Passed
405 Yea0 Nay25 Not voting2/3 required
HR-3234-119
Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
Sponsored by Tom Emmer (R-MN)
What it does
This bill would increase the amount of reciprocal deposits that federally insured banks and credit unions may accept, using a tiered system tied to each institution's total liabilities. Reciprocal deposits are large deposits split across a network of institutions so that each portion falls within FDIC insurance limits. The bill would also broaden eligibility by allowing institutions with a CAMELS rating of 1, 2, or 3 — rather than only those rated 1 or 2 (outstanding or good) — to participate in reciprocal deposit networks.
Who benefits
Smaller and mid-sized community banks and credit unions, particularly those currently rated a CAMELS 3, who would gain access to a larger pool of insured deposits. Depositors with large balances — including small businesses, nonprofits, municipalities, and individuals with significant savings — who would have more options to keep funds fully insured without spreading them across many institutions manually. Local economies where community banks operate, as more insured deposits may support local lending. Reciprocal deposit network operators (e.g., IntraFi/CDARS) who would see expanded business volume.
Who is hurt
Larger national and regional banks that compete with community institutions for large depositors, as the bill may shift deposit flows toward smaller institutions. The FDIC, which could face modestly increased insurance exposure if more deposits at marginally weaker institutions (CAMELS 3) are brought into reciprocal networks. Taxpayers who backstop the FDIC insurance fund if bank failures increase. Depositors who rely on CAMELS ratings as a proxy for institutional health may face less transparency if the distinction between ratings 2 and 3 is blurred in practice.
Supporters argue
Supporters argue that the current caps on reciprocal deposits put community banks at a structural disadvantage, pushing large depositors toward megabanks that are perceived as "too big to fail." They contend that expanding reciprocal deposit access keeps capital circulating in local economies, supports small business lending, and strengthens financial stability by distributing deposits more broadly — a lesson reinforced by the 2023 failures of Silicon Valley Bank and Signature Bank, where uninsured deposit concentration accelerated bank runs.
Opponents argue
Opponents argue that allowing CAMELS 3-rated institutions — those with supervisory concerns flagged by regulators — to access larger pools of insured deposits increases moral hazard and exposes the FDIC insurance fund to greater risk. They contend that CAMELS 3 ratings exist precisely to signal elevated risk, and that expanding deposit access to these institutions could mask underlying weaknesses, delay corrective action, and ultimately shift losses onto the broader banking system and taxpayers if those institutions fail.
Constitutional context
This bill operates squarely within Congress's Commerce Clause authority (Art. I, §8, cl. 3) to regulate banking and financial institutions engaged in interstate commerce — an area with well-established federal jurisdiction since McCulloch v. Maryland (1819) and affirmed broadly under Wickard v. Filburn (1942). No significant constitutional tension is apparent, as the bill modifies existing statutory thresholds rather than creating new agency mandates subject to major questions doctrine scrutiny under West Virginia v. EPA (2022).
Checks and balances
Congress sets the new deposit caps and eligibility thresholds; the FDIC and banking regulators retain supervisory authority over participating institutions and continue to assign CAMELS ratings that determine eligibility.
Historical precedent
The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 previously modified reciprocal deposit rules, establishing the current framework this bill would amend — including the brokered deposit exemption and the CAMELS 1/2 eligibility standard.
Passed