WASHINGTON Defying predictions that it would be dead on arrival in Congress, deposit insurance reform legislation continues to pick up steam in both chambers.
Sen. Tim Johnson announced Friday that Senate Banking Committee Chairman Paul Sarbanes has agreed to hold a hearing on his bill next month, and sources said that the full House Financial Services Committee is expected to vote on a similar bill about the same time.
Some critical questions remain, including where the so-far-silent Sen. Sarbanes stands and whether the Maryland Democrat will want to move a bill this year. But industry representatives and key Senate lawmakers welcomed the hearing announcement and reiterated their support of the Johnson bill.
Tim has demonstrated strong leadership and extensive knowledge of this issue and has fostered legislation that would address many serious concerns that have been raised by South Dakotans about the security of their retirement savings and the strength of the deposit insurance system, Senate Majority Leader Thomas Daschle said in a prepared statement.
Sen. Sarbanes said that he was holding the hearing at Sen. Johnsons behest but offered no clues about whether he supports the bill. The hearing is expected to be held in mid-to-late April and will primarily focus on the views of federal regulators, including officials from the Federal Reserve Board, the Treasury Department, and the Federal Deposit Insurance Corp.
Community bank representatives lobbying for the bill said Sen. Sarbanes views would be pivotal.
The key question is, what sort of a bill would Chairman Sarbanes allow to be marked up? said Kenneth Guenther, the president of the Independent Community Bankers of America.
Industry representatives said that Sen. Sarbanes is likely to have concerns about one of the bills most controversial provisions raising the general deposit insurance limit by 30%, to $130,000 per account. They said the increase is likely to pass as part of the House bill but faces growing problems in the Senate, including the outspoken opposition of Sen. Phil Gramm.
Sen. Sarbanes is going to be very important on these issues, said Edward L. Yingling, deputy executive vice president with the American Bankers Association. The limit increase already has great difficulties because of the strong opposition of Sen. Gramm But if Chairman Sarbanes ends up opposing it, I think it will be real hard to see a bill pass with the general limit increase in the Senate.
Mr. Yingling said that the chances were better for provisions that would index the general limit in the future or that would increase the limit for individual retirement accounts to $250,000.
I think indexing would have a much stronger shot, he said. I think IRAs have the second-strongest shot.
Observers said that Sen. Sarbanes has felt rising pressure to do something on reform, as the House continues to move forward with its bill, and Sen. Daschle has publicly endorsed advancing the Johnson bill this year. The once-obscure topic has taken on new importance because of Sen. Johnsons reelection campaign a key race for Democrats hoping to keep control of the Senate.
Reforms fate is more certain in the other chamber, where the House Financial Services Committee is expected to vote on the bill at the end of April. Some sources said that leaders hope to move it for a full vote before Memorial Day.
Despite opposition from some large banks and early predictions that Congress would not want to address the issue this year, deposit insurance reform has repeatedly proved its resilience.
Last April, when Donna Tanoue, who was then the FDIC chairman, first proposed reforms last April, many said that no lawmakers would be interested. Then, after Rep. Spencer Bachus championed the issue in the House, many claimed that Senate lawmakers would not be interested.
Even when Sen. Johnson said he was crafting a comprehensive bill, some skeptics assumed that the Bush administration or the newly sworn-in FDIC chairman, Don Powell, would seek to squash the effort. But Mr. Powell has become one of reforms most ardent supporters, and the issue has continued to build momentum on all fronts.
Most observers said the hearing notice was yet another encouraging sign that legislation could be passed soon. We do have a good chance for passing a bill this year, said Diane Casey, the president of Americas Community Bankers.
