Powerful Rep. John D. Dingell Jr., chairman of the House Energy and Commerce Committee, has muscled himself onto the congressional conference committee seeking to blend differing versions of omnibus banking legislation, leaving in doubt whether provisions creating secondary markets for small business and commercial real estate loans will pass Congress.
Language facilitating securitization of small business and commercial real estate loans passed the Senate in H.R. 3474, a bill that started as an administration measure to establish community development financial institutions.
The bill has since been ladened with provisions dealing with diverse issues ranging from the status of Jerusalem to tree planting. Securitization provisions have passed the House Banking Committee, but have been held up in Dingell's committee, as well as what of another powerful congressman, Rep. Dan Rostenkowski, D-Ill., chairman of the Ways and Means Committee.
But now, as a result of action by the House parliamentarian and Speaker Thomas Foley, D-Wash., Dingell will play key roles on the conference committee negotiating with the Senate to blend the differing bills into legislation acceptable to both houses.
While Dingell sought to have representatives on conference committees dealing with most issues contained in the bill, the House leadership has decided to confined Dingell to key roles on provisions of the bill dealing with securitization, some rollback in the regulatory burden for bank holding companies and language designed to give new powers to the Treasury as leverage in its efforts to open foreign markets to U.S. financial firms.
And, given past practice, that does notbode well for the securitization provisions. Industry lobbyists say Dingell "is not yet showing his hand." Congressional staffers say Dingell's presence on the conference panel will mean the conference will take a long time and that securitization faces an uphill fight to be retained in the bill.
The Senate version, being pushed by Sen. Alfonse D'Amato, R-N.Y., on behalf of the securities industry, would merely clear away laws that served as technical barriers to securitization of these products. The version being pushed by House Banking conferees was proposed by Rep. Paul E. Kanjorski, D-Pa. This would allow the Treasury to certify companies to serve as secondary market agents.
Regarding commercial real estate, Dingell said April 11 that his panel and the banking committee had the chance in 1984 to include commercial real estate loans in the Secondary Mortgage Market Enhancement Act of 1984 - a bill which allowed the mortgage securitization industry to take off - but declined to do so because commercial real estate loans are much riskier for investors than residential loans.
The Senate bill would facilitate securitization of commercial real estate loans by adding that product in the definition of "mortgage related securities" added to the securities laws by SMMEA. That would pre-empt state laws restricting securitization through investment limit and "blue sky" laws. But Dingell wants the bill to be amended to allow states to "optout" of including commercial real estate loans in their definition of mortgage securities, especially in connection with legal investments limits.
