WASHINGTON - The House Banking Committee is expected to approve legislation this year that would create low-cost transaction accounts for the working poor, but odds are slim it will be enacted.

The bill, which would authorize a pilot program for President Clinton's so-called First Accounts initiative, earmarks $30 million to be divided among four uses:

  • Financial incentives for institutions that provide the inexpensive accounts.
  • Programs to increase financial literacy.
  • Expansion of ATM access in underserved areas.
  • And research on the financial services needs of the poor.

Previous legislative efforts to create "lifeline" and "basic banking" accounts have met strong opposition in Congress because they would have required banks to offer low-cost accounts that conform to a specific formula. The bill now before the committee would make providing such accounts voluntary, which supporters say makes it more attractive.House Banking Chairman Jim Leach, a co-sponsor of the legislation, said he expects to schedule a committee vote on the bill this session, and believes it will receive bipartisan support. "I think this is a consensus bill, because it uses incentives rather than a mandate approach," he said. "This taps into the real American problem of the unbanked, and into another issue that many American bankers are concerned about: financial literacy."
But the chances are "bleak" that a companion bill introduced in the Senate by Maryland Democrat Paul Sarbanes will get a hearing in Senate Banking, a committee spokeswoman said Tuesday. "We would have to see a lot [more] evidence that there is a significant problem of people being unable to find or access accounts or financial institutions," she said.

During Tuesday's hearing, that question of need got a lot of attention.

Testifying for the American Bankers Association, Daniel L. Krieger, president and chief executive officer of First National Bank in Ames, Iowa, said that 93% of banks with over $1 billion of assets already offer "basic, no-frills" checking accounts. While there are millions of unbanked individuals in the United States, he said, "The availability or cost of accounts are not the primary reasons."

Speaking on behalf of Independent Community Bankers of America, Joseph S. Bracewell, chairman and chief executive officer of Century National Bank in Washington, opposed the legislation. A law that starts out by giving incentives for certain behavior, he argued, could easily turn into an order requiring it.

"This is a case of letting the camel's nose under the tent," Mr. Bracewell said. He referred specifically to a passage in the law that gives the Treasury Secretary the power to mandate the provision of certain services that he deems necessary. That is "a very broad and potentially dangerous grant of authority," he warned.

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