Action on Legislation financial Modernization

Majority Leader Trent Lott plans for the Senate to take up financial reform by mid-May.

However, the bill could stall unless Senate Banking Committee Chairman Phil Gramm and committee Democrats iron out differences. The committee adopted legislation on a 11-to-9, party-line vote March 4. President Clinton has threatened to veto the bill unless its community reinvestment requirements are tightened and other changes are made.

Minority Leader Thomas A. Daschle and Senate Banking's Democrats introduced an alternative March 26 that would impose tougher Community Reinvestment Act requirements, prohibit the sale of existing unitary thrifts to commercial firms, and grant broader powers to operating subsidiaries.

On the House side, Republican leaders have given the Commerce Committee until May 14 to vote on financial reform. House Commerce Chairman Thomas J. Bliley Jr. is expected to push that deadline to the limit to see how the Senate votes. The panel's finance subcommittee plans to hold hearings in April. House Commerce is expected to scale back powers for bank subsidiaries and review measures on privacy and unitary thrifts.

The House Banking Committee approved legislation on a 51-to-8 vote March 11 that-like the Senate Banking bill-would remove restrictions between investment and commercial banking and permit affiliations between banks and insurance companies. The committee adopted an amendment on a 29-to-26 tally that would let commercial firms purchase unitary thrifts. It also adopted a provision that would require banks to disclose their privacy policies to customers and keep medical information confidential. Bankruptcy

The House and Senate Judiciary committees are scheduled to start debating bankruptcy reform after Congress returns April 12 from the Easter recess.

House Judiciary's commercial and administrative law subcommittee approved the bill, 5 to 3, on March 25 after two days of debate. Introduced by subcommittee Chairman George W. Gekas, the bill would use a formula to determine whether consumers could eliminate unsecured debts in Chapter 7 or repay them in Chapter 13. Consumers generally would be barred from Chapter 7 if, after accounting for living and other expenses, they could repay over five years at least 25% of unsecured credit or $5,000.

Senate Judiciary was scheduled to vote March 25 on the version introduced March 16 by Sen. Charles E. Grassley, R-Iowa, but postponed action to give members more time to review the details. The Grassley bill would let bankruptcy judges force consumers to repay unsecured debt if, after living and other expenses, they could afford to pay 25% of unsecured debt or $15,000.

The Clinton administration on March 24 threatened to veto the House bill; many of its objections also apply to the Senate bill. Credit Cards

Sen. Charles E. Schumer, D-N.Y., and Rep. John J. LaFalce, D-N.Y., vowed in late March to attach legislation that would protect credit card users to the bankruptcy reform bills. Their plan would bar credit card issuers from fining people who pay their balance in full each month or from canceling their accounts. It also would expand disclosure requirements. For instance, on monthly statements lenders would have to note the total cost and number of months it would take to retire the debt if the customer only made the minimum payment. Rep. LaFalce introduced the legislation March 2, and Sen. Schumer introduced the same plan March 24. Year 2000- Problem

President Clinton on April 2 signed legislation that would let the federal government guarantee loans to help small businesses survive the year-2000 problem. The House passed the legislation March 23; the Senate had approved it on a 99-to-0 vote March 2.

Under the legislation, the Small Business Administration could back at least 85% of loans that financial institutions make to small businesses to repair-or recover from-year-2000 computer glitches. The legislation also raises the $750,000 lending limit per small business to $1 million if the borrower has other SBA loans. This program would expire at the end of next year. Pending Legislation Regulatory Relief

Senate Banking Committee Chairman Phil Gramm vowed last month that the regulatory relief bill would become law by itself or as a part of financial reform.

The committee on Feb. 11 unanimously approved a bill offered by Sens. Richard C. Shelby, R-Ala., and Connie Mack, R-Fla., that would let banks earn interest on reserves held at the Federal Reserve. Also, banks and thrifts could pay interest on business checking accounts starting Jan. 1, 2001; in the interim, the legislation would expand the number of withdrawals that commercial customers could make from money market deposit accounts to 24 per month from the current limit of six. New Legislation Privacy

Rep. Edward J. Markey, D-Mass., introduced two bills March 25 to protect the financial privacy of bank customers and securities investors. Financial companies would have to obtain written permission from consumers (known as "opt in") before sharing personal information with affiliates or selling it to outsiders.

Sens. Paul S. Sarbanes, D-Md., and Christopher J. Dodd, D-Conn., introduced legislation Jan. 19 that would make banks get permission from customers before selling confidential information to, or sharing it with, an unaffiliated third party. Banks could continue sharing a customer's information among affiliates unless the person objects.

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