H.R. 4894 would repeal title II of the Dodd-Frank Wall Street Reform Act of 2010. That title provides the Federal Deposit Insurance Corporation (FDIC) with the authority and funding through the Orderly Liquidation Fund (OLF) to liquidate large, systemically important financial firms (including banks and nonbank firms) that become or are in danger of becoming insolvent, subject to certain conditions.
Enacting H.R. 4894 would eliminate the FDIC’s authority to use the OLF. Under current law CBO estimates there is a small chance that the OLF will be used over the next 10 years to resolve very costly financial failures of large firms. CBO estimates that any spending by the OLF will eventually be offset by fees imposed on a portion of the financial industry. However, because of the anticipated lag between OLF expenditures and fee collections, CBO estimates that the fund will operate at a net cost over the 2017-2026 period.
CBO estimates that ending the FDIC’s authority to use the OLF would reduce the deficit by $15.2 billion over the 2017-2026 period, reflecting an estimated reduction in both direct spending and revenues of $20.3 billion and $5.1 billion, respectively. That estimated reduction in the deficit includes an estimated increase in net costs to the Deposit Insurance Fund (DIF) of $1 billion over the same period to resolve additional failures of federally insured depositary institutions.
Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. CBO estimates that implementing H.R. 4894 would have no significant effect on spending subject to appropriation.
CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits by more than $5 billion in one or more of the four consecutive 10-year periods beginning in 2027.
H.R. 4894 contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would not affect the budgets of state, local, or tribal governments.
CBO expects that the FDIC would raise assessments on insured deposits to cover the cost of increased losses to the DIF. Doing so would increase the cost of an existing mandate on institutions responsible for paying those assessments. Some of those institutions may also experience savings as the bill would eliminate assessments associated with the OLF. CBO estimates that the incremental cost of the mandate would fall well below the annual threshold established in UMRA for private-sector mandates ($154 million in 2016, adjusted for inflation).
