Floor Statements

Madam Speaker, I thank Chairman Pryce, and will start by commending Chairman Pryce and Congresswoman Maloney and Congresswoman Biggert and also Ranking Member Frank for this legislation.

A lot of citizens might be hearing this debate and they may be thinking, what has this got to do with the United States? What do problems in Latin America have to do with the United States? What is in it for me, my constituents might ask me? Why would you support spending $25 million a year on this program? What do Americans get out of this program?

I submit to you that this program is probably one of the best uses of our taxpayers' money for one simple reason: when I go home today, people say to me, illegal immigration; do something about illegal immigration.

Well, let me say this to fellow Members: if you want to do something about illegal immigration, this vote today, a ``yes'' vote on this bill, will do more from a practical standpoint to stem the flow of illegal immigration than anything else.

James Schlessinger, one of my favorite quotes is a quote of his when he says: ``When a problem has no solution, it is not a problem. It is a fact.''

Well, I can tell you that illegal immigration is a fact. But it is also a problem that has solutions. And the first solution, the first step to solving it we can take today by voting for this bill.

Now, why is that? Well, let me tell you about illegal immigration. Let me tell you about Mexico, one of the countries that benefits from this program. It creates small enterprises, small jobs in Mexico. In Mexico every year, 600,000 Mexicans enter the job force; but there is only room for 150,000 of them. So almost a half million of them cannot even get a job at any wage.

The ones that do get a job is at one-fifth of what Americans pay, American jobs. Guatemala, El Salvador, the Dominican Republic, we are beginning to have more and more illegal immigrants from those countries. The reason? In the countries that I have just mentioned, about one out of every five young men or women that enters the job market can get a job.

So I can tell you it is a fact of life when they cannot get a job at any salary, they are going to try to come over here. Yes, we can build walls. Yes, we can employ more people on the border. But a cheaper, more practical, more long-term solution is this legislation today which will create the very jobs these countries need. And that is not the large government enterprises. It is the private enterprise businesses.

I close by saying this: another great thing about this program is we have partners. It is not a government program. The NGOs, the private sector business organizations, trade groups, they are all involved in this.

Let us vote ``yes'' on this. Let us start creating jobs in those countries and stemming the flow of illegal immigration.

Mr. Speaker, earlier today I was inadvertently detained during rollcall vote No. 81. Had I been present, I would have voted ``aye.''

Mr. Speaker, let me say under Chairman Oxley's leadership, this committee has been committed for almost 6 years with freeing depository institutions of unduly and unnecessary burdensome regulations.

When we started this quest, the burden on those institutions was estimated at $25 billion a year. It is now $36 billion a year, and that is despite the fact that we have passed two or three pieces of legislation that have done away with some of these regulations.

Last year the House passed overwhelmingly similar legislation to this legislation; it unfortunately died in the other body. The legislation before us has a potential to save somewhere between $15 and $20 billion, and that is not to depository institutions; that is actually money that will be available to loan to Americans to finance home purchases, cars, property, or it will be available to pay greater yields on their deposits. So this is a very good bill for America. It will strengthen not only our financial institutions, but our economy.

I would like to commend the following people: Mrs. Maloney and Mr. Renzi. Mrs. Maloney has already spoken about the importance of the seasoned investor exemption where people who deal with banks on a daily and weekly basis depositing money, where those banks will not have to file unnecessary paperwork.

It will aid Bill Fox at FinCEN, who is in charge of preventing money laundering and says that this provision will make it easier for law enforcement, for the FBI and other agencies to track money laundering and eliminate costly filings.

I would like to commend Mr. Ryun for some very strong provisions helping our community and independent banks; and Mr. Kanjorski and Mr. Royce.

Finally, I would say to Mr. Hensarling and Mr. Moore, you have done a fine job on this bill, and I commend you and commend this product.

Mr. Speaker, today, we have the opportunity to make significant improvements in our Federal Deposit Insurance system. We do this from a position of strength, as both the insurance fund and the banking industry are extremely healthy. What better time than to fine tune the system and establish a strong footing going forward.

Basic principles of reform: Fairness and Flexibility

The fundamental driving principles of reform were to provide fairness to all insured depository institutions by assessing each based on risk and provide the FDIC with greater flexibility to manage the fund to reflect different economic conditions.

Regarding fairness: The bill provides greater fairness to insured banks in many important ways. First, it authorized the FDIC to revise the risk-based formula to better reflect the risk each institution poses to the insurance fund. In providing this authority, our Committee looked to and relied upon examples provided by the FDIC regarding how the new system might work, including FDIC representations that about 42 percent of all banks would likely remain in the lowest risk category. We know that the very nature of bank loans involves risk. Therefore, we expect the FDIC to form a reasonable system that encourages appropriate risk-taking, consistent with safe and sound banking, and with premiums at a level that protect the best run banks from being overcharged and that don't inadvertently stop lending. In this bill, we make explicit that the size of the financial institution should not bar an institution from being in the lowest risk category. It is risk that matters, not size. We expect the FDIC to time assessments in such a manner that banks are able to plan for such an expense, thereby avoiding unexpected or untimely costs on the bank.

Secondly, the bill recognizes that about 10 percent of institutions have never paid a premium to the FDIC to support its operations.

This has put a burden on those institutions that fully capitalized the insurance funds in the mid-1990s. Thus, this legislation provides that those institutions that capitalized the fund with initial credits--in proportion to each institution's financial contribution to FDIC--that are intended to offset premium assessments for many years to come. Those institutions that have not financially supported the FDIC would not have these credits and would begin to pay premiums to the FDIC. Moreover, should the insurance fund grow to the upper regions of the normal operating range for the FDIC, banks would be entitled to a cash dividend in proportion to their historic financial contributions.

Regarding flexibility: The bill provides FDIC greater flexibility to manage the insurance fund. The law that our bill replaces constrained the FDIC from charging most banks when the reserve ratio remained above a certain level and would force FDIC to charge high premiums, 23 basis points, at times when it made the least sense. Our bill allows the FDIC to manage the fund within a wide range, with the idea that assessments would remain reasonably constant and predictable.

Importantly, this bill is not intended to raise more money than what the FDIC would have collected under the old law. Nor is this bill intended to encourage the FDIC to build the fund to the highest possible level. In fact, we know that each dollar sent to the FDIC means that there are fewer dollars that can support lending in our communities. And as we considered this bill, we heard testimony that suggested that each dollar sent to Washington means that eight dollars of lending is lost. We cannot afford to restrict lending in our communities just to have more money added to the nearly $50 billion already in the insurance fund.

To protect against the fund growing too quickly, the legislation provides an automatic braking system that would return as a dividend 50 percent of any excess when the reserve ratio of the fund is above 1.35 percent. It also caps the fund level, providing a 100 percent dividend when the reserve ratio exceeds the upper limit of the range at 1.50 percent. This assures that money will remain in our communities. And while we provided the FDIC some authority to suspend the 50 percent dividend under extraordinary circumstances where it expects losses over a 1-year timeframe to be significant, our expectation is that this authority be used rarely and be reviewed each year when the new designated reserve ratio is set. The intention of this exception is that it be temporary and not a regular event, and that the FDIC communicates to Congress and the industry its justifications.

Designed for the Future

Not only does the legislation provide fairness and flexibility, it also anticipates needed changes in the coverage levels over time. We know that inflation has cut in half the real value of the current insurance coverage since it was last changed in 1980. We also know that as the baby boomers move into retirement, that the current coverage level was inadequate to protect their life-long savings. Thus, this bill increased to $250,000 the insurance limit on retirement accounts.

The House has repeatedly voted overwhelmingly in favor of legislation that would automatically index coverage levels based on inflation. The other body has only recently passed deposit insurance reform. The indexing language included in the Senate reconciliation bill required the FDIC to ``determine whether'' to increase coverage based on the amount of inflation increase plus a long list of factors. The compromise language we have agreed to calls on the FDIC and NCUA to jointly consider just three narrow factors. Those factors are (1) the overall state of the Deposit Insurance Fund and economic conditions affecting insured depository institutions; (2) potential problems affecting insured depository institutions; and (3) whether the increase will cause the reserve ratio of the fund to fall below 1.15 percent of estimated insured deposits. If the FDIC and NCUA elect not to increase coverage, they must make the case based on these three narrow factors. The key language in the compromise is that the FDIC and NCUA, ``upon determining that an inflation adjustment is appropriate, shall jointly prescribe the amount by which'' coverage ``shall be increased by calculating'' the amount of inflation. This change in language, from ``determine whether'' to ``shall jointly prescribe'' is a clear statement that Congress is establishing a presumption that the agencies will increase coverage if warranted by past inflation.

Stronger than Ever

This legislation will make the insurance fund even stronger than it already is and, in combination with the extensive regulatory and supervisory authorities of the FDIC, ensures that the fund and the banking industry will remain strong for a very long time.

Mr. Speaker, I rise in strong support of the Deposit Insurance Reform legislation included in S. 1932, the Deficit Reduction Act of 2005.

I want to begin by thanking Financial Services Committee Chairman Oxley for his relentless efforts on moving this deposit insurance reform legislation. He has shown tremendous leadership in steering this complex bill through the legislative process, and I am deeply grateful that he gave me the opportunity to work on this landmark piece of legislation. I also want to thank the Ranking Member of the Committee, Mr. Frank, for his support. This was truly a bipartisan effort, and I believe we have a better legislative product because of that. In addition, I want to express my deep appreciation for Senator Shelby's work on increasing coverage for retirement accounts to $250,000.

Deposit insurance reform has been thoroughly discussed and debated over several years. During both the 107th (H.R. 3717) and 108th (H.R. 522) Congress, I introduced comprehensive deposit insurance reform legislation. The legislation was a byproduct of recommendations made by the FDIC in early 2001, a series of hearings held in my Subcommittee on proposed reforms to the Federal deposit insurance system, and broad- based bipartisan cooperation. H.R. 3717 passed the House in the 107th Congress by a vote of 408-18, and H.R. 522 passed the House in the 108th Congress by a vote of 411-11. During this Congress, Congresswoman Hooley and I introduced this same legislation--H.R. 1185--with Chairman Oxley and Ranking Member Frank. On May 4, 2005, H.R. 1185 passed the House by a vote of 413 to 10. The legislation is supported by the American Association of Retired Persons (AARP) as well as all of the banking and credit union trade associations.

Federal deposit insurance has been a hallmark of our nation's banking system for more than 70 years. The reforms made by this legislation will ensure that this system that has served America's savers and depositors so well for so long will continue to do so for future generations.

What does the legislation do? First, it merges the separate insurance funds that currently apply to deposits held by banks on the one hand and savings associations on the other, creating a stronger and more stable fund that will benefit banks and thrifts alike.

Second, the bill makes a number of changes designed to address the ``pro-cyclical'' bias of the current system, which results in sharply higher premiums being assessed at ``down'' points in the business cycle, when banks can least afford to pay them and when funds are most needed for lending to jumpstart economic growth. By giving the FDIC greater discretion to manage the insurance funds based on industry conditions and

economic trends, the legislation will ease volatility in the banking system and facilitate recovery from economic downturns.

Third, the legislation makes monumental changes to law with regard to deposit insurance coverage levels. The system has gone 25 years without such an adjustment--the longest period in its history--and the increases provided for in the legislation are critical if deposit insurance is to maintain its relevance. The legislation establishes a permanent indexation system to ensure that coverage levels keep pace with inflation by indexing coverage from its current level of $100,000 every five years. The indexation, which begins in 2010, applies to all accounts, including retirement and municipal accounts. Without these changes, deposit insurance will wither on the vine, which is an unacceptable outcome for the millions of Americans who depend upon it to protect their savings.

The legislation also immediately increases deposit insurance coverage available to retirement accounts, including IRAs and 401ks, from its current level of $100,000 to $250,000. Particularly in light of volatility on Wall Street and other developments that have shaken confidence in the markets in recent years, senior citizens and those planning for retirement need a convenient, conservative, 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. That is why the AARP has enthusiastically endorsed the coverage increases in this bill.

All of us have heard from community bankers in our districts about the challenges they face in competing for deposits with large money- center banks that are perceived by the market--rightly or wrongly--as being ``too big to fail.'' By strengthening the deposit insurance system, the conference report will help small, neighborhood-based financial institutions across the country, particularly in rural America, continue to play an important role in financing economic development. The deposits that community banks are able to attract through the Federal deposit insurance guarantee are cycled back into local communities in the form of consumer and small business loans, community development projects, and home mortgages. If this source of funding dries up, it will have devastating consequences for the economic vitality of small-town America.

I want to again commend Chairman Oxley for the tremendous leadership he has shown in steering this complex bill through the legislative process. I also want to thank Ranking Member Frank, Congresswoman Hooley, Senator Shelby, Senator Sarbanes, Senator Enzi, Senator Crapo, Senator Enzi, and Senator Johnson for all of their work on this legislation.

Let me also take this opportunity to thank the staff members on the House Financial Services Committee who worked on this legislation. Both Chairman Oxley and Ranking Member Frank are to be commended for assembling such a talented group of staff to work on Deposit Insurance Reform legislation. On the majority side, I would like to thank Bob Foster, Carter McDowell, Peggy Peterson, Tom Duncan, Peter Barrett and Dina Ellis who serves as my designee on the Committee. I want to give a special thanks to Jim Clinger who recently left the Committee to work at the Department of Justice. Without Jim's hard work, dedication and knowledge we would not be here today, and I am grateful for all of his efforts. I would also like to thank Larry Lavender, Warren Tryon and Kim Olive of my staff for their work on this issue. On the minority staff, I would like to thank the following staff members: Jeanne Roslanowick, Jaime Lizarraga, Erika Jeffers, Ken Swab and Matt Schumaker of Congresswoman Hooley's staff.

In closing, Mr. Speaker, let me just say that this legislation will promote the stability and soundness of the banking system. It will also provide assurance to working families, retirees, and others who place their hard-earned savings in U.S. banks, thrifts, and credit unions that their FDIC-insured deposits are safe and secure.

Mr. Speaker, today, we have a great opportunity to make significant improvements in our Federal Deposit Insurance system. Our position is strong, as both the insurance fund and the banking industry are extremely healthy, making this the ideal time to fine tune the system and establish a strong footing going forward.

Basic principles of reform: Fairness and Flexibility

The two fundamental driving principles of reform are to provide fairness to all insured depository institutions by assessing each based on risk, and to promote greater flexibility by allowing the FDIC to manage the fund differently based on existing economic conditions.

The bill provides greater fairness to insured banks in many important ways. It authorizes the FDIC to revise its risk-based formula to reflect with greater accuracy the risk each institution poses to the insurance fund. In providing this authority, our Committee looked at examples provided by the FDIC to determine how the new system might work, including FDIC representations that show about 42 percent of all banks would likely remain in the lowest risk category. Because the very nature of bank loans involves risk, we expect the FDIC to form a reasonable system that encourages appropriate risk-taking, consistent with safe and sound banking, and with premiums at a level that protect the best run banks from being overcharged but don't inadvertently stop lending. In this bill, we make explicit that the size of the financial institution should not bar an institution from being in the lowest risk category. It is risk that matters, not size. We expect the FDIC to conduct assessments in such a timely manner that banks are able to plan for such an expense, thereby avoiding unexpected or untimely costs.

Secondly, the bill recognizes that about 10 percent of institutions have never paid a premium to the FDIC to support its operations. This has put a burden on those institutions that fully capitalized the insurance funds in the mid-1990s. This legislation provides that those institutions that capitalized the fund with initial credits in proportion to each institution's financial contribution to FDIC. The credits are intended to offset premium assessments for many years to come, Those institutions that have not financially supported the FDIC would not have these credits and therefore must begin to pay premiums to the FDIC. Moreover, should the insurance fund grow to the upper regions of the normal operating range for the FDIC, banks would be entitled to a cash dividend in proportion to their historic financial contributions.

In addition to promoting fairness, the bill provides the FDIC greater flexibility to manage the insurance fund. The current law constrains the FDIC from charging most banks when the reserve ratio remained above a certain level and forces the FDIC to charge high premiums (23 basis points) at times when it makes the least sense. Our bill corrects these problems by allowing the FDIC to manage the fund within a wide range, with the intention that assessments would remain reasonably constant and predictable.

Importantly, this bill is not intended to raise more money than what the FDIC would have collected under the old law. Nor is this bill intended to encourage the FDIC to build the fund to the highest possible level. In fact, we know that each dollar sent to the FDIC means that there are fewer dollars that can support lending in our communities. As we considered this bill, we heard testimony that suggested that each dollar sent to Washington means that eight dollars of lending is lost. We cannot afford to restrict lending in our communities just to have more money added to the nearly $50 billion already in the insurance fund.

To protect against the fund growing too quickly, the legislation provides an automatic braking system that would return as a dividend 50 percent of any excess when the reserve ratio of the fund is above 1.35 percent. It also caps the fund level, providing a 100 percent dividend when the reserve ratio exceeds the upper limit of the range at 1.50 percent. This assures that money will remain in our communities. And while we provided the FDIC some authority to suspend the 50 percent dividend under extraordinary circumstances where it expects losses over a one-year timeframe to be significant, our expectation is that this authority will be used rarely and reviewed carefully each year when the new designated reserve ratio is set. This exception should be temporary and not a regular event, and the FDIC must communicate to Congress and the industry its justifications.

The FDIC's development and implementation of a new risk-based assessment system should not negatively impact the cost of homeownership or community credit by charging higher premiums to prudently managed and sufficiently capitalized institutions simply because they fund mortgages and other types of lending through advances from Federal Home Loan Banks. The Gramm-Leach-Bliley Act took great care in trying to provide adequate funding resources for community financial institutions and insured housing lenders through expanding community institutions' access to Federal Home Loan Bank advances. The FDIC shall take into consideration the goals of the Gramm-Leach-Bliley Act with respect to Federal Home Loan Bank advances and the objectives of this Act when developing a risk-based premium system.

Designed for the Future

Not only does the legislation provide fairness and flexibility, it also anticipates needed changes in the coverage levels over time. We know that inflation has cut in half the real value of the current insurance coverage since it was last changed in 1980. We also know that, as the baby boomers move into retirement, the current coverage level was inadequate to protect their life-long savings. Thus, this bill increased to $250,000 the insurance limit on retirement accounts.

The House has repeatedly voted overwhelmingly in favor of legislation that would automatically index coverage levels based on inflation. The other body has only recently passed deposit insurance reform. The indexing language included in the Senate reconciliation bill required the FDIC to ``determine whether'' to increase coverage based on the amount of inflation increase plus a long list of factors. Our compromise language calls on the FDIC and NCUA to consider just three narrow factors. Those factors are: (1) the overall state of the Deposit Insurance Fund and economic conditions affecting insured depository institutions; (2) potential problems affecting insured depository institutions; and (3) whether the increase will cause the reserve ratio of the fund to fall below 1.15 percent of estimated insured deposits. If the FDIC and NCUA elect not to increase coverage, they must make their case based on these three narrow factors. The key language in the compromise is that the FDIC and NCUA, ``upon determining that an inflation adjustment is appropriate, shall jointly prescribe the amount by which'' coverage ``shall be increased by calculating'' the amount of inflation. This change in language, from ``determine whether'' to ``shall jointly prescribe'' is a clear statement that Congress is establishing a presumption that the agencies will increase coverage if warranted by past inflation.

Stronger than Ever

This legislation will make the insurance fund even stronger than it already is and, in combination with the extensive regulatory and supervisory authorities of the FDIC, ensures that the fund and the banking industry will remain strong for a very long time.

Mr. Speaker, I thank the Chairman for yielding time, and I rise in strong support of the Deposit Insurance Reform legislation included in the conference report to S. 1932, the Deficit Reduction Act of 2005.

I want to begin by thanking Financial Services Committee Chairman Oxley for his relentless efforts on moving this deposit insurance reform legislation. He has shown tremendous leadership in steering this complex bill through the legislative process, and I am deeply grateful that he gave me the opportunity to work on this landmark piece of legislation. I also want to thank the Ranking Member of the Committee, Mr. Frank for his support. This was truly a bipartisan effort, and I

believe we have a better legislative product because of that. Senator Shelby and the other Senators on his committee are also to be commended for their fine work.

Deposit insurance reform has been thoroughly discussed and debated over several years. During both the 107th (H.R. 3717) and 108th (H.R. 522) Congress, I introduced comprehensive deposit insurance reform legislation. The legislation was a byproduct of recommendations made by the FDIC in early 2001, a series of hearings held in my Subcommittee on proposed reforms to the Federal deposit insurance system, and broad- based bipartisan cooperation. H.R. 3717 passed the House in the 107th Congress by a vote of 408-18, and H.R. 522 passed the House in the 108th Congress by a vote of 411-11. During this Congress, Congresswoman Hooley and I introduced this same legislation--H.R. 1185--with Chairman Oxley and Ranking Member Frank. On May 4, 2005, H.R. 1185 passed the House by a vote of 413 to 10. The legislation is supported by the American Association of Retired Persons (AARP) as well as all of the banking a credit union trade associations.

Federal deposit insurance has been a hallmark of our Nation's banking system for more than 70 years. The reforms made by this legislation will ensure that this system that has served America's savers and depositors so well for so long will continue to do so for future generations.

What does the legislation do? First, it merges the separate insurance funds that currently apply to deposits held by banks on the one hand and savings associations on the other, creating a stronger and more stable fund that will benefit banks and thrifts alike.

Second, the bill makes a number of changes designed to address the ``pro-cyclical'' bias of the current system, which results in sharply higher premiums being assessed at ``down'' points in the business cycle, when banks can least afford to pay them and when funds are most needed for lending to jumpstart economic growth. By giving the FDIC greater discretion to manage the insurance funds based on industry conditions and economic trends, the legislation will ease volatility in the banking system and facilitate recovery from economic downturns.

Third, the legislation makes monumental changes to law with regard to deposit insurance coverage levels. The system has gone 25 years without such an adjustment--the longest period in its history--and the increases provided for in the legislation are critical if deposit insurance is to maintain its relevance. The conference report establishes a permanent indexation system to ensure that coverage levels keep pace with inflation by indexing coverage from its current level of $100,000 every five years. The indexation, which begins in 2010, applies to all accounts, including retirement and municipal accounts. Without these changes, deposit insurance will wither on the vine, which is an unacceptable outcome for the millions of Americans who depend upon it to protect their savings.

The legislation also immediately increases deposit insurance coverage available to retirement accounts, including IRAs and 401ks, from its current level of $100,000 to $250,000. Particularly in light of volatility on Wall Street and other developments that have shaken confidence in the markets in recent years, senior citizens and those planning for retirement need a convenient, conservative, 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. That is why the AARP has enthusiastically endorsed the coverage increases in this bill.

All of us have heard from community bankers in our districts about the challenges they face in competing for deposits with large money- center banks that are perceived by the market--rightly or wrongly--as being ``too big to fail.'' By strengthening the deposit insurance system, the conference report will help small, neighborhood-based financial institutions across the country, particularly in rural America, continue to play an important role in financing economic development. The deposits that community banks are able to attract through the Federal deposit insurance guarantee are cycled back into local communities in the form of consumer and small business loans, community development projects, and home mortgages. If this source of funding dries up, it will have devastating consequences for the economic vitality of small-town America.

I want to again commend Chairman Oxley for the tremendous leadership he has shown in steering this complex bill through the legislative process. I also want to thank Ranking Member Frank and Congresswoman Hooley for all of their work on this legislation.

Let me also take this opportunity to thank the staff members on the House Financial Services Committee who worked on this legislation. Both Chairman Oxley and Ranking Member Frank are to be commended for assembling such a talented group of staff to work on Deposit Insurance Reform legislation. On the majority side, I would like to thank Bob Foster, Carter McDowell, Peggy Peterson, Tom Duncan, Peter Barrett and Dina Ellis who serves as my designee on the Committee. I want to give a special thanks to Jim Clinger who recently left the Committee to work at the Department of Justice. Without Jim's hard work, dedication and knowledge we would not be here today, and I am grateful for all of his efforts. I would also like to thank Larry Lavender, Warren Tryon and Kim Olive of my staff for their work on this issue. On the minority staff, I would like to thank the following staff members: Jeanne Roslanowick, Jaime Lizarraga, Erika Jeffers, Ken Swab and Matt Schumaker of Congresswoman Hooley's staff.

In closing, Mr. Speaker, let me just say that this legislation will promote the stability and soundness of the banking system. It is also provide assurance to working families, retirees, and others who place their hard-earned savings in U.S. banks, thrifts, and credit unions that their FDIC-insured deposits are safe and secure.

Mr. Speaker, I rise today to pay tribute to a very special member of the Birmingham community, Harry Hancock.

Harry Hancock has provided compassionate and caring service as the District Manager of the Birmingham Downtown Social Security office for many years. For over a quarter century, Harry has given of his time to ensure that his fellow Americans are treated fairly in their attempts to access Social Security benefits. However, Harry's time with the Social Security Administration is but one aspect of a lifetime devoted to public service, which began with Harry's courageous service as a member of the United States Army during the Vietnam War.

Mr. Speaker, I am honored to bring Harry Hancock's career of service to the attention of my colleagues here today. I join with the residents of the entire 6th Congressional District of Alabama in congratulating Harry Hancock as he retires from federal service. I wish Harry and his wife Rene nothing but happiness in the days ahead.

Mr. Speaker, I was unavoidably detained during rollcall 568. Had I been present I would have voted ``yea.''

Mr. Speaker, I rise in support of the rule. Let me say that there have been several newspaper articles lately dealing with these side agreements that we had under NAFTA and China, NTPR, and the two fast tracks. And, in fact, here is one in a

newspaper yesterday after the side agreement that we made on textiles. It said, The nonprofit Public Citizen reviewed past trade votes and found that 89 percent of the side deals affecting trade policy were broken. Never enacted. And, in fact, I got that information, and it is about a 40-page attachment with all the broken side agreements. Very sobering to read. Promises made in the midst of negotiations, then promises broken.

But let me just say this, and I want to be positive here. These are the trade agreements, these are the side agreements that President Bush made, and although there have been almost 89 broken agreements, President Clinton, of all the ones he has made, 3 of the over 80 have been by President Bush. The vast majority of the side agreements that President Bush has made he has kept, and they are on the books today.

So is there a difference between this and past agreements? I think the difference is that we have a President who has honored his side agreements in the past 3 or 4 years and will honor them again. That is his track record. He has made side agreements, and the vast majority of those he has abided by.

As we talk about these side agreements, and I will just say that here it says, ``Democrats opposing CAFTA have warned colleagues about last- minute promises in exchange for votes. `Side letters and so-called side agreements promised are not worth the paper they are written on,' said Sherrod Brown, Democrat of Ohio, Jan Schakowsky, Democrat of Illinois.''

There is a lot of truth to that. There is a record of broken side agreements, but not by President Bush. The Business Week says, ``Signed, sealed and undelivered. The history of broken side agreements.'' That was in the paper about CAFTA.

Again, I will say to you, this President has honored his agreements.

Mr. Speaker, I rise today to recognize an individual whose tireless dedication to service is continuing to impact the lives of countless Alabama schoolchildren. Over his thirty-four year teaching career, Mr. Danny Goggins came to embody the true nature of a selfless public servant.

His career began by teaching history at Helena Elementary, and he rapidly rose through the ranks to become a High School principal at the young age of thirty-one. The positive and lasting impression that he made on countless people is best known in the growing town of Calera, Alabama. For over two decades, Danny Goggins served as the Principal of Calera High School in Shelby County. In fact, it was not a rare occasion for him to have awarded diplomas to the parents of some of Calera High's most recent graduates.

Mr. Goggins' teaching philosophy was based on knowing that many of his students came from hard-working families not unlike the one he was raised in, and he felt that it was his responsibility to see that Calera's children had the same opportunity to learn as students in much wealthier schools. He accomplished this difficult task by continually hiring quality teachers and by maintaining a positive learning environment. Through his efforts, Calera High School consistently produced the most improved standardized testing scores in Shelby County, and also won several state championships in mathematics and boy's basketball along the way.

He was respected by both his students and teachers because they knew him to be a fair and impartial administrator who would address issues with common sense solutions. In fact, many of his former students often see him out and make it a point to say hello or remind him about the time they had to visit his office for one reason or another. In the end however, I believe the real reason people feel compelled to speak is because they remember him for treating them fairly and as an adult, regardless of who they were. It is Mr. Goggins belief that everyone has an equal chance at success if they behave with a positive attitude and demonstrate the character needed to succeed.

Prior to his retirement in the fall of 2004, Mr. Goggins' proudest moment as an educator came when he had the personal satisfaction of awarding a diploma to his youngest son, who graduated with top honors from Calera in 2003.

Today, Danny Goggins continues to educate younger generations by serving as the Scout Master for Boy Scout Troop 548 in Alabaster, a post he has held since 1972. It has been my pleasure to recognize a distinguished Alabamian such as Mr. Goggins, who has asked for nothing in return for service to so many.

Mr. Speaker, I move to suspend the rules and agree to the bill (H.R. 1042) to amend the Federal Credit Union Act to clarify the definition of net worth under certain circumstances for purposes of the prompt corrective action authority of the National Credit Union Administration Board, and for other purposes.

Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 1042.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I rise in strong support of this legislation, H.R. 1042, the Net Worth Amendment for Credit Unions Act, which I and the gentleman from Vermont (Mr. Sanders), the ranking member, introduced along with 16 other cosponsors, evenly divided between Republicans and Democrats, including ranking members of both committees.

It is a so-called technical amendment, but it is also a very important piece of legislation designed to address the potentially harmful and unintended consequences of the recently proposed FASB accounting rules of mergers of financial institutions and, in particular, credit unions.

Because this new accounting rule is expected to become effective early next year, it will impact, going forward, credit union mergers, and it is essential that we have in place H.R. 1042 prior to that time. This legislation has been endorsed by FASB. It has the endorsement of the Federal credit union regulators.

I had testimony which I would like to introduce from NCUA chairman Joanne Johnson who testified before the Committee on Financial Services this past Thursday in strong support of this legislation. In fact, she said without this legislation, it would be hard to, in cases of mergers, provide the safest, most efficient and most beneficial mergers to the benefit of credit union consumers, and she says this legislation is essential for credit union consumers and for their protection.

It has no opposition that I know of. As far as explaining the rule, I am going to submit in its entirety two different pieces on actually what the issue is, what the solution is. The solution is 1042, and then I would like to introduce this two-page summary.

Let me briefly try to very briefly state what this does.

Under the current FASB rule, credit unions are able to use the pooling of interests method of accounting for mergers; however, the new rule will require use of the purchase method.

In doing that, they did not anticipate the current definitions in the National Credit Union Act. Under the new approach that FASB will be instituting, an institution is not permitted to bring over the retained earnings of the acquired institution onto its own balance sheet as retained earnings, but rather as acquired equity. Thus, the surviving institution, the institution which is taking the other institution into its corporate being, would not be able to count the retained earnings of the merged institution in its net worth for purposes of prompt corrective action purposes under the Federal Credit Union Act.

And the Prompt Corrective Action, as those of us on Committee on Financial Services know, is the mechanism to bring credit unions into compliance as far as safety and soundness. This change, therefore, would have the unintended effect of lowering the merged credit union's net worth category classification.

We have taken testimony of Board members of FASB who say this was not their intent; and as I said, they are in favor of the current legislation. So the practical effect of FASB's directive changing the accounting treatment of credit union mergers from the pooling method to the purchase method are perhaps illustrated by a simple hypothetical.

Under the pooling method previously used to account for a combination of two credit unions, if a credit union with $2 million in retained earnings merged with a credit union with $2 million in retained earnings, the surviving credit union would have $4 million in retained earnings, simply, two plus two equals four, which counted as its net worth for purposes of applying the Prompt Corrective Action capital requirements outlined above.

However, under the new purchase method of accounting mandated by the new FASB rule, if a credit union with $2 million in retained earnings merges with another credit union with $2 million in retained earnings, the surviving credit union would only have $2 million in retained earnings, not a result that makes any sense, and our legislation simply preserves the two plus two equals four.

As I say, Madam Speaker, the legislation simply amends the Federal Credit Union Act's definition of net worth to include retained earnings of both credit unions that merge in the net worth of the credit union that continues after the transaction. Failure to make this statutory change will create major disincentives to otherwise merged credit unions.

We took testimony last week from George Reynolds, Senior Deputy Commissioner of the Georgia Department of Banking and Finance, and I would

like to include his statement, but what he and others have pointed out to the committee is that oftentimes, whether it be a bank or a thrift or a credit union, if you have one credit union that is sound and one that may be in need of corrective action, one of the alternatives is to merge the weaker institution into a stronger institution for the protection of the members of that credit union.

The NCUA, and also the different State commissioners of banking and bank supervisors, and credit union supervisors had not been able to do this because of the anticipation of the FASB rules. It has resulted in a lot of hesitancy in merging these institutions and, in many cases, is slowing corrective action because of this. So failure to make the statutory change will, as I say, create major disincentives.

A credit union seeking to merge with another union institution would be faced, in many situations, with a marked decline in its capital for PCA purposes once the merger went through, giving rise to a supervisory intervention by the NCUA designed to limit its growth and restore its now depleted capital to acceptable levels when actually there would have been no depletion of capital at all.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I yield myself such time as I may consume, and let me simply conclude by saying that when the NCUA seeks a healthy credit union, or when there is a troubled credit union and the NCUA seeks a healthy credit union to rescue it through merger, the pooling of potential White Knights is presently limited because of the present interpretation. And as they have said, ``They are limited by the prospect of a significant postmerger reduction in capital for the acquiring credit union under the present interpretation, if the FASB rule goes forward without this legislation.'' It goes on to say, NCUA, that ``this will inevitably make NCUA-assisted mergers more difficult to execute, resulting in more credit union failures and a higher cost to the National Credit Union's Share Insurance Fund, which insures the deposits to credit union members.''

So I conclude by saying that for this reason, among others, not only the NCUA but also the National Association of Federal Credit Unions, NAFCU, and the Credit Union National Association, CUNA, strongly support this legislation to ensure an accurate depiction of net worth in credit union mergers and to avoid creating unintended obstacles to mergers that would otherwise benefit credit union members.

In addition, FASB has stated that, while it does not take positions on public policy initiatives unless they could impair the mission and independence of FASB, it believes H.R. 1042, and I quote, ``does not propose to establish or change general purpose standards of financial accounting and reporting and, therefore, has no impact on the standard- setting activities of FASB.''

I would like to again thank, and I will name as I close, the cosponsors of this legislation: Introduced by the gentleman from Vermont (Mr. Sanders), myself, the gentlewoman from Florida (Ms. Ginny Brown-Waite), the gentleman from Florida (Mr. Feeney), the gentlewoman from Oregon (Ms. Hooley), the gentlewoman from New York (Mrs. Kelly), the gentlewoman from New York (Mrs. Maloney), the gentleman from Kansas (Mr. Moore), the gentleman from Texas (Mr. Paul), the gentleman from California (Mr. Royce), the gentleman from California (Mr. Sherman), the gentleman from Michigan (Mr. Camp), the gentleman from Illinois (Mr. Gutierrez), the gentleman from Pennsylvania (Mr. Kanjorski), the gentleman from Ohio (Mr. LaTourette), the gentlewoman from

New York (Mrs. McCarthy), the gentleman from Ohio (Mr. Ney), the gentleman from Arizona (Mr. Renzi), and as I said, the main cosponsor, ranking member of the committee, the gentleman from Vermont (Mr. Sanders).

So that, I think, illustrates not only what the gentleman from California (Mr. Sherman) said, that there is no opposition to this legislation, but also the strong bipartisan support that this has across this Congress.

Madam Speaker, I submit for the Record herewith the various documents referred to throughout my remarks:

Mr. Speaker, I recently had the opportunity to meet with the senior operating officials of nearly all of the Nation's freight railroads, large and small. What I heard from them, each of them, was their continued commitment to the safe and secure transportation of all goods tendered to them in interstate commerce.

I also heard their concern about being caught in the middle of a political crossfire over the issue of transporting certain hazardous materials through major cities located along their rail lines. They find themselves in this untenable position because of a legal duty. The common carrier obligation requires them to accept all legal goods for transport. Despite this legal duty and with no regard for the vital role some of these commodities play in protecting the public health and welfare, there are communities like the District of Columbia that are using every resource at their disposal to prevent railroads from going through their towns with these goods; in particular, hazardous materials.

Railroads clearly are the safest means of transporting hazardous materials, with a 99.996 percent safety record. These materials include chlorine to clean your water and propane to heat your homes. The transportation of the most hazardous chemicals represent three-tenths of one percent of the railroads' annual revenue, but well over 50 percent of their insurance premiums. But the railroads are not allowed to get out of the business. And if they did, the transportation of these goods would be much less safe.

That is why I urge my colleagues to oppose local initiatives such as those enacted by the District of Columbia and now being contemplated by other cities, like Cleveland, Philadelphia, Pittsburgh, Baltimore and Atlanta, in trying to prohibit the routing of these goods through their cities. The Constitution vests the Federal Government with the responsibility for regulating interstate commerce (Article I, Section 8). Through (among others) the Federal Railroad Safety Act, the Hazardous Materials Transportation Act, and ICCTA, Congress has given Federal agencies the responsibility to oversee the transportation of hazardous materials in interstate commerce. Further, in the case of DC, the Department of Homeland Security is actively analyzing rail security matters, particularly hazmat transportation (e.g., through the DC Rail Corridor Project's vulnerability assessment, and an analysis of security of hazmats that pose a toxic inhalation hazard).

What the DC Council has done, and what other cities are threatening to do, not only usurps the responsibilities and actions of the Federal Government, but also actually increases the risks of hazmat transportation, by increasing transit time and distance due to rerouting, and by shifting the risk involved with hazmat transport to other areas of the country. Rerouting trains carrying hazardous materials will cause delays, idling of hazmat containers, and switching of containers to other trains. Each handling of hazmat containers raises the risk level. In sum, the re-routing potentially threatens national security, disrupts interstate commerce, and jeopardizes public health.

We should be constantly vigilant about our national security. Thus, we cannot let the misguided efforts of myopic municipalities compromise our Nation's health, economy, safety and security through punitive and ill-advised legislation, such as that passed by the District of Columbia.

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. Speaker, first of all, I would like to commend the gentleman from California, who must feel like it is Ground Hog Day because he has actually been out here two prior times on this bill. In the 107th Congress, it passed by voice vote. In the 108th Congress, the gentleman from California (Mr. Royce) was here, and his bill passed 424 to nothing, and yet it died in the other body, not because there was opposition, but it simply got caught up in the paperwork. I want to commend him on his persistence.

And he is doing this because without this bill, when a mortgage is transferred or assigned or bought, there are always a few people who are not only in default, but even those who are just simply delinquent, behind on a payment, and it misleads those people into believing that they are receiving a call from a debt collector who has to make Miranda-like warnings, and when they do that, they have a tendency not to talk to them.

And, in fact, and I will read a letter from some of our Democratic colleagues who are also cosponsoring this bill, in fact, the very thing that we would want these people to do is talk to their new mortgage servicer and establish a relationship to work out of that default and to work out of that delinquency, because there are actually rules that these servicers are supposed to make every attempt to establish such a relationship; yet the Fair Debt Collection Practices Act, it was not meant to be. This was an unforeseen technicality in the interpretation.

So the FTC came to the Congress and enlisted the help of the gentleman from California (Mr. Royce) to remedy this. Let me read the letter because I think it says it very well. It was drafted by the gentleman from Pennsylvania (Mr. Kanjorski), who has worked tirelessly on this bill for the last two Congresses. It has a signature of the gentlewoman from New York (Mrs. Maloney), the gentleman from California (Mr. Sherman), the gentlewoman from Ohio (Mrs. Jones), and the gentleman from New York (Mr. Meeks). These are all Democrats and all members of the Committee on Financial Services.

They said this about the present state of the law and the need for the gentleman from California's (Mr. Royce) legislation: One, the present Miranda notice misleads borrowers about the nature of the new servicer's relationship. The most important thing a delinquent mortgage borrower can do is call his or her servicer to work out options. The harshly worded warnings actually discourage borrowers from doing just that, from contacting the new servicer out of fear that the company is simply another debt collector. Two, the notice protects borrowers from providing information that the mortgage servicer already has in its possession. Mortgage servicers already possess detailed information about the borrower in the loan files. Third, the notice hurts customer relationships for the remaining term of the mortgage. The mini-Miranda warning is required in all subsequent contacts with the borrower even after the customer has brought their loan current and maintained them for years. In other words, under the present state of the law, these customers are treated for years to come as if they are delinquent or in default, and that is an insulting thing when they have brought their mortgages up to speed.

In closing, I will summarize the entire bill this way: In today's market, Mr. Speaker, mortgages are transferred, they are assigned, they are bought. And when that happens, those customers have a right to know whether they are dealing with a debt collector or they are dealing with their mortgage service provider, and that is a big difference. And this law will actually allow that to happen.

So I commend the gentleman from Pennsylvania (Mr. Kanjorski), and I commend the gentleman from California (Mr. Royce) particularly for his diligence in this matter, and I would ask the Members of this body to do what the last two Congresses have done, and that is unanimously approve this legislation, which is truly bipartisan and ought to be a model for this Congress as it works to do what is best for our citizens without regard to political party.

Mr. Speaker, earlier today, I, along with 15 of my colleagues introduced H.R. 1042, the Net Worth Amendment For Credit Unions Act. This amendment to Section 216 of the Federal Credit Union Act (12 USC 1790d(0)(2)(A)) redefines the term ``net worth'' for Prompt Corrective Action (PCA) purposes for credit unions. This legislation is needed in order to avoid an unintended consequence caused by an accounting change that the Financial Accounting Standards Board (``FASB'') is about to promulgate, requiring credit unions to utilize the ``purchase method'' of accounting rather than the ``pooling of interests'' method of accounting to account for credit union mergers.

This amendment does not affect accounting practices; credit unions will be required to use the ``purchase method'' of accounting for mergers in order to receive a clean audit. It should be noted that FASB itself has stated that it sees no problem with the amendment from an accounting perspective. The legislation does not grant credit unions that currently lack the authority to offer alternative capital accounts the authority to do so, nor does it confer upon the National Credit Union Administration (NCUA) the regulatory authority or discretion to authorize such accounts now or in the future. This amendment is intended to address a narrow and technical accounting issue and in the process simply maintain the status quo so that, in the case of merging credit unions, 2 + 2 can continue to equal 4.

Currently, under the ``pooling of interests'' method of accounting, if a credit union with $2 million in retained earnings merges with another credit union with $2 million in retained earnings, the