Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, introduced H.R. 10542, the Employee Paycheck and Small Business Protection Act. This bill proposes to update the deposit insurance framework for business payment accounts to ensure small businesses can bank with community financial institutions and continue to pay their employees, even if their bank or credit union unexpectedly fails. This bill also enhances emergency tools for the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) to use in future crises.

The Employee Paycheck and Small Business Protection Act follows the sudden failure of Silicon Valley Bank and two other regional banks last year, where startups and other small businesses were worried they wouldn’t be able to pay their employees the following week. Regulators used emergency tools that eventually protected these depositors, but many other businesses moved their money to the biggest banks. Since 2007, there have been 37 bank failures, including many small banks like First National Bank of Lindsay which recently failed in Oklahoma, where emergency tools were not used to protect depositors and small businesses were harmed, losing money through no fault of their own. This bill will help protect all small businesses and their employees while helping community banks and credit unions better serve local businesses in their communities.

“As we saw with the collapse of Silicon Valley Bank, when banks quickly fail, small businesses are left scrambling to figure out how they’re going to pay their hardworking employees if they lose any money, while other businesses quickly transfer their funds from community banks to megabanks. Or worse, they lose funds through no fault of their own because their community bank fails and is too small to protect with emergency tools, as was the case with First National Bank of Lindsay. This is not fair to small businesses or their workers, and this threatens to undermine community banks and credit unions while even more power is concentrated in our megabanks,” said Ranking Member Waters. “The simple truth is small businesses need reliable banking services, and they should be able to work with local financial institutions in their community. My bill, the Employee Paycheck and Small Business Protection Act will expand deposit insurance coverage for business accounts, so entrepreneurs are protected if their depository institution fails. I look forward to working with my Republican and Democratic colleagues on the House Financial Services Committee to address this urgent, bipartisan issue for our community banks, credit unions, and the small businesses they are well positioned to serve.”

Specifically, the Employee Paycheck and Small Business Protection Act will:

• Authorize the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) to collect data, conduct analysis, and issue a proposed rule within 18 months to increase the deposit and share insurance threshold for business payment accounts from $250,000 to a higher dollar threshold. The agencies would jointly determine this higher threshold, along with which type of business transaction accounts would be covered that would promote safety and soundness, financial stability, depository institution competition, and the ability for businesses to make timely payments, including payroll and vendor payments.
  
  
• Require FDIC and NCUA Chairs to testify on their findings and proposed rule. The agencies would then be required to implement the expanded insurance coverage within 30 months, and if they don’t by then, they would be required to testify before Congress again. GAO would also be required to do a study and issue any administrative or legislative recommendations.
  
  
• Enhance regulators emergency tools, allowing the FDIC and NCUA to establish a temporary Transaction Account Guarantee (TAG) program for six months, which could be extended for a total of nine months, provided that it is authorized by the Secretary of the Treasury, with the support of at least two-thirds of the FDIC and Federal Reserve Boards. These TAG programs would temporarily guarantee all deposits in transaction accounts in a future crisis, and any extension beyond nine months would require Congressional approval.
  

On March 10, 2023, Ranking Member Waters issued a statement following the closure of Silicon Valley Bank.

On March 12, 2023, Ranking Member Waters and Senate Banking Committee Chairman Sherrod Brown issued a statement commending Federal regulators for their actions to protect the banking system.

On March 17, 2023, Ranking Member Waters issued a statement announcing a letter to regulators, urging them to finish rules and use existing authorities to hold executives of failing banks accountable, while also announcing plans to introduce a bill to strengthen those executive accountability authorities.

On March 17, 2023, Ranking Member Waters and Chair McHenry sent a letter to the Government Accountability Office requesting an independent investigation into the failures of Silicon Valley Bank and Signature Bank, and announced the first in a series of hearings on the matter.

On March 18, 2023, Ranking Member Waters wrote a letter to the FDIC, encouraging them to ensure California communities remain supported through SVB’s housing and community reinvestment plan.

On March 31, 2023, Ranking Member Waters issued a statement applauding President Biden’s call on regulators to reverse Trump-led deregulatory banking measures that contributed to the regional bank failures.

On April 21, 2023, Ranking Member Waters issued a statement applauding the Financial Stability Oversight Council’s (FSOC) move to reverse harmful Trump-era guidance and urged them to take further actions to promote financial stability.

On May 1, 2023, Ranking Member Waters issued a statement regarding the failure of First Republic.

On May 4, 2023, Ranking Member Waters sent a letter to Chair McHenry encouraging him to immediately schedule a hearing with CEOs of the failed regional banks.

On May 17, 2023, Ranking Member Waters wrote a letter to First Citizens Bank, encouraging the bank to honor SVB’s community benefits plan and support housing for vulnerable California communities.

On June 21, 2023, Ranking Member Waters announced a series of bills that were introduced by Democratic Members of the House Financial Services Committee in response to SVB and other regional bank failures.

On June 23, 2023, Ranking Member Waters convened a roundtable with stakeholders and experts to discuss deposit insurance reform options, including those outlined by the FDIC in a report.

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