Keeping Deposits Local Act

Floor Speech

Mr. Speaker, I rise in support of H.R. 3234, the Keeping Deposits Local Act, sponsored by Representative Emmer and our former Diversity and Inclusion Subcommittee chairwoman, Mrs. Joyce Beatty.

I appreciate the sponsors' bipartisan work on this bill. In 2018, I worked with them to establish the initial framework for the so-called reciprocal deposits.

When a business comes to a bank and deposits, say, $1 million to cover payroll and other expenses, the FDIC only ensures up to $250,000.

To help these customers receive deposit insurance on all of their deposits, banks can send a deposit over the $250,000 cap to another bank in exchange for a separate deposit from the receiving bank, which is known as a reciprocal deposit.

The product has become popular, especially after the dramatic failures of Silicon Valley Bank and two other regional banks in 2023 because businesses wanted to make sure they don't have any uninsured deposits. This bill would increase the limits we set back in 2018 based on a bank's size.

Now, megabanks don't need our help because they are, unfortunately, still perceived as too big to fail. In fact, a number of small businesses moved their deposits to megabanks after the 2023 regional bank failures.

I appreciate that the chairman and the sponsors worked with me to address my concerns that an earlier version of this bill would have been a windfall for megabanks. It has been revised to ensure the bill prioritizes support for smaller community and midsize banks like MDIs and CDFI banks.

There is more that we should do than just this bill. Since 2007, there have been at least 37 bank failures where emergency tools were not used to protect depositors because the bank was too small. As a result, small business customers with more than $250,000 lost money through no fault of their own when their bank failed. That is not fair.

After convening a roundtable with industry experts and consulting extensively with our former chairman, Mr. McHenry, I introduced my bill, H.R. 4551, the Employee Paycheck and Small Business Protection Act.

Under my bill, the government would take a data-driven approach, conduct an extensive analysis, and then propose an increase to the $250,000 deposit insurance threshold for business payment accounts. There would be multiple opportunities for stakeholders to weigh in as the proposal gets developed, with extensive congressional oversight.

Furthermore, my bill would allow regulators to do an emergency Transaction Account Guarantee, or TAG, program for up to 9 months, just like the FDIC did in the 2008 crisis, to protect depositors from harm in a major crisis.

My bill would help protect all small businesses and their employees while helping community banks and credit unions better serve their communities. This concept has broad support, including several House Republicans recently introducing their own bills, along with a bipartisan effort in the Senate. Moreover, Vice President Vance and Treasury Secretary Bessent are strongly supportive of these efforts.

In a letter from when we marked up this bill we are considering today, the Independent Community Bankers of America wrote: ``ICBA looks forward to working with the committee on the broader, comprehensive deposit insurance coverage level debate and ensuring more small businesses can have important protection for their deposits.''

We should do more, Mr. Speaker, but in the meantime, I urge my colleagues to support H.R. 3234, which will complement broader deposit insurance reform efforts.
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Ms. WATERS. Mr. Speaker, I have no further speakers, and I yield myself the balance of my time to close.

Mr. Speaker, this is a good bill that will help community banks. The bill is supported by the National Bankers Association and the Community Development Bankers Association, and I am very pleased to support it.

As we have discussed, there is more Congress can do to update the deposit insurance reform framework to ensure it is working for community banks, for midsize banks, for MDIs and CDFIs, for rural banks, and all of their customers, especially the small businesses, nonprofits, churches, and other organizations and their workers.

Let's pass comprehensive deposit insurance reform into law without further delay. In the meantime, I, again, urge my colleagues to support this bill, and I yield back the balance of my time.

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