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Senate Deposit Insurance Hearing

September 16, 2025

Last week, the Senate Banking Committee held a hearing to consider proposals to expand and reform bank deposit backstops, including for business accounts. The Sept. 10 hearing entitled Evaluating Perspectives on Deposit Insurance Reform was broadly bipartisan on the need for modernization, though divisions remained over scope and scale.

• The bank failures, along with First Republican, had ripple effects across regional and small banks deposits. 
• Amid higher interest rates and a downturn in the business cycle, commercial real estate lending became a frequent talking point among policymakers when examining the health of regional and small banks. 

What they’re saying: Senators debated reforms to deposit insurance with particular focus on a bipartisan proposal from Sens. Bill Hagerty (R-TN) and Angela Alsobrooks (D-MD) to expand coverage for business checking accounts held by small businesses at community and regional banks. 

• Republicans emphasized that any changes must be narrowly tailored and indexed to inflation, while Democrats called for broader protections to level the playing field with large banks. 
• Both parties agreed community and regional banks face unique pressures, but differed on whether targeted expansion would curb or accelerate deposit flight. 
• Members raised concerns about moral hazard and systemic risk, while also pointing to liquidity backstops, reciprocal deposits, and CDFIs as complementary tools.

Hagerty–Alsobrooks Proposal

• Sens. Hagerty and Alsobrooks highlighted their bipartisan bill to insure business checking accounts, particularly payroll accounts, up to $20 million at small banks. Senators examined whether the $250,000 deposit insurance cap remains appropriate, with discussion centered on targeted coverage for payroll and business operating accounts. 
• Committee Chair Tim Scott (R-SC) argued that any reform should be indexed to inflation and narrowly designed to deter destabilizing runs without creating blanket guarantees, while warning of the cost to smaller banks. 
• Ranking Member Elizabeth Warren (D-MA) strongly supported expanding coverage for small-business transaction accounts, stressing that local firms should not be left exposed while venture-backed corporations like Silicon Valley Bank were made whole. 
• Witnesses Bob Harrison, CEO, First Hawaiian Bank and Peter Rice, CEO, Hanscom Federal Credit Union, endorsed a $20 million payroll account cap as a workable threshold. Nicholas J. Podsiadly, a partner at Jones Day, cautioned that such a level may be excessive. 
• Overall, members agreed depositor confidence is essential, though Republicans leaned toward targeted, indexed reforms while Democrats pressed for broader coverage to protect communities and workers.

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Section 899 Again? Officials Float Return of “Revenge Tax” 

September 16, 2025

The Section 899 tax provision removed from the One Big Beautiful Bill Act (OBBBA) could see a revival if U.S. companies are still subject to certain global minimum taxes. 

• The provision responded to unfair taxes by increasing the rate of tax applicable to certain taxpayers connected to a foreign jurisdiction. Section 899 was included in the House-passed version of the OBBBA and a draft Senate bill before being removed. 
• CREFC and other trade partners warned of negative impacts on foreign investment if the provision was passed without change. The provision could have chilled investment in U.S. real estate debt and equity through a combination of increased costs and uncertainty as to whether the tax applied to certain countries.
• The provision was removed at the request of Treasury Secretary Scott Bessent after apparently securing commitments from G7 countries for fair global tax treatment. 

Yes, but: According to reporting by Bloomberg Tax, House Ways and Means Chairman Jason Smith (R-MO) relayed that GOP members of his committee discussed the prospect with Kenneth Kies, assistant secretary for tax policy at Treasury and acting IRS chief counsel. 

• Smith and Rep. Ron Estes (R-KS) have been proponents of Section 899 powers as a means to secure fair international tax treatment for U.S. companies. 
• Both lawmakers floated the prospect of including the provision in a second reconciliation package or a year-end government funding bill.
  

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Government Funding Update

September 16, 2025

With 14 days to go until a government shutdown, lawmakers are considering a short-term funding deal that would keep federal operations running through November 21, sources confirmed this weekend. The proposed continuing resolution (CR) would buy more time for Congress to negotiate full-year appropriations. 

• House Republicans just released the legislative text of their CR. 

Why it matters: The new plan comes as negotiations between the White House and Capitol Hill remain tense. The Trump administration has pushed for a longer stopgap bill running through January 31, 2026, but House Republicans appear to favor the shorter extension to maintain leverage over spending priorities. 

• While no deal is finalized, leadership aides say the November 21 CR is gaining traction in both chambers as the most realistic path to avoid a shutdown when current funding expires September 30. Its passage in the House can be done without Democratic support.
• However, in the Senate seven Democrats will need to work with Republicans to pass any bill, to reach the 60 -vote threshold to pass this bill, and their support is far from guaranteed.
• Without action, many federal agencies would face closure, with services halted and employees furloughed. Lawmakers have seven legislative days remaining to find a path, as they are out of town next week on recess.
  

If you want to make it about trying to get an extension so we actually have time to try and run a normal appropriations process and get some of the bills passed under regular order, then I think you want to have it as clean as possible.

Source: The Hill

In addition, the Trump administrations use of pocket recissions is being litigated in court. The controversial technique allows the President to claw back congressionally appropriated funds. Democrats argue that their use of this provisions could make spending negotiations moot, as they could just retract the funds later.

Democrats have focused their criticism on the GOP regarding healthcare, and have said they will not vote for any spending measure that failures to address the extension of Affordable Care Act subsidies, which expire on Jan. 1, 2026. They warn that if this is not addressed, millions of Americans will be forced to pay more for health coverage. 

What’s next: The upcoming days will be crucial as lawmakers negotiate to avoid a government shutdown, with key issues such as the extension of Affordable Care Act subsidies and the Trump administration's use of pocket recissions shaping the discussions.

Contact James Montfort (jmontfort@crefc.org) with any questions.

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