HR-6547-119
Placed on the Union Calendar, Calendar No. 405.
Sponsored by Mike Flood (R-NE)
What it does
This bill would allow the FDIC to bypass its standard requirement to use the cheapest available method when resolving a failed insured bank, if the cheapest option would involve a global systemically important bank (G-SIB). The FDIC could instead choose a more expensive resolution method, provided the cost difference stays within a limit set by FDIC rule, the alternative is the least costly option that does not involve a G-SIB, and any buyer pays an assessment to the FDIC. The FDIC would also be required to issue a public report analyzing the economic impact of any cost difference whenever it uses this exception.
Who benefits
Regional and community banks that compete with G-SIBs, who would gain a better chance of acquiring failed banks' assets and customer relationships. Non-G-SIB financial institutions broadly, including mid-size banks and credit unions, who could expand through FDIC-assisted acquisitions. Customers of failed banks who may prefer their accounts move to a non-G-SIB. Policymakers and regulators concerned about banking sector concentration. Smaller communities where a regional bank acquirer may be more locally engaged than a G-SIB.
Who is hurt
The Deposit Insurance Fund (DIF) and, indirectly, all FDIC-insured institutions that pay premiums into it — since the exception permits costlier resolutions, the fund could absorb higher losses. G-SIBs (the eight largest U.S. banks) would be explicitly excluded from certain acquisition opportunities. Depositors and creditors of failed banks could face marginally greater uncertainty if a non-G-SIB acquirer is less financially robust. Taxpayers could be indirectly affected if DIF losses eventually require federal backstop support.
Supporters argue
Supporters argue that the current least-cost rule systematically advantages G-SIBs in FDIC-assisted acquisitions, accelerating banking consolidation and concentrating systemic risk in a handful of institutions. They contend that the 2023 failures of Silicon Valley Bank and Signature Bank — both resolved through G-SIB-adjacent transactions — illustrated how crisis conditions can further entrench the largest banks, and that a modest, rule-bounded cost exception is a reasonable price to pay for preserving a more competitive and resilient banking system.
Opponents argue
Opponents argue that the least-cost requirement exists specifically to protect the Deposit Insurance Fund and the insured institutions that fund it, and that deliberately choosing a more expensive resolution method transfers real costs onto the broader banking system. They contend that excluding the most financially capable acquirers — G-SIBs — may result in failed bank assets going to less stable buyers, potentially increasing the risk of secondary failures and undermining the very financial stability the bill aims to protect.
Constitutional context
Congress has broad authority to regulate the banking system under the Commerce Clause (Art. I, §8, cl. 3), and the FDIC's statutory framework has long been upheld under that authority. The bill delegates rulemaking to the FDIC to set the maximum permissible cost difference, which could face scrutiny under the major questions doctrine (West Virginia v. EPA, 2022) and post-Loper Bright independent judicial review (2024) if the FDIC's implementing rules are challenged as exceeding the bill's authorization.
Checks and balances
The FDIC (executive branch) gains new discretionary authority to choose costlier resolutions; Congress checks this through the bill's criteria and cost-cap requirement, and the FDIC's mandatory public reporting requirement provides transparency accountability.
Historical precedent
The systemic risk exception under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) similarly allowed the FDIC to deviate from least-cost resolution when systemic financial stability was at risk, and was invoked during the 2008 financial crisis and the 2023 Silicon Valley Bank failure.