Interest on Business Checking

HR 4067, S 576, HR 5341

Senate Banking Committee Chairman Phil Gramm and House Banking Committee Chairman Jim Leach are working to bundle several banking bills and attach them to a spending bill before Congress adjourns next week.

The primary bill in the package would let banks pay interest on business checking accounts as early as 2002, and possibly expand sweeps accounts in the interim.

The last-minute push could also include a bill that would authorize payment of interest on mandatory reserves held at the Federal Reserve and measures to reauthorize certain regulatory reports to Congress.

A likely candidate - and one that would help garner the support of the top Democrat on House Banking - is the "Annual Banking Fee Survey Extension Act." Rep. John LaFalce introduced the bill Sept. 28 to require the Federal Reserve Board to continue to report annually to Congress on the cost and availability of banking services. The Fed, citing a 1995 law allowing federal agencies to eliminate unnecessary reports, had determined that the annual bank fee surveys and reports were no longer needed.

Bankruptcy Reform

S 625, HR 833

Though Republican leaders contend they have not given up, even the most optimistic advocates of bankruptcy reform legislation conceded this week that prospects of enactment look slim at best. Supporters of the legislation had hoped Republicans would revive the legislation by attaching it to a mandatory spending bill, most probably the transportation bill. However, one appropriations bill after another has moved ahead without bankruptcy provisions.

The bankruptcy 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.

On Sept. 22 the White House had issued a statement reiterating the President's long-standing threat to veto the bankruptcy reform package. The White House wants protection for consumers from abusive check collection practices and language barring abortion clinic attackers from filing for bankruptcy to escape court penalties.

The two sides have made progress on a third sticking point: state "homestead" laws that let wealthy debtors thwart creditors by buying expensive homes that cannot be seized. The White House said in the statement that it could accept a $500,000 cap on homestead exemptions if agreement were reached on other issues.

China Trade

HR 4444

President Clinton signed legislation Oct. 10 to permanently liberalize trade with China. The law grants China permanent normal trade relations and ends the annual congressional trade review that focused on human rights and religious persecution.

The measure is expected to boost trade and makes it easier for multinational banks to set up operations in China. Under the trade agreement, foreign banks face fewer hurdles in obtaining licenses, and foreign investors no longer have to form joint ventures with Chinese entities to offer banking products.

Geographic restrictions on foreign operations would be phased out over five years, and branching restrictions on foreign financial firms would be eased.

The Senate passed the bill Sept. 19 by a vote of 83-15; the House had adopted it May 24 by a narrow 237-197.

Privacy

HR 4049, HR 4857, HR 4585, S 2554

With Congress expected to be in session at least until next week, industry lobbyists are keeping a close watch in case attempts are made to attach privacy legislation to appropriations bills.

In fact, efforts were being made Wednesday to attach to an appropriations bill for the Commerce Department and other agencies a provision covering the sale of Social Security numbers. Consumer advocates are trying to block the move, because the bill includes a provision to preempt state online privacy laws and thus allow Social Security numbers found on public documents to be sold over the Internet.

The provision is based on a bill sponsored by Sen. Judd Gregg, R-N.H. Industry lobbyists have described the Gregg measure as "benign" because it would protect legitimate business use of Social Security numbers. However, they worry that trying to pass it so late in the legislative session could open the door for privacy hawks to add more cumbersome measures.

The House Ways and Means Committee on Sept. 28 unanimously passed an identity theft bill intended to prevent the misuse of Social Security numbers. Among other things, the bill would prohibit the purchase and sale of Social Security numbers by companies. It would penalize companies for denying service to customers who refuse to provide their numbers, and would amend the Fair Credit Reporting Act to include Social Security numbers as information protected under that law. The bill also would prohibit federal, state, and local governments from selling Social Security numbers.

The banking industry does not support the bill, which it fears would block legitimate uses of Social Security numbers. Banks say it could affect their ability to sell loans, because the portfolios contain borrowers' Social Security numbers.

The House rejected legislation Oct. 2 to create a federal commission to study the need for additional privacy legislation. Lawmakers voted 250-146 in favor of the measure, but it failed because it was considered under a special parliamentary procedure that prohibits amendments and requires a two-thirds vote for passage.

Companion legislation introduced in the Senate by Sens. Fred Thompson, R-Tenn., and Herb Kohl, D-Wis., is not expected to be considered.

Swaps Agreements

S 2697, HR 4541

The Treasury Department and congressional Republicans continue negotiations on the Commodity Futures Modernization Act of 2000, which would wall off all bank-executed swaps transactions from regulation by the Commodity Futures Trading Commission.

On Sept. 7, staff members of the House and Senate Banking and Agriculture committees and the House Commerce Committee - each of which has passed its own version of the bill - sent Treasury and congressional Democrats a 247-page draft. Democrats have balked at the proposal, which is vague as to the legal certainty it provides bank-executed swaps.

House Majority Leader Richard K. Armey said Wednesday that negotiators need to resolve differences over the definition of bank-executed swaps and what legal certainty can be provided. He was optimistic, though, that an agreement can be reached and the legislation can be voted on as a stand-alone bill.

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 remain enforceable agreements.

Retirement Savings

HR 1102

Republican leadership promised Wednesday to include legislation to broaden retirement savings opportunities in a package of other tax bills.

The Senate Finance Committee amended and then unanimously approved the bill Sept. 7. The latest version would expand 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 that passed in July by a vote of 401-25, the Senate bill would increase the maximum that individuals could save each year 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.

New Markets

S 3152, S 2779, S 2936, HR 4923

House Republican leadership also promised Wednesday to include in a tax package legislation that would create tax breaks for corporations that invest in so-called "new markets" and community renewal projects.

The White House strongly backs the measure, which - if enacted in the form that the House passed overwhelmingly in July - would make banks and others eligible for tax credits worth more than 30% of investments made in poor inner-city and rural communities. They would also could get $1 billion of guarantees for low-cost loans funding large job-producing projects, as well as $150 million of matching venture capital for small businesses. The plan also would increase the low-income-housing tax credit by 40%.

The Senate Finance Committee attempted to mark up a similar package in September, but abandoned the attempt Sept. 28 after a slew of unrelated amendments threatened to bog it down. Finance Committee Chairman William Roth, R-Del., introduced the tax portions of the initiative as a stand-alone bill Oct. 3.

Though the Senate leadership is not expected to bring the bill up for a vote, Sen. Roth's maneuver was an effort to assure he has a role in the yearend negotiations on the issue between Congress and the White House.

NEW LEGISLATION

Credit Scoring

S 3063, H.R. 2856, H.R. 4644

On Sept. 18, Sen. Charles Schumer, D-N.Y., introduced "The Consumer Credit Score Disclosure Act" to require lenders to provide customers with their credit scores and a summary of what the scores mean.

Though it is too late in the legislative year for any action on bill, Sen. Schumer is teeing up for consideration next year when the new Congress convenes.

Rep. Chris Cannon, R-Utah, and Rep. Harold Ford Jr., D-Tenn., also have introduced similar bills, which would provide for the disclosure of credit scores to consumers but in slightly different ways. Rep. Cannon's bill would give consumers the right to view their credit scores and other information in their credit reports. Rep. Ford's would require lenders to provide free credit reports to consumers once a year.

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