Negotiators report out banking bill - with a hitch.

WASHINGTON -- House and Senate negotiators completed work Monday on a broad legislative package that authorizes interstate branching, provides incentives for increased community development lending, and eases burdensome regulations on banks.

The bill now goes back for final votes in each chamber, where it enjoys strong support.

However, the package still faces an additional hurdle. The House-Senate conference committee accepted an amendment that would have the effect of reinstating a provision of the Texas Constitution barring home-equity loans.

Sen. Phil Gramm, R-Tex., warned that he would raise a point of order against the provision on the Senate floor, arguing that it is beyond the scope of the conference. If he succeeds, the package would be returned to the House-Senate conference for additional negotiations.

Concern Over Objection

Sen. Donald W. Riegle, D-Mich., the banking committee chairman, said he is confident that the Senate parliamentarian would rule against Sen. Gramm. However, banking lobbyists expressed concern over the Gramm objection.

"It's not out of the woods yet," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

The legislative package, renamed the "Riegle-Neal Community Development and Financial Modernization Act of 1994" in honor of Sen. Riegle and another prominent supporter, Rep. Stephen L. Neal, D-N.C., counts as a big win for the banking industry.

The regulatory relief section contains a number of provisions the industry has been pushing for years. Among other things, it would allow well-run community banks to be examined every 18 months, rather than once a year. Easier reporting requirements for antimoney laundering laws are expected to save the industry up to $40 million a year, Mr. Yingling said.

In addition, the passage of interstate legislation settles an issue that has divided the industry in the past and that was used by insurance and securities interests as a vehicle to limit bank powers.

Perhaps most important, Mr. Yingling said, the bill contained solid pluses for the industry with no big "negatives" being extracted in return. In the past, the industry has often paid a price - usually new consumer service requirements - for new powers granted by Congress.

The measure passed by the conference committee folds two separate bills into a single package.

The interstate branching bill permits adequately capitalized banks to begin acquiring institutions across state lines one year after the date of enactment. However, they would be required to maintain those institutions as separately chartered, free-standing banks.

After June 1, 1997, interstate organizations would be able to merge banks they own into a single organization.

Provisions requiring foreign banks to branch from a U.S.-based office were dropped.

The Community Development Financial Institutions bill, which was also added to the package, provides $382 million to spur lending institutions for low-income communities.

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