Vento's gift

Northwestern Financial Review, Oct 15-Oct 31, 2005 by Bengtson, Tom

Bruce Vente died on Oct. 10, 2000, three days after his 60th birthday. Vento was a United States Congressman representing St. Paul and the rest of Minnesota's fourth district from 1977 to 2000. He served on the Banking and Financial Services Committee and for a while was the ranking Democrat on the subcommittee on financial institutions and consumer credit. As an advocate for credit unions, Vento often frustrated bankers who came to him with concerns about over-regulation and unfair competition.

The fifth anniversary of his death corresponds with movement in Congress on legislation to reform the deposit insurance system. Sen. Richard Shelby (R-AIa. I, who long has opposed increases in deposit insurance coverage, has now said he would consider legislation that indexes the coverage level, and increases the coverage of retirement accounts to $250,000. Since the hold up on this legislation has always been in the Senate, Sen. Shelby's change of heart may be all it takes to make deposit insurance reform reality.

If the law is not changed soon, it is likely that banks will be paying premiums for their insurance once again. The coverage ratio of the Bank Insurance Fund currently sits at 1.26 percent; the law requires a coverage level of 1.25 percent. With insurable deposits growing at a rate of about 7.5 percent annually; the fund will drop below its mandated coverage level, thereby triggering across the board premiums. It would be grossly unfair to charge all banks because some have paid into the fund for decades while others have never paid into it at all. New banks that are bringing additional deposits under the insurance umbrella should be required to pay first, with older banks paying in only if still necessary.

Vento comes to mind now because he teamed up with Nebraska Congressman Doug Bereuter in 1995 to get the amendment that made it possible for deposit insurance premiums to go to zero for well-run banks. Bereuter is a Republican and it took this bi-pnrti.san pair to convince Congress to accept zero premiums as a trade off for the banking industry, which was being saddled with interest payments on the FICO bonds. The law was passed with the Vento/Bereuter amendment and since 1996, the banking industry has saved more than $12 billion in premium payments. About 92 percent of banks have been excused from paying into the deposit insurance system for nearly a decade.

Most Minnesota bankers don't really remember Vento as a friend to the banking industry but, in fact, his participation in the deposit insurance premium issue a decade ago has saved the industry more money than perhaps any other legislative initiative in the 20th century.

By Tom Bengtson, Publisher