Bankruptcy Reform H Rept. 106-970

Compromise legislation to overhaul bankruptcy laws hit another roadblock Nov. 1, when a procedural Senate vote on the bill failed. It is not clear if another attempt to schedule a vote on final passage will be made when the Senate reconvenes next week.

President Clinton has repeatedly said he would veto the measure.

The House passed the legislation by voice vote Oct. 12. It contains tougher "needs-based" standards that would push more bankruptcy filers into Chapter 13 payment plans instead of having their debts eliminated under Chapter 7 of the Bankruptcy Code. For example, judges could force debtors into Chapter 13 who could afford to repay the lower of $10,000 or 25% of unsecured debt over five years.

The compromise legislation retains a provision from a Senate version that would require credit card companies to warn customers about the cost of making the minimum monthly payment, and to give standard illustrative examples or mathematical tables to help them estimate their debt.

The White House has called the legislation "fundamen- tally flawed" because, saying it favors creditors and is not tough enough on abortion-clinic attackers who abuse bankruptcy legislation.

Earlier White House concerns over state "homestead" laws, which let wealthy debtors thwart creditors by buying expensive homes that cannot be seized, have been ironed out. The White House has said that it could accept a $500,000 cap on homestead exemptions if agreement were reached on other issues.

Tax Cuts

HR 5542, HR 2614

The House on Oct. 26 passed, by a vote of 237-174, a $240 billion tax-cut package containing provisions sought by the banking industry, particularly community banks. The measure, which President Clinton has said he would veto, could face a Democratic filibuster if the Senate takes it up next week.

The legislation would authorize interest on business checking accounts; raise limits on contributions to individual retirement accounts and 401(k) plans; create a special tax-deferred savings accounts for farmers and ranchers; give over $4 billion in tax breaks over five years to banks and other companies that invest in poor communities; and increase the low-income housing tax credit.

The checking provision would let banks start paying commercial customers interest on checking in 2002. In the interim, it would quadruple the number of withdrawals that could be made from interest-bearing business sweeps accounts each month, to 24.

Industry opinion is divided on interest for business checking. Some small banks say they believe that the new product would attract more customers and funds. Other community banks are opposed to the initiative out of fear that it would drive up the cost of deposits. A few large institutions oppose the move because they have already invested so much in sweep programs.

The measure's pension provisions, which Senate Finance Committee Chairman William Roth had helped shepherd, would increase the maximum that individuals could save each year in IRAs to $5,000, from $2,000, and increase maximum contributions to 401(k) accounts to $15,000, from $10,500. It would also make it easier for small businesses to offer employee pension plans, and would let workers older than 50 and those who have temporarily left the work force deposit more.

The package also includes legislation that would create over $4 billion in tax breaks for corporations that invest in so-called "new markets" and community renewal projects. The White House and House Speaker J. Dennis Hastert had strongly backed the new-markets plan, which would make banks and others eligible for tax credits worth more than 30% of investments made in poor inner-city and rural communities. They 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%.

In explaining why he would veto the package, the President complained that it does not contain any savings provisions targeted to the poor. Not included was a provision sponsored by Sen. Roth and cleared by Senate Finance that would have allowed low-income individuals to establish tax-favored Individual Development Accounts. Democrats have also protested that the tax package does not include $5 billion of federal guarantees for loans to special private entities that in turn would invest in poor communities. That provision was in the new markets bill the House passed in July.

Swaps Agreements

S 2697, HR 4541

Negotiations between the Treasury Department and Senate Republicans on the Commodity Futures Modernization Act of 2000, which would permit the trading of single-stock futures and protect swaps agreements from regulation by the Commodity Futures Trading Commission, are on hold until after the election.

The House passed the legislation Oct. 19, but critics have said it would insufficiently protect bank products from regulation by the CFTC.

Sen. Gramm is also pressing to shield bank swaps from Securities and Exchange Commission regulation.

Supporters of strengthening the legislation to protect bank products hope the extended congressional session will give negotiators more time to work out their differences.

Regulatory Relief

S 1452 with amendments

The House approved Oct. 24, by a voice vote, a package of banking and housing bills called the Manufactured Housing Improvement Act. It was spearheaded by Banking Committee Chairman Jim Leach and the panel's top Democrat, Rep. John J. LaFalce of New York.

The package includes about 20 regulatory relief provisions that, among other things, would repeal the requirement that thrifts keep 4% to 10% of their assets liquid. It would also provide more flexibility for electing national bank directors, by allowing staggered terms of as many as three years. Another measure would extend to May 12 the Federal Home Loan Bank's deadline to issue new capital rules.

The package also contains provisions to reinstate a number of federal banking regulatory reports to Congress, including the Federal Reserve Board's annual survey of bank fees. The Fed chairman also would be required to testify on the state of the economy at least twice a year, once before the House Banking Committee and once before the Senate Banking Committee.

It also contains some measures related to mortgage lending, including one that would create low-cost mortgages for teachers, law enforcement officers, and other municipal employees.

Supporters of the package say Senate Banking Committee Chairman Phil Gramm's objections to the municipal workers provision have caused the legislation to stall. Sen. Wayne Allard, R-Colo., has been given the task of negotiating a compromise. Even if a compromise is worked out before Congress adjourns for the year, it is unclear if Republican leaders would attach the bill to any large, end-of-session spending or tax bills.


HR 4942

Industry lobbyists are keeping a close watch for attempts to add consumer privacy protections to any last-minute spending bills.

The industry won a minor victory Oct. 27, when the Senate passed an appro- priations bill containing an amendment sponsored by Sen. Judd Gregg, R-N.H., that would give companies more leeway in using Social Security numbers for such business purposes as identifying customers.

While the measure, under many circumstances, would ban the sale of Social Security numbers, it would exempt many businesses, including banks, that wish to share the numbers with affiliates or other companies.

The President said he would veto the bill, in part because of the Social Security number provision. The White House and consumer advocates said it would roll back consumer privacy protections.

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