any industry for answering consumer demands. The fact that we are addressing the issue here today is a step in the right direction.''

Even the chairman of the American Council For Fitness and Nutrition, Susan Finn, has written that ``Although obesity is a serious health threat to millions of Americans, lawsuits and fingerpointing are not realistic solutions. If you are obese, you don't need a lawyer, you need to see your doctor, a nutritionist and a physical trainer. Playing the courtroom blame game won't make anyone thinner or healthier.''

Section 4(5)(b) of H.R. 554 makes it clear that obesity-related lawsuits can be brought by anyone who can prove he has suffered harm as a result of a violation of State or Federal law, including laws that prohibit deceptive or misleading advertising, by showing they individually and justifiably relied on such deceptive or misleading advertising and such reliance was the proximate cause of their injury. So if a manufacturer of a health bar or a diet shake lies concerning the calorie content of the food, and someone relies on that false statement and suffers injury, the person can sue the manufacturer under this legislation.

But let us not encourage people to sue makers of health bars and diet shakes because they choose to eat too many of them and get fat. I urge my colleagues to defeat this amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

The gentleman is talking about various kinds of supplements. He mentioned ephedra and other supplements to help people lose weight. That is a substantial distinction here. If a person buys a supplement and there has been misleading advertising or the manufacturer knows of adverse effects and does not communicate those, and if that constitutes a violation of law, a lawsuit is not prohibited by this legislation. This legislation is going the other way and saying you cannot sue people if you get fat because you make wrong choices, as opposed to you have had some kind of injury or illness because of a misadvertised or otherwise inappropriate utilization of a supplement.

I yield to the gentleman from California.

Reclaiming my time, we are not trying to change the whole world of consumer law here, we are only trying to change one aspect of it. If the gentleman is concerned about, and I know the gentleman has great concern about the effect of supplements like Ephedra which have largely been abandoned by the industry, that is something we ought to be considering, but not in the context of this legislation. I urge my colleagues to reject this amendment.

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 494 and ask for its immediate consideration.

Mr. Speaker, for purposes of debate only, I yield 30 minutes to the gentlewoman from California (Ms. Matsui), pending which I yield myself such time as I may consume. During consideration of this resolution, all time yielded is for the purpose of debate only.

Mr. Speaker, H.R. 494 is a structured rule. It provides 1 hour of general debate, equally divided and controlled by the chairman and ranking minority member of the Committee on the Judiciary. It waives all points of order against consideration of the bill. It provides that the amendment in the nature of a substitute recommended by the Committee on the Judiciary and now printed in the bill shall be considered as an original bill for the purpose of amendment. This resolution makes in order only those amendments printed in the Committee on Rules report accompanying the resolution, and it provides that the amendments printed in the report may be considered only in the order printed in the report, may be offered only by a Member designated in the report, shall be considered as read, shall be debatable for the time specified in the report equally divided and controlled by the proponent and an opponent, shall not be subject to amendment, and shall not be subject to a demand for division of the question in the House or the Committee of the Whole. It waives all points of order against the amendments printed in the report, and it provides one motion to recommit with or without instructions.

Mr. Speaker, I rise today to speak on behalf of House Resolution 494 and the underlying bill, H.R. 554, the Personal Responsibility in Food Consumption Act. First, I want to take this opportunity to thank the distinguished chairman of the Committee on the Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner), and the ranking member, the gentleman from Michigan (Mr. Conyers), and additionally I want to commend the gentleman from Florida (Mr. Keller), a member of the Committee on the Judiciary, for authoring the underlying bill.

Mr. Speaker, today the House will consider H.R. 554, the Personal Responsibility in Food Consumption Act, a common sense piece of legislation that passed this House in the last Congress by a substantial bipartisan vote of 276 to 139. I might further add that 55 Democrats joined with 221 Republicans supporting this bill in an effort to help rein in this mentality of jackpot justice that has plagued our judicial system and cluttered the dockets to a virtual standstill. This legislation would require courts to dismiss any lawsuits that seek damages for injury resulting from weight gain, obesity, or any health condition associated with obesity filed against manufacturers, distributors, sellers, marketers, or advertisers of any food product, in addition to trade associations that represent them.

Of course, support of this bill is not limited to Capitol Hill, Mr. Speaker. A recent Gallup poll found that approximately 9 in 10 Americans, a number of whom are themselves in the ranks of overweight or even obese, opposed holding the fast food industry legally responsible for diet-related health problems of people who eat that kind of food on a regular basis.

Without question, Mr. Speaker, obesity is a problem in our society. Having practiced medicine for nearly 30 years, I am well aware of the habit and complications that obesity can wreak on a person's health, especially over a long term. Like most other Americans, I am also well aware that obesity is on the rise in our country, and particularly among our children. However, the root of the problem is not the existence of fast food or the presence of a local fast food restaurant, but rather the root of the problem lies in the choices of consumers. I have never heard of anyone pulling up to the drive-through window with a hamburglar sitting in the passenger seat forcing someone to buy just one more Big Mac.

Mr. Speaker, allowing an individual to sue a restaurant because the consumer chose to eat there often or chose to eat too much is simply ridiculous and, frankly, it is a dangerous waste of the court's time. For every frivolous case that takes up a spot on the docket, a legitimate case where an individual is truly harmed and truly needs expeditious judicial review gets pushed farther and farther down the line. And as we all know, justice delayed is justice denied.

The title of this bill emphasizes the type of solution needed to address the underlying problem. It is called personal responsibility. It is not just a catch phrase. Individuals have to take control of their own lives. They have to make wise decisions, especially when it comes to their health. And when an individual does make a poor decision, he or she should not be able to abuse the courts so as to shift responsibility to someone else in order to cash in.

Mr. Speaker, while H.R. 544 prohibits certain types of lawsuits, it does make various reasonable exceptions to ensure the protection of a consumer's legitimate claim for legitimate harm. An individual, for example, can still sue in those instances where a contract or a warranty is breached, as long as the basis for the lawsuit is not related to weight gain, obesity or a health condition associated with either. Additionally, a manufacturer or seller is still liable if they knowingly violate a Federal or State statute concerning the marketing, the advertising, or the labeling of a product.

Mr. Speaker, this bill would still allow individuals to bring obesity or weight gain related matters before the FTC, the Federal Trade Commission, or the FDA, the Food and Drug Administration, for consideration and appropriate action. Obviously, individuals can still sue in accordance with applicable State laws protecting against deceptive trade practices and if a person becomes sick from a tainted food product.

In closing, I just want to emphasize that this legislation is common sense and it includes exemptions to ensure legitimate claims still make it to court while abusive lawsuits are stopped at the courthouse door.

Again, Mr. Speaker, I look forward to the consideration of this rule, and I ask my colleagues to support the rule and the underlying bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume, following which I will yield 2 minutes to the gentlewoman from Michigan.

Mr. Speaker, this bill, the Personal Responsibility in Food Consumption Act, H.R. 554, is all about, again, personal responsibility and to point out how ludicrous it would be if we allowed personal injury lawsuits against the food industry or any other company that makes a legitimate product.

We just talked earlier in the afternoon, Mr. Speaker, in regard to gun manufacturers.

Mr. Speaker, let me just give an example, if I might. This is a belt, an alligator belt. In fact, it is my belt. Size 36. I have a size 36 waist. This belt, I am proud to say, is hand-finished, American alligator, produced right here in the good old U.S.A. This alligator skin was obtained from a Louisiana hunt, it says on this belt, 1993, manufactured by the Trafalgar Limited Belt Company, a good company. And the belt has served me very well. Size 36 fits me well.

Mr. Speaker, let us suppose now that I decided, it is unlikely that I would do this, but let us suppose I decided I wanted to wear a size 42 and I punched a few extra holes in this belt, which is a size 36, so I could wear it and buckle it with a size 42 pair of trousers. These trousers fell right to my knees in a public place. I do not think I should have the right to sue the belt company because I used its product in a manner that it was not designed to use. I could go out and buy myself a size 42 belt.

Let me give another example, and this is more likely. Let us suppose I really felt like my waist was a size 34, and so I cinched this belt up really good so I could proudly say I am not a 36, I have a 34 inch waist at my age. I would feel pretty good about myself.

But, unfortunately, Mr. Speaker, there is a nerve at my waist called the lateral femoral cutaneous nerve. If someone puts too much pressure around their waist by wearing a belt inappropriately, by cinching it up too tightly, they put compression on that nerve, that lateral femoral cutaneous nerve, and I speak from knowledge on this from 30 years as a practicing physician. That condition, my colleagues can look it up, but I will share it with them, it is called meralgia paresthetica. If Members do not believe me, look it up. It creates tremendous numbness and loss of feeling in the anterior part of the thigh.

Let us suppose someone misused this belt and wore it as a size 34 and decided for that reason to sue this Trafalgar Company, this good, solid American company that makes this belt, for damages. That is totally ridiculous and ludicrous, and that is why this bill is so important. That is why it is called personal responsibility.

Mr. Speaker, I yield 2 minutes to the gentlewoman from Michigan (Mrs. Miller).

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, I would like to close by thanking my colleagues for a productive discussion on the rule and the underlying bill. Today, this House has an

opportunity to again pass meaningful reform to not only promote personal accountability but also to strengthen the opportunities for legitimate claims to be heard and adjudicated. Let us take one more step to turn back the tide of so-called ``jackpot justice.''

While runaway juries and frivolous lawsuits might make a few individuals and certain ambulance-chasing lawyers rich, the American people ultimately pay the price both economically and socially.

Mr. Speaker, discouraging individuals from taking personal responsibility does not help anyone. In fact, it will only make matters worse. Encouraging healthy lifestyles and wise dietary choices should always trump rewarding poor decisions by shifting the blame to innocent bystanders.

The Personal Responsibility in Food Consumption Act of 2005 is a good bill, and I look forward to further discussing its merits on the House floor today.

Mr. Speaker, as I mentioned earlier, a strong bipartisan majority passed this bill in the last Congress; and I have no reason to doubt that we should be able to pass it again by a similar, maybe even a stronger, margin; and I urge my colleagues to support this rule and the underlying bill.

Mr. Speaker, I yield back the balance of my time, and I move the previous question on the resolution.

The previous question was ordered.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Chairman, I rise in opposition to H.R. 1185, but I appreciate all the hard work that the gentleman from Alabama (Mr. Bachus) and the gentleman from Massachusetts (Mr. Frank) have done on this bill. I understand that they are very sincere in their efforts, but I have a strong philosophical opposition to what this bill represents and what it is all about.

Let me note that if section 3 were taken out of this legislation, I could support the bill; but the heart of this bill is section 3, which is a 30 percent increase in the Federal deposit insurance rate. What we are talking about here is increasing Federal deposit insurance, the taxpayers' guaranteeing private accounts in private banks from $100,000 to $130,000; for savings accounts I think it goes up to $240,000, $250,000, or is it $260,000; as well as $1 million, I believe, for community-type savings accounts.

But the most important factor here is this: this system was set up to protect the little guy. It was set up to protect average Americans who are not saving hundreds of thousands of dollars, so that they could save $10,000, $20,000, $30,000 and not worry about having a bank default and close up on them and then losing that money.

What has happened is a perversion of that basic premise. What has happened now is the taxpayers, the average person out there working is protecting the rich guy. We have the little guys now with their tax dollars protecting the rich guys who, at $100,000 in an account, and now they want to make it $130,000 in an account are protected by the taxpayers. It is not just one account, however. There are multiple accounts that these rich people use, so we are not just protecting $130,000. We are protecting $130,000 times 10 or 20, where they can place it in various banks. What we end up doing is having the little guy protecting the rich people in this society.

And there is a downside to having this protection. Not only is it not fair, but the downside is people who invest their money, when it is guaranteed, will be less cautious about where they put their money. We have just heard from the gentleman from Alabama (Mr. Bachus) about the people who lost their money in a bank. Well, those people should have paid closer attention to that bank. The fact is that we are encouraging people to be frivolous where they are putting their money because we are guaranteeing it as taxpayers.

This is exactly what led to the savings and loan debacle in the 1980s. In 1980, before Ronald Reagan was elected President, this went from the early 1970s, from $10,000, to 1980 when they jumped it to $100,000 protection. All of a sudden, people could then invest with these multiple accounts, millions of dollars protected by the taxpayers.

So what happened? What happened is, we have millions, billions of dollars now in our system being invested in the most irresponsible way. Because the banks and the savings and loans themselves, no matter what, they ended up paying more interest than they should have. The bad institutions were bringing down the good institutions, and the public was protected from any bad decision they made. We ended up with a debacle, a financial debacle created by this increase in 1980 that ended up by the mid-1980s costing us tens of billions, maybe even $100 billion of the American taxpayers' money.

We do not need this kind of irresponsibility. That is not what this program started out as. It has been perverted to be that now. Section 3 is just that kind of perversion, where we end up now increasing it precipitously from $100,000 to $130,000. It should be basically back in the arena of the average American taxpayer instead of protecting the rich.

So with that said, I can remember personally, just to note, I remember during the mid-1980s when I worked in the White House, a friend of mine from the Reagan administration was in charge of one of those institutions, savings and loans, and he was being attacked because he was not giving out enough loans to various people and various institutions that would be guaranteed. He was not giving out these guaranteed loans, and I called him up, I said, Well what is the matter? Are you not part of the team? We want to have a strong economy. He said, Dana, we are being put behind the eight ball. Every one of these things that we are giving out has a government guarantee because of this deposit insurance, and it is going to take us right down the road to economic hell.

Well, that is exactly what happened, and we should not be going in that direction anymore. We should be doing a reversal, making the system more responsible, asking people to be more responsible with their money and where they put it and not having the middle-class taxpayer subsidizing rich people by guaranteeing wherever they would want to put their money.

I oppose the amendment, and I will be proposing an amendment later on.

Mr. Chairman, I offer an amendment.

Mr. Chairman, let me reiterate that I do this with great respect to the gentleman from Alabama (Mr. Bachus) and the gentleman from Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank) who put a great deal of time and effort into this bill and this legislation.

I have a fundamental philosophical disagreement about Federal Deposit Insurance. But I have no doubt that they have worked hard to try to produce some good legislation here.

With that said, I offer this amendment on behalf of myself and the gentlewoman from New York (Mrs. Maloney). The Rohrabacher-Maloney amendment would strike out section 3, keeping the Federal Deposit Insurance at its current level of $100,000 per account.

Let me note the argument was made earlier that simply by raising insurance, for example, from $100,000 to $130,000, would that, we were asked, make people more irresponsible if it was car insurance, and you just increased the car insurance from $100,000 to $130,000? The answer is, yes, if someone else was paying for the car insurance.

If somebody gave whatever it is, if the Federal Government ends up coming in and saying, if all else fails, do not worry, you are going to get paid off, because we are going to pay it, the taxpayers will pay it in the end, if this whole system fails we are there. Yeah, people who ended up not having to take that responsibility off their shoulders, the institutions might be a little less responsible, and, of course, the individuals themselves might be less responsible in picking out where to put their money.

This bill also increases to $260,000 retirement accounts, the deposit insurance for that, and $2 million per account for municipalities. Well, this, as I say right in the beginning, the FDIC was supposed to be for the little guy. And, again, there has been the argument that the gentleman from Massachusetts (Mr. Frank) gave, well, $100,000 or $130,000 these days is the little guy. Well, that is if you are counting one account. Everybody involved in this knows that we are taking about multiple accounts.

Now we are talking about multiple accounts of $130,000 per account, and, yeah, someone who has 10 accounts at $130,000 is someone who I would catalog as rich. But, I just say this much, yes, if someone has $1.3 million in various accounts that are going to be ultimately guaranteed by the Federal Government, and the question is, where

does this money come from? Does it come from, yes, the banks and the savings and loans?

Well, it comes, yes, from the banks and savings and loans. But, what is important is, the ultimate guarantor is the Federal Government, otherwise we would not be talking about that.

But, when we put the taxpayers on the ultimate hook, will it ever happen? Well, it has happened, and I have seen it happen, and you have seen it happen. And this bill may or may not make that less likely. In fact, when you combine the deposit insurances, and put them together, yes it might add some strength to the system, but it also means that if the system collapses, it collapses big time, big time collapse; not just medium time collapse, but a big time collapse.

So could it happen? Yes, it could happen. I think that things like this happen, like the savings and loan debacle, because fundamental principles are ignored. And the fundamental principles are people should be responsible for their own money, and that institutions should be responsible.

If they commit acts or they are charging too much or their expenses are too high, or they are not competent enough, people should not be placing their money in that institution simply because there is a guarantee, there is a deposit guarantee, which is what we have now.

By ignoring these fundamental principles, you have less responsibility on the part of the depositor and less responsibility on the part of the financial institution. So here we are, faced with a major jump in the deposit insurance. What are we going to do?

I think it is about time to reexamine the fundamental issue of whether or not we should be guaranteeing this deposit insurance in the first place. And I will say, as I have said before, I watched this happen during the Reagan administration. In 1980, they dramatically increased the deposit insurance, and do not tell me that there have not been people, well known economists suggesting that that was a major cause of the savings and loan debacle, they are.

Because, even today Alan Greenspan, Milton Friedman and others oppose this increase in the deposit insurance for that very reason, because they have seen that this makes the system more vulnerable, and we should not be doing that.

With that, I would suggest that I would hope that people could vote for my amendment to strike section 3 out, which would then increase that.

Mr. Chairman, will the gentleman yield?

If that is the criteria we are using, why do we not then limit it to one account because the less sophisticated people will not have multiple accounts.

Would the gentleman support that one?

I thank the gentleman very much.