Summary: The Comptroller General makes four main points about the landmark Federal Deposit Insurance Corporation Improvement Act. First, although it is true that the legislation increases the amount of regulation, the act's key safety and soundness reforms are critical to preventing further losses to the insurance funds and to taxpayers. Second, access to bank credit is essential to the viability of small and medium-sized businesses, the main source of new jobs in the United States. Consequently, steps should be taken to streamline the paperwork burden and regulations that may be unnecessarily hindering some kinds of business loans. Third, some of the regulatory burden placed on banks can be eased by eliminating the inconsistency and duplication associated with bank examinations. Fourth, before Congress passes any legislative remedies, it needs sound analyses to determine whether the root causes of unnecessary burden are in the statutes, the implementing regulations, the behavior of the regulators, or some combination of factors. On a related matter, GAO applauds the general direction of the President's recently announced regulatory initiative directed at problems of credit availability. This testimony also discusses two GAO studies under way--one on small business lending and the other on regulatory burden.
