Around the States: Texas Branching Bill Held Hostage in Legislative

The breakneck pace of Texas' anti-interstate branching measure has slowed to a crawl in the state Senate. The reason: the state's famous ban on home equity lending.

Linking interstate branching and home equity lending has resulted in a war between the two chambers of the Texas Legislature. The House, which passed legislation to opt out of interstate branching last month, is now refusing to consider any bill that originated in the Senate.

And members of the Senate, who passed legislation to repeal Texas' quirky home equity loan ban, are promising to sabotage the opt-out measure if the House doesn't consider home equity reform.

"Down here we have a term for what's happening," said Karen Neely, general counsel to the Independent Bankers Association of Texas. "It's called a Mexican standoff."

Texas is the biggest in a small group of states pushing for opting out of the branching provisions of the Riegle-Neal Interstate Banking and Branching Act. The Texas House, in an extremely rare unanimous vote, passed the opt-out law last month and sent it to the Senate.

The first hearing on the bill was to be Monday in the State Affairs Committee. But, in what could be a harbinger of trouble for the bill in the upper chamber, it was "tagged" and the hearing was delayed.

A spokesperson for committee chairman Ken Armbrister, a supporter of the bill, said a hearing is being rescheduled for Thursday.

Key senators have said in the last week that they believe the opt-out measure will pass if it comes to a floor vote, Ms. Neely said.

"I genuinely don't believe the issues (branch and home equity lending) will remain linked," she said. "It's simply a matter of tactics right now."

The state's 240 independent banks are pushing for opting out, and last week said they would not oppose opting in later if the state passes laws addressing what they believe are competitive inequities between community banks and multistate banks.

The Texas Bankers Association, along with the state's largest banks, opposes the opt-out bill.

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