Financial Bailout Package

Rep. Grace F. Napolitano voted against the final bailout package (HR1424) because it lacked key provisions to help families keep their homes. She was also concerned about taxpayers on Main Street being asked to foot the bill to rescue Wall Street. The final vote was 263-171 on Friday, October 3.

President Bush signed the legislation that same day.

The bill gives the Treasury Department the ability to spend $700 billion to shore up our nation's financial system, which is in the midst of a global crisis due to the risky behavior of Wall Street.

Republican opposition kept out a provision to allow bankruptcy judges to set monthly mortgage payments at affordable levels so that families forced into bankruptcy by the financial crisis, unemployment or unexpected medical expenses can stay in their homes.

" The bankruptcy provision would have made this a much better deal for middle class families," said Rep. Napolitano.

Deposit Insurance Increase Helps Main Street America

• The legislation expands coverage for deposits in federally insured banks, thrifts and credit unions from $100,000 per account to $250,000, effective immediately and through the end of 2009.

Promoting Increased Confidence – Confidence in the banking system has been shaken by the recent credit market crisis. These problems are compounded when depositors, concerned for the safety of their money, withdraw money quickly from smaller institutions or those perceived as weak. This kind of “silent run” causes more stress on the institution and can prompt the need to close a bank that could otherwise have remained open. The insurance increase helps here in several ways:

• Protecting Individual Depositors – The FDIC and the credit union insurance fund always covers deposits up to the insured amount and often arrange to cover amounts over that limit. Expanding coverage, combined with new FDIC rules regarding revocable trust accounts, provides individuals and businesses with incentives to keep their funds in banks, thrifts and credit unions.

• Protecting Small Businesses – The expansion is particularly important for small businesses. With less credit available, small businesses rely on their bank deposits to meet payroll and other critical needs. The increase will ensure that they have access to their working capital at all times and discourage them from moving funds due to concerns about a particular institution.

According to the Federal Reserve, raising the limit will have a major impact on businesses with less than ten employees (which make up 80% of small businesses). 75% fewer businesses will have uninsured deposits and the total uninsured deposits will be reduced by two thirds.

• Small Bank Parity – The insurance increase gives small banks greater parity with the temporary money market fund insurance recently implemented by the Treasury Department. This will help keep deposits in banks and promote their stability.

• Protecting Taxpayers – If there are losses to the insurance fund during the period, existing statutory mechanisms ensure that banks pay for such losses through increased premium assessments in the future and that taxpayers will be protected.

Related Documents:

October 3, 2008- Napolitano's Statement on the Final Bailout Package

November 17, 2008- House Democratic Leaders Meet with Paulson and Bernanke