ACTION ON LEGISLATION
Bankruptcy Reform
S 220, HR 333
The House approved bankruptcy overhaul legislation on March 1 by a vote of 306 to 108. On Monday, the Senate began debating the measure and a slew of amendments, and is expected to vote next week.Among other provisions, the bill would establish a "means test" to determine whether people should be allowed to file for protection under Chapter 7 of the federal Bankruptcy Code, which discharges filers from credit card and other unsecured debts. It would make more debtors file under Chapter 13, which requires debtors to pay off most or all their debts.
The legislation came out of the House Judiciary Committee Feb. 14 on 19-to-8 party-line vote with no substantive amendments. The Senate Judiciary Committee added more amendments to its version of the measure, which cleared the panel Feb. 28 by a vote of 10 to 8.
Senate Judiciary accepted an amendment by Sen. Charles Schumer, D-N.Y., that would prohibit people convicted of crimes from filing for bankruptcy to avoid paying court-ordered fines, penalties, or damages. Similar amendments that specifically applied to people convicted of violence against abortion clinics held up identical bankruptcy legislation last year before it eventually passed, only to be pocket-vetoed by President Clinton. Sen. Schumer modified his amendment to eliminate all specific references to abortion.
The committee also adopted Sen. Schumer's "netting" amendment. The provision is designed to limit the damage that can occur when a company that holds derivatives contracts files for bankruptcy. Under current law, derivative contracts are frozen in a bankruptcy proceeding, which prevents creditors of a bankrupt institution from settling their obligations. The amendment would let creditors reconcile, or "net out," their derivatives contracts, and thus reduce their losses.
Senate Judiciary Chairman Orrin Hatch of Utah and Sen. Patrick Leahy of Vermont, the ranking Democrat on the committee, collaborated on an amendment to protect consumer privacy. Their amendment, adopted on a voice vote, would prohibit companies filing for bankruptcy from selling client lists containing personal information, such as Social Security numbers, as a way to pay off creditors. The provision also would create a consumer privacy ombudsman to protect consumers' interests in bankruptcy court.
Tax Cuts
S 275, HR 3
The House is scheduled todayto approve legislation that would implement the core of President Bush's $1.6 trillion tax cut plan to reduce personal income taxes. While the $958 billion individual rate cut proposal offers little specifically for banks, the industry has enthusiastically applauded its potential to spur long-term economic growth.
Though not part of the bill to chop rates, bankers are particularly interested in the portion of President Bush's plan that would repeal estate taxes, which currently max out at 55%.
Those provisions are being sponsored in the Senate by Sen. Jon Kyl, R-Ariz., and in the House by Reps. Jennifer Dunn, R-Wash., and John Tanner, D-Tenn. Sen. Kyl introduced his version of the bill on Feb. 7. Reps. Dunn and Tanner are expected to offer their measure soon.
The legislation would cut the 55% maximum inheritance tax by five percentage points immediately and by five more points in each of the next 10 years. It would exempt from estate taxes the first $1.3 million of assets; the current exemption is $675,000.
Congress passed a similar bill last August, but President Clinton vetoed it, and there were not enough votes to override the veto. Prospects for enactment are brighter this year.
NEW LEGISLATION
Privacy
S 324, HR 583
Sen. Richard C. Shelby, R-Ala., introduced legislation Feb. 14 that would restrict commercial uses of Social Security numbers.
Buying or selling of numbers would be prohibited. The financial services industry is seeking a provision, negotiated into a similar bill last year, that would give banks explicit leeway in using Social Security numbers for limited commercial purposes, such as identifying customers.
Senate Banking Committee Chairman Phil Gramm said he would hold a hearing on the legislation after Sen. Shelby floated - but did not offer - the legislation as an amendment to securities legislation last week. Sen. Gramm said he was not necessarily opposed to the bill but wanted to be careful of "unintended consequences."
Sen. Shelby also proposed but did not offer an amendment to require federal regulators to post on their Web sites the privacy policies of the institutions they supervise. Sen. Gramm said he was open to the idea.Separately, Reps. Asa Hutchinson, R-Ark., and Jim Moran, D-Va., introduced legislation in the House on Feb. 13 to create a bipartisan Privacy Protection Commission. The bill, which was narrowly defeated in the House last year, would establish a 17-member commission, appointed by the president and Congress, to examine how the financial services, high-tech, and medical industries, as well as the government itself, handle privacy.
Interest on Business Checking
S 229
The House financial institutions subcommittee has scheduled a hearing for March 13 on legislation to let banks pay interest on business checking accounts as early as 2003.
The bill is expected to be introduced soon by subcommittee Chairman Spencer T. Bachus, R-Ala., or another panel member. The measure is expected to be similar to a bill Sen. Chuck Hagel, R-Neb., introduced on Jan. 31.
The Hagel bill would let banks and thrifts offer the interest-bearing accounts two years after the bill's enactment. In the interim, the legislation would increase to 24 per month, from six, the number of times banks could "sweep" funds overnight from non-interest-bearing commercial checking accounts into interest-bearing accounts.
The legislation also would authorize the government to pay interest on reserves that banks and thrifts are required to deposit with the Federal Reserve, but it is unclear whether this provision will be included in the House bill.
The measures are nearly identical to one that easily cleared the full House and the Senate Banking Committee last year, and then stalled. It has the strong backing of the small-business and farm lobbies, but banking industry opinion is divided.
Deposit Insurance
S 128, S 227, HR 746
Rep. Joel Hefley, R-Colo., introduced legislation Feb. 27 to increase federal deposit insurance coverage to about $200,000 per account. Sen. Tim Johnson, D-S.D. introduced the same bill in the Senate in January.
The measures would index coverage to 1980, when the limit on insured deposits was raised to $100,000 from $40,000. Afterward, deposit insurance would be indexed every three years to the consumer price index to keep up with inflation.
Supporters say the measure should help increase deposits in rural community banks, since rural people often have only one bank in their area.
Separately, Sen. Robert Torricelli, D-N.J., introduced a bill on Jan. 31 that would give municipal deposits 100% federal insurance coverage. In-state public deposits currently are insured for up to $200,000, and out-of-state municipal deposits are guaranteed up to $100,000.
Community Reinvestment
(Bill number not yet assigned)
Reps. Thomas M. Barrett, D-Wis., and Luis V. Gutierrez, D-Ill., on Tuesday introduced legislation that would repeal many changes to the Community Reinvestment Act made by the Gramm-Leach-Bliley Act of 1999, and would extend CRA requirements to other financial service providers, such as securities firms and insurance companies.
The bill would eliminate Gramm-Leach-Bliley's CRA "sunshine" provision, which requires banks and community groups to report details of CRA-related deals. It would undo some of the law's regulatory relief for small banks, requiring CRA exams to be conducted every two to three years.
The legislation would require banks to report more detailed demographic and geographic data under the Home Mortgage Disclosure Act, and would apply similar reporting requirements to insurance companies and small business and farm lenders.
It would also combat predatory lending by reducing the CRA ratings of financial institutions and their affiliates found to be engaging in the practice.
