WASHINGTON - Responding to Democratic objections, Senate Banking Committee Chairman Alfonse M. D'Amato is considering dropping a measure that would exempt small banks from the Community Reinvestment Act.
At the same time, the New York Republican is also mulling whether to create a new CRA rating - "high satisfactory" - that would narrow the field of banks that could be protected from community group protests. Both CRA measures are being considered in the context of a pending regulatory relief bill.
Sen. D'Amato's behind-the-scenes maneuvering on the CRA language is part of an effort to protect the broader relief bill. Senate Democrats have threatened to filibuster over the CRA provisions, and even the threat of a procedural obstruction could be enough to keep the bill off the floor this fall.
The White House has also raised objections, threatening to veto a House bill if it contains a CRA provision similar to the measure in the Senate bill.
The industry is greeting the two proposed changes with mixed feelings. One community bank lobbyist said the industry might be willing to "swallow hard" and accept Sen. D'Amato's proposal if it assures passage of the regulatory relief bill.
However, Edward L. Yingling, top lobbyist for the American Bankers Association, said his organization still hopes to win passage of a relief bill that includes the small bank exemption.
Even if the exemption is dropped during committee consideration of the bill, it could be added on the floor, he said.
"That kind of amendment would not only draw Republican support, but a number of moderate Democrats would be hard pressed not to support it as well," he said.
Procedurally, he added, it would be more difficult for Senate liberals to begin a filibuster in the middle of the floor debate.
Mr. Yingling expressed concern about the proposed new CRA rating category. The bill now would shield banks with satisfactory or outstanding ratings from the protests community activists often mount to hold up bank applications. Over 90% of the nation's banks and thrifts fall into those two categories.
A new "high satisfactory" category could be used to dramatically limit the number of institutions that qualify, he said.
However, Karen Shaw Petrou, president of ISD/Shaw Inc., said a new category would create a more meaningful method to gauge compliance with the law.
"Any rating in which 92% of institutions are satisfactory or better ... is not really a meaningful measure of performance," said Ms. Petrou, whose firm tracks bank legislation and regulations.
The final version of the CRA section of the bill is likely to be written in House-Senate negotiations. The House is expected to come in with legislation that is very favorable from the industry's perspective. Since negotiators often try to compromise in the middle, bank lobbyists would like to see the talks start with the strongest possible Senate position.
While Democrats may well applaud changes in the CRA provisions, Republican Senators could object if the provisions are scaled back too far.
"My boss feels very strongly about keeping a small-bank exemption," said an aide to one GOP member of the Senate Banking Committee.
"We don't want to see something that forces the little guys to take people off the front lines in order to stick pins in maps and figure out if they are complying with CRA," he said.
"Without the exemption, this would become a NationsBank bill," he added, suggesting that without the small-bank exemption, the legislative package would be seen as a benefit primarily to large institutions.