House Vote May Signal Rough Ride For Industry
WASHINGTON -- The banking industry's recent political strength against the consumer lobby began to erode Wednesday as the House Banking Committee approved a measure that would require increased reporting of small-business loans.
The 28-to-23 vote, on an amendment offered by Rep. Richard Neal, D-Mass., stood in stark contrast to an industry victory last month. The earlier opposition to the measure was so strong then that Rep. Neal was forced to withdraw it from consideration.
The industry's defeat Wednesday may foreshadow action by the full committee on a number of other consumer banking issues that will come up this week and next, as the panel considers the Bush administration's banking reform bill.
Divided over CRA Provisions
In particular, the Banking Committee is believed to be closely divided on a series of amendments to water down the Community Reinvestment Act. Votes on those amendments went the industry's way in subcommittee; if retained, the provisions would exempt many small banks from reporting requirements of the reinvestment law.
Consumer lobbyists were elated by the endorsement of Mr. Neal's amendment, even though it had been watered down from its subcommittee form. As rewritten, the measure would require a new line on bank call reports breaking out small-business loan volume. The previous version called for more detailed reporting of small-business loans in the manner of the CRA law.
Close Votes Expected
The vote on the Neal amendment "may be a bit of a bell-wether of whether the full committee has a bit more open ear" on consumer banking issues than was the case in the subcommittee, said Chris Lewis, a lobbyist for an organization representing low-income persons.
Edward L. Yingling, director of government relations for the American Bankers Association, said the latest vote reflected "hard work by the consumer lobby." It also demonstrated that the full committee is "somewhat more liberal than the subcommittee."
As a result, Mr. Yingling said he expects a close vote when the full committee takes up two amendments added by the subcommittee that would weaken the Community Reinvestment Act. Both were sponsored by Rep. Paul Kanjorski, D-Pa.
Strict Auditing Provisions
One would exempt banks with less than $100 million in assets, or $250 million in rural areas. The other would create a so-called "safe harbor" for banks that have received a favorable CRA rating within two years. Their acquisitions would be immune from protests on CRA grounds.
In its first day of action on the administration's banking reform package, the Banking Committee also adopted amendments setting new auditing and accounting requirements for banks.
The measure, sponsored by committee Chairman Henry B. Gonzalez, D-Tex., would require annual, independent audits of all banks. The audit would include an evaluation of internal management controls and would be required to "objectively determine the institution's compliance with laws and regulations."
The outside audit requirement would apply to a number of privately held banks that are not now required to obtain independent audits.
Both the Gonzalez and Neal amendments include exemptions for small banks.
Industry Support Threatened
Mr. Yingling of the ABA said the Gonzalez amendment indicates that Congress "slowly, but surely, is adding more regulatory burden to the industry." If it continues, he said, the industry's already fragile support for the reform package might disappear altogether.
"If the bill gets loaded up with these type of things, and if they continue to put restrictions on the things we can do now, this will not be a bill which we can support," the ABA lobbyist said.
Of immediate concern to some banks is an amendment that would restrict bank insurance powers. The amendment is expected to pass with the backing of Rep. Frank Annunzio, Illinois, who is the committee's second-ranking Democrat, and Rep. Chalmers Wylie of Ohio, the top-ranking Republican.