Retirement Savings

HR 1102

The Senate Finance Committee unanimously approved legislation Sept. 7 to broaden retirement savings opportunities, putting the measure on the fast track for Senate approval as early as next week.

The committee expanded a pension reform bill the House overwhelmingly passed in July by adding a tax credit for low- and moderate-income investors. They would get as much as a 50% credit, depending on their income, for investments of up to $2,000 in individual retirement accounts, corporate 401(k) plans, tax-sheltered annuities, or some other retirement plans.

The credit would be available through 2005 to single people with incomes of $25,000 or less, heads of households making $37,500 or less, and married couples earning $50,000 or less.

Like the House version, the Senate bill would increase the total that individuals could save annually in IRAs to $5,000, from $2,000, and increase allowable contributions to 401(k) accounts to $15,000, from the current $10,500. It would also make it easier for small businesses to offer employee pension plans and would let workers older than 50 or those who have temporarily left the workforce deposit more.

Industry lobbyists had feared President Clinton would veto the bill because he wanted more breaks for lower-income people, but comments from the White House were more upbeat this week about the prospects for a compromise.

China Trade

HR 4444

A final Senate vote on legislation to establish permanent trade relations with China has been delayed until next week.

The legislation would make it easier for multinational banks to set up operations in the world's most populous country and would boost trade that banks of all sizes play a large part in financing.

Supporters' efforts to pass a "clean" version of the bill are getting bogged down by a series of amendments opponents hope will shackle the measure. However, supporters remain optimistic that, with the leadership of both parties, the White House, and business interests stepping up lobbying, the measure will pass.

The House passed its China trade bill by such a narrow margin in May that supporters fear any Senate amendments would spell the measure's doom by sending it back to the House to reconcile the differences.

Estate Taxes

HR 8

The House failed Sept. 7 to override the President's Aug. 31 veto of a bill to eliminate estate taxes within a decade, effectively killing Republican efforts to enact it this year.

The bill was particularly important to community bankers who want to pass on ownership to their heirs. The bill would gradually cut the inheritance tax each year from its current maximum rate of 55% until it disappeared in 2010. The estimated cost would have been $750 billion by the time the tax was fully phased out.


Swaps Agreements

S 2697, HR 4541

The Commodity Futures Modernization Act of 2000, which would wall off all bank-executed swaps transactions from regulation by the Commodity Futures Trading Commission, has some powerful allies in the House but is stalling in the Senate.

The legislation would protect virtually all swaps contracts entered into by banks and other financial institutions from new federal regulation and also would give legal certainty that swaps will remain enforceable agreements.

A House Banking Committee spokesman said Speaker J. Dennis Hastert, R-Ill., has indicated that he wants to pass legislation on the issue this session, but the Senate has been less than encouraging, though its Agriculture Committee approved a bill on June 29 identical to that of its House counterpart.

The House Banking version of the bill, approved in committee July 27, would exempt from CFTC oversight securities products and banking products defined in the Gramm-Leach-Bliley Act of 1999 when either is offered by "banks, broker dealers, insurance companies, or affiliates of any of these institutions." Also, swaps in which both counterparties have a net worth of $5 million or more or businesses that have $10 million or more of assets would be exempted from regulation.

A stricter version that would protect fewer bank products was passed by the House Agriculture Committee on June 27 and by the House Commerce Committee on July 26.

Bankruptcy Reform

S 625, HR 833

With Congress scheduled to adjourn in less than four weeks, the prospects for bankruptcy reform are rapidly dimming.

Negotiations between Senate Republicans and the White House stalled again this week, with the administration maintaining its threat to veto the bankruptcy reform package. President Clinton has called the legislation "seriously flawed" because, he said, it would weaken consumer protections on abusive check collection practices and preserve state laws that let wealthy debtors thwart creditors by buying expensive homes that cannot be seized. He also demanded that the bill explicitly prohibit abortion clinic attackers from filing for bankruptcy to escape court penalties.

The Senate approved its bankruptcy reform bill Feb. 2 on an 83-to-14 vote. In May 1999, on a vote of 313 to 108, the House passed a stricter version. The bills generally would make it harder to eliminate debts under Chapter 7 of the bankruptcy code and instead force those who could afford to repay to do so under Chapter 13.


HR 4049, HR 4857, HR 4585

Of the slew of financial privacy measures introduced in this Congress, only a handful are still alive. Their chances for survival are slim, though the industry is keeping close watch in case attempts are made to attach privacy language to appropriations bills.

A bipartisan bill to create a federal commission to study the need for additional privacy legislation was cleared by the House Government Reform Committee in June. It is uncertain whether it will be brought up for a House vote. A companion bill may be introduced by Sen. Fred Thompson, R-Tenn.

The House Ways and Means Committee on Wednesday postponed a vote to consider the "Privacy and Identity Protection Act," which would ban the sale of Social Security numbers. There is private-sector concern that the measure could unintentionally affect banks' ability to sell loans because the portfolios contain borrowers' Social Security numbers. A similar measure sponsored by Sen. Judd Gregg, R-N.H., has been attached to a Senate appropriations bill.

The House Banking Committee approved legislation June 29 that would prevent insurance companies from transferring personally identifiable medical records to bank or other affiliates, or to third parties, unless the customer affirmatively consented, or "opted in." Nor could a bank use such records to decide whether to grant a loan without the applicant's express permission.

Similar efforts died in the Senate Banking Committee in July. However, committee Chairman Phil Gramm, R-Tex., agreed to cooperate on bipartisan, more carefully worded amendments that could be offered to the Senate.

Regulatory Relief

HR 4067, S 576

Even the most ardent supporters of legislation to streamline banking regulations concede that passage is unlikely this year in the Senate, where it is stalled on the floor by Sen. Richard H. Bryan, D-Nev., who wants to tack on a privacy-related amendment.

However, some Senate observers hold out a glimmer of hope for a provision sponsored by Sen. Richard C. Shelby, R-Ala., that would let banks pay interest on business checking accounts by next year and expand sweeps accounts in the interim. Like the bill the House passed in April, Sen. Shelby's measure, which could be attached to an appropriations or other bill, would increase the number of withdrawals - to 24, from six - that corporate customers could make per month from sweep, or money market, deposit accounts.

Holding up the measure is a dispute between Sen. Shelby and Sen. Charles E. Schumer, D-N.Y., over whether to postpone the effective date for interest payments on business checking to give small banks more time to prepare. Sen. Shelby has resisted recommendations to break the stalemate by expanding sweeps accounts alone.

New Markets

S 2779, S 2936, HR 4923

Prospects remains strong for enactment of a legislative package that President Clinton and House Speaker J. Dennis Hastert shook hands on late last year to attract private investment to the country's poorest regions.

The House approved a bill in July. If the Senate Finance Committee, which has jurisdiction over the measure, does not take it up, the White House plans to fight for its attachment to spending legislation.

If enacted in its current form, the legislation would make banks and other investors eligible as early as next year for tax credits worth more than 30% of the amounts invested in poor inner-city and rural communities, $1 billion of guarantees for low-cost loans funding large job-producing projects, and $150 million of matching venture capital for small businesses. The plan also would increase the low-income-housing tax credit by 40%.


Deposit Insurance

S 2798, HR 4603, HR 4467, S 2589

A bill introduced Sept. 7 by Sen. Robert Torricelli, D-N.J., is the latest in a line of legislation designed to expand deposit insurance coverage. Sen. Torricelli's bill calls for 100% coverage of all municipal deposits.

Other alternatives include a bill from Sen. Wayne Allard, R-Colo., introduced June 27, that would index the coverage limit every three years to account for inflation, starting from Jan. 1, 2000, and a proposal by Rep. Charles A. Gonzalez, D-Tex., that would require banking regulators to study the viability of doubling deposit insurance coverage, to $200,000.

Any effort at reform is unlikely to pass in this legislative session, while the Federal Deposit Insurance Corp. considers options for improving the system. Specific proposals are expected early next year when the new Congress convenes.

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