Unfinished Legislation Financial Modernization

Coming closer than ever to enactment, financial reform legislation died in the Senate in October. Supporters will start from scratch when the new Congress convenes in January to pass legislation letting banks, insurance, and securities firms combine.

Senate Majority Leader Trent Lott set the bill aside Oct. 9 after Sens. Phil Gramm, R-Tex., and Richard C. Shelby, R-Ala., objected to community reinvestment provisions.

Advocates' efforts for swift approval early next year were complicated by the Nov. 3 reelection defeat of Senate Banking Committee Chairman Alfonse M. D'Amato. His expected successor is Sen. Gramm, who after the elections vowed support for financial reform, provided deals are struck that satisfy his Community Reinvestment Act-related concerns and overcome the Clinton administration's veto threat.

The House, which approved a reform bill by a 214-to-213 vote in May, is expected to act first. House Banking Committee Chairman Jim Leach introduced symbolic legislation at the end of the session that resembled an industry-supported Senate compromise bill.

Banks and other financial industry factions will try to hold together a fragile coalition during the winter break. Regulatory decisions on new charters, court decisions, or an economic downturn could fragment the coalition and derail the bill. Bankruptcy

Consumer bankruptcy reform stalled in the Senate in early October under heavy Democratic opposition and a White House veto threat. Supporters failed to attach any significant provisions of the legislation to the catchall spending bill at the end of the session.

Banks and credit card issuers hope to build next year on the veto-proof majority in the House, which approved a compromise bill by a 300-to-125 vote Oct. 9. However, supporters were disappointed that Republicans did not gain any seats in the Senate to improve chances of approval.

The Clinton administration and Sen. Richard J. Durbin, D-Ill., attacked a compromise formula for determining who would have to repay some unsecured debts in Chapter 13 as too rigid. They also complained that the Senate bill, sponsored by Sen. Charles E. Grassley, R-Iowa, weakened consumer protections. Regulatory Relief

The Senate did not take up a regulatory relief bill for banks that the House had approved Oct. 9.

House Banking Committee Chairman Jim Leach persuaded Republican committee members to drop a controversial provision that would have exempted small banks from the Community Reinvestment Act. But mixed industry views and a crowded calendar prevented Senate action.

The legislation would have rolled back dozens of minor, outdated rules on banks and thrifts and would have permitted the Federal Reserve Board to pay banks interest on reserves. Both would have expanded the use of sweep accounts, in effect letting banks pay interest on checking accounts, and then drop the ban within several years. News Laws International Monetary Fund

President Clinton signed into law Oct. 21 the yearend spending bill that included $18 billion for the International Monetary Fund. The Senate had included the funding in two bills, but the House had previously failed to approve full funding. House Republican leaders ultimately conceded to pressure from the President and agreed to the funding, provided the IMF institutes some reforms. Farm Relief

The yearend spending law also contained a $6 billion emergency aid package for farmers. The relief-which includes subsidy payments for crops, compensation for multiyear crop losses caused by natural disaster or disease, and tax breaks-was nearly $2 billion more than Republicans included in legislation that the President vetoed Oct. 7. Farmers and ranchers were also expected to benefit from the law's expansion of tax deductions for health insurance premiums of the self-employed. FHA Laws

President Clinton signed into law Oct. 21 the housing appropriations bill that raises the caps on mortgage loans insured by the Department of Housing and Urban Development's FHA program. It lets the FHA program insure residential mortgages as large as $197,621 in high-cost areas and $109,032 in the cheapest housing markets. The current limits are $170,362 and $86,317, respectively. The same law also eliminates the caps on loans for multifamily residences that may be bought by Fannie Mae or Freddie Mac, and it requires lenders to tell borrowers the difference in cost between FHA- backed loans and privately insured ones. Year-2000

President Clinton signed into law Oct. 19 legislation that would require businesses to share information about solutions to year-2000 computer problems and readiness by offering limited liability protection. It would reinforce a recent Justice Department statement that such actions would not violate antitrust laws, but it would not protect reckless or deceptive statements. The law also would not protect false filings made to bank regulators. Privacy

President Clinton signed into law Oct. 30 legislation that would make it a federal crime to knowingly use a Social Security number or other personal identifying information to establish false credit or accounts. Violators could face as many as 20 years in prison plus fines for the most serious of these crimes, and victims may seek restitution. The House on Oct. 7 approved the bill, which was sponsored by Rep. John B. Shadegg, R-Ariz. The Senate adopted the House version Oct. 14 after passing a similar bill in July that had been offered by Sen. Jon Kyl, R-Ariz.

Separately, the House failed to approve legislation that would make it a crime to trick banks into divulging private customer data. The House Banking and Commerce committees could not resolve conflicting versions of the legislation, which House Banking Committee Chairman Jim Leach had originally introduced. Senate Banking Committee Chairman Alfonse M. D'Amato had included the companion of Rep. Leach's bill in the stalled financial reform legislation and was unable to move it separately.

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