WASHINGTON - To deflect a presidential veto, the House Banking Committee voted to tone down legislation to grant nearly 7,000 banks a break under the Community Reinvestment Act.
Rather than an outright exemption, banks with up to $100 million in assets would be allowed to "self-certify" that they are complying with CRA. This would consist of the bank president's signing a statement assuring that the bank is meeting the needs of its community and listing the products and services it offers.
The 1,936 banks with $100 million to $250 million in assets also would be allowed to attest to their own compliance. However, examiners would check to make sure that the bank was being "reasonable." If it was not, the bank would have to pass full-blown CRA exams for the next five years before it could self-certify again.
The total of 8,922 banks affected by the legislation hold $602.2 billion in assets, which means 87.7% of the nation's banks would get relief under CRA. But these institutions - mostly smaller banks - hold just 14.5% of the industry's assets.
House Banking's measure also contains all the CRA revisions in the pending regulatory relief bill, including blocking regulators from denying applications on CRA grounds and prohibiting them from imposing new data collection requirements.
Treasury Secretary Robert Rubin denounced the bill as "a step backward for America's communities."
In a statement released late Tuesday night after the House Banking Committee concluded a full day of voting, Mr. Rubin noted that federal regulators spent two years revamping the way they enforce CRA. The final rules only came out in April and don't begin to phase in until January. "They deserve a chance to work," Mr. Rubin said.
Parallel legislation approved by the Senate Banking Committee Wednesday does not include the CRA changes. The House committee tucked the CRA changes into a budget bill Congress is aiming to enact before the new fiscal year begins Oct. 1. Differences between the House and Senate bills will be worked out by a committee of lawmakers from both chambers.
The Independent Bankers Association of America was pushing for an outright exemption, but the group said the self-certification process would work.
"If the bank doesn't serve the community it simply isn't going to survive," said Karen M. Thomas, the group's director of regulatory affairs. "They can't ignore those needs because there simply isn't enough business to sustain them if they do."
Community activists objected to tacking CRA changes in a budget bill.
The House committee "is abusing its power by using the budget reconciliation act as a back-door means of launching still another all-out attack on CRA," Ralph Nader wrote in a Sept. 19 letter to committee chairman Jim Leach, R-Iowa.
Allen J. Fishbein, general counsel at the Center for Community Change, called the House's self-certification process "a figleaf" on Wednesday.
"It is tantamount to an exemption," he said.
John Taylor, president of the Community Reinvestment Coalition, said if banks can confirm their own compliance, "We ought to have congressmen elect themselves, too."
While banking leaders saw the legislation a bit differently, they were still concerned about tacking CRA changes onto a budget bill.
"It's a two-edged sword," said James D. McLaughlin, director of agency relations at the American Bankers Association. "If the President vetos the whole budget package, CRA goes down with it."
During the House Banking Committee's voting Tuesday, Rep. Doug Bereuter, R-Neb., proposed eliminating all CRA reporting requirements for banks under $100 million but was defeated on a voice vote.
Rep. Leach said all banks must have some responsibility under CRA or the administration would oppose the bill.
"With (Bereuter's amendment) do we have a law that some are beholden to and some are not?," Rep. Leach asked. "It's my view that we want to create a change in the law, but also pass muster with the executive branch."
Rep. Joseph P. Kennedy II, D-Mass., proposed an amendment to delete all references to CRA from the budget bill.
"I can't believe this is what the banking committee has come down to," he said. His amendment was defeated on a vote of 24-20 with members voting along party lines.
