Bankruptcy Reform HR 2415

Legislation to overhaul bankruptcy laws cleared the Senate 70-28 on Dec. 7. The White House has promised to veto the bill, which passed the House Oct. 12 by a unanimous voice vote.

The measure, called the Bankruptcy Reform Act of 2000, is a top industry priority because it would relieve creditors from shouldering most of bankruptcy filers’ debts. Specifically, it would create a means test that would require those with higher incomes to repay more of their debt. The means test 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.

Though the measure passed the House and Senate by veto-proof majorities, it is not clear if Congress will be in session to attempt an override. If it is, National Economic Council Director Gene Sperling last week predicted enough Democrats will pull back their initial support to prevent an override. Meanwhile, the industry plans to step up lobbying efforts in support of the override.

The White House has charged that the legislation favors creditors and that it is not tough enough on abortion-clinic attackers who use bankruptcy laws to avoid paying for damages they have caused.

The administration also objects to a provision in the bill that would let wealthy debtors thwart creditors by buying expensive homes that cannot be seized. The bill would let debtors keep any home they have lived in for two years.

Regulatory Relief HR 5640

The House and Senate last week unanimously approved a bipartisan bill containing a number of banking and housing measures. The legislation, which President Clinton is expected to sign into law, cleared the House on Dec. 5 and the Senate on Dec. 7.

The bill 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 provide more flexibility for electing national bank directors by allowing staggered terms of as many as three years. Another measure would extend a deadline for new capital rules at the 12 Federal Home Loan Banks by six months, to May 2001.

The package also contains provisions to reinstate some 45 federal banking regulatory reports to Congress, including the Federal Reserve Board’s annual survey of bank fees and services, and another comparing the prices of credit cards. The Fed chairman 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.

Among the bill’s housing provisions is authority for local housing officials to allow families receiving Federal rental assistance to aggregate up to a year’s worth of assistance to use toward down payment and closing costs in the purchase of a home. It also would clarify a 1998 law to make it easier for homeowners to cancel private mortgage insurance.

Finally, the bill would raise the salaries of Fed officials, and allow the central bank to purchase a third office building in Washington. The chairman’s annual salary would rise $15,700 to the level of cabinet secretaries, currently $157,000.

The American Homeownership and Economic Opportunity Act of 2000, an earlier version of which passed the House on Oct. 24, was spearheaded by Banking Committee Chairman Jim Leach and the panel’s top Democrat, Rep. John J. LaFalce of New York.

The final version contains compromises to accommodate concerns of Senate Banking Committee members. The primary sticking point was committee Chairman Phil Gramm’s objections to a provision that would have established low-cost FHA mortgages for municipal employees such as teachers and firefighters whose salaries did not keep pace with the private sector. Sen. Gramm said the provision was government favoritism. It was dropped.

Swaps Agreements HR 4541

Attempts to jump-start negotiations between the administration and congressional Republicans on the Commodity Futures Modernization Act appear to be failing.

The legislation, which the House passed overwhelmingly Oct. 19 but has since stalled in the Senate, would exclude over-the-counter derivatives from commodities laws and permit the trading of single-stock futures. Critics have said the House version would insufficiently protect bank swaps products from regulation by the Commodity Futures Trading Commission, and thus drive American business overseas.

Last week Senate Banking Committee Chairman Phil Gramm drafted legislation aimed at giving current and future banking products — particularly swaps contracts — ironclad protection from regulation by the Futures Commission.

The draft, which representatives from the futures exchanges have agreed to, would amend the Gramm-Leach-Bliley Act. That statute, the Legal Certainty for Bank Products Act of 2000, would explicitly bar the Futures Commission from regulating bank products as currently defined by Gramm-Leach-Bliley, and would also require the commission to seek permission from the Federal Reserve Board to regulate “any new banking product.”

Democrats charge that under that plan, futures exchanges could escape Futures Commission oversight by merging with a bank.

The Treasury Department, the lead for the Clinton administration on the issue, countered late Monday with draft legislation of its own. A Senate Banking spokeswoman described the Treasury offer as a step backwards.


Tax Cuts HR 5542, HR 2614

Republican leaders last week ruled out passage of a $240 billion package of tax cuts and other measures sought by bankers, arguing that Congress should put off action to allow the next administration to have a say in such matters. The measure had already been stalled in negotiations between Congress and the Clinton White House.

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

Unless the pension provisions are revived by being attached to a mandatory spending bill, which the White House indicated last week it would support, they will be a top legislative priority for the industry next year. The legislation would increase the tax-deductible maximum that individuals could place each year in IRAs to $5,000, from $2,000, and increase maximum contributions to 401(k) accounts to $15,000, from $10,500.

Federal Reserve Chairman Alan Greenspan last week said he supports the business checking provision, as do Republican leaders. But the industry is divided. It could find new life in an appropriations measure. If not, next year congressional supporters are expected to revive the provision, which would have let banks start paying commercial customers interest on checking in 2002. In the interim, it would have quadrupled the number of withdrawals that could be made from interest-bearing sweeps accounts each month, to 24.

Privacy HR 4049, HR 4857, HR 4585

As Congress moves closer to adjournment, industry lobbyists said they are increasingly confident that no attempts will be made to add consumer privacy protections to any last-minute spending bills.

Money Laundering HR 3886

Deputy Treasury Secretary Stuart E. Eizenstat last month criticized Republican leaders in the House and Senate for failing to advance anti-money-laundering legislation. The House Banking Committee endorsed the bill 31-1 in June, but it was never taken up by the full House nor considered by the Senate Banking Committee.

The bipartisan bill, known as the International Counter-Money-Laundering Act of 2000, was introduced in March by House Banking Chairman Jim Leach and the committee’s top Democrat, Rep. John J. LaFalce. It would have given the Treasury secretary authority to identify countries or overseas financial institutions with weak anti-money-laundering policies or to target suspect types of international transactions. Such formal designation would trigger different requirements depending on the situation, ranging from special reporting mandates by U.S. financial institutions doing business with suspect foreign banks to barring institutions from operating or maintaining correspondent accounts for these entities.

Critics have said that sanctions would be too discretionary and less likely to be imposed because of diplomatic concerns. Mr. Eizenstat disagreed, saying that international efforts to single out money laundering havens had been successful, even when that meant criticizing U.S. allies or major banking centers. He and other Treasury officials have urged Congress to act next year.

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