WASHINGTON - A House plan to ease banks' regulatory burden would "eviscerate" the Community Reinvestment Act, a group of Democrats said last week.
CRA proposals pose a "major obstacle" to regulatory reform and will doom bipartisan support for the House Banking Committee's Glass-Steagall regulatory relief bill, Democrats on the House Banking Committee wrote in a letter to the panel's chairman, Rep. Jim Leach, R-Iowa.
To collect more ammunition for their fight, the Democrats last week also asked regulators to detail the new reporting requirements that will be needed to implement revised CRA rules.
Fueling their argument is a Dec. 1 statement from the Federal Reserve Board calling the bill a "poison pill" to CRA reform.
The bill's provisions prevent regulators from imposing new reporting requirements on banks and thrifts, eliminating their power to implement CRA rules revised in April, said Griffith Garwood, the Fed's director of Consumer and Community Affairs. "It is vitally important to eliminate these two provisions from the bill," he said.
New reporting requirements are essential because the CRA revisions place more emphasis on banks' lending performance rather than on advertising and other marketing practices, Garwood said.
New York banking lawyer Warren Traiger agreed that the House bill will hamper enforcement of new CRA rules, but he said the Democrats' complaints are exaggerated.
"The bill would hinder CRA, but I think 'eviscerate' is somewhat strong," he said.
Mr. Traiger said the bill's CRA proposals are much milder than those originally in the House Banking regulatory relief package. Earlier provisions included self-certification for banks under $250 million in assets and a "safe harbor" rule that would have shielded highly rated banks banks from community protests.
The House Banking Committee Democrats, led by ranking member Henry B. Gonzalez, R-Tex., said Rep. Leach's bill should be void of CRA changes just like the Senate's regulatory relief bill. Senate Banking Chairman Alfonse M. D'Amato wants to bring his bill to the Senate floor before Christmas, his staff said. However, his bill has stalled as the Congressional Budget Office reviews its impact on federal revenue and spending.
Staffers for Rep. Leach said they are baffled by the Democrats' protests because no opposition was voiced when the bill's CRA provisions were drafted in September.
A General Accounting Office Report released Nov. 28 concluded that attempts to restrict bank reporting requirements would hinder efforts to implement the new CRA rules.