Tax-free savings

Sens. Pete V. Domenici, R-NM, and Sam Nunn, D-Ga.

On April 25, Sens. Pete V. Domenici, R-N.M., and Sam Nunn, D-Ga., introduced a tax bill that would exempt from federal income tax net increases in bank accounts, among other investments.

By focusing on new savings, the Unlimited Savings Allowance Tax Actattempts to end a widespread practice in which individuals fund retirement accounts by moving money from existing accounts - thus gaining the tax advantage without creating new savings.

While there is growing interest on Capitol Hill in revamping the tax code, industry sources said other more pressing issues, such as deficit reduction, are likely to push back any action on this bill to next year.

Fair credit reporting

Sen. Christopher S. Bond, R-Mo.

A bill introduced last month by Sen. Christopher S. Bond, R-Mo., that would revamp credit reporting laws provides lenders with a mixed bag of pros and cons.

The measure, S 709, would make compliance easier and less expensive by replacing a patchwork of state credit reporting requirements with a uniform federal statute. The federal preemeption would last eight years after the bill is enacted.

However, some industry sources say the preemption would not go far enough because it does not cover state laws that hold banks liable for mistakes in credit reports.

The measure would hold banks liable for errors in credit information they submit to credit bureaus if a consumer notifies the lender of the mistake and it is not corrected. The consumer would then have the right to sue the creditor.

Retirement CD

Rep. Marge Roukema, R-N.J.

Rep. Marge Roukema, R-N.J., introduced legislation, HR 1574, this month that would ban bank sales of the controversial Retirement CD. The investment product resembles a traditional annuity, but is insured by the Federal Deposit Insurance Corp.

Bankers like the Retirement CD because it generates fee income and provides guaranteed, long-term deposits. However, lawmakers such as Rep. Roukema and Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y., who introduced similar legislation last Congress, don't like the fact that the instrument exposes the deposit insurance system to risk.

Legislative sources said this measure has a good chance of passage.


Financial Industry Modernization

Rep. Jim Leach, R-Iowa

The House Banking Committee on May 9 approved a bill to break down the barrier separating the securities and banking industries.

A variety of amendments were adopted during the vote, but House Banking Committee Chairman Jim Leach managed to steer the bill away from any controversial add-ons.

On May 4, the Iowa Republican unveiled his latest Glass-Steagall bill - the one that was voted on Tuesday. The bill contained a variety of changes, including one that would allow banks to continue selling within the institution many investment products that earlier version of the bill would have forced into a separately capitalized subsidiary.

The new version also would pare the amount of oversight the Federal Reserve has over holding companies.

While the Leach bill cleared a major hurdle in the House Banking Committee, the controversial question of allowing banks to merge withinsurance companies has still not been resolved. The Glass-Steagall bill will be taken up by the House Commerce Committee next, which is likely to be less friendly to the banking industry. Lawmakers in that committee may attempt to attach a measure that would roll back bank insurance powers.

Rodash Moratorium

Rep. Bill McCollum and Rep. Henry Gonzalez

The Senate on April 24 passed legislation placing a six-month moratorium on all Rodash-style class actions brought under the Truth-in-Lending Act. The bill passed the House on April 4, after being pieced together the night before. It was co-sponsored in the House by Reps. Bill McCollum, R-Fla., and Henry B. Gonzalez, D-Tex., among others.

HR 1380 gives Congress breathing room to deal with Rodash, a case in which a Florida court permitted a woman to rescind her mortgage, collecting fees and interest she paid to the lender, because of a technical error in the loan documents.

The president is expected to sign the bill soon.

Regulatory Relief

Sen. Richard Shelby and Rep. Doug Bereuter

In the Senate, Richard Shelby, R-Ala., and Connie Mack, R-Fla., are co- sponsoring a broad regulatory reform bill, S 650. During hearings held on the bill this month, bank regulators generally supported the measure, but urged lawmakers not to tinker with the newly revised CRA. The Shelby-Mack bill, among other things, seeks to exempt small banks from the Community Reinvestment Act.

Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y., hinted that he may defer to the administration, which is adamantly opposed to new CRA legislation.

The Senate bill would exempt banks with assets of less than $250 million from CRA. A House bill, introduced by Rep. Doug Bereuter, R-Neb., has a similar provision but targets banks with less than $100 million in assets located in small towns.

The House version, HR 1362, would also allow banks under $250 million in assets to "self-certify" that they are in compliance with CRA.

Both bills also contain provisions to scale back the Truth-in-Savings Act and eliminate reporting overlaps between the Fair Credit Reporting Act and the Equal Credit Opportunity Act.

Insurance Regulation

Rep. Thomas Blilely

A bill introduced by House Commerce Committee Chairman Thomas Bliley would give states the right to limit insurance powers for national banks.

A Commerce Committee aide said recently that the Virginia Republican intends to hold hearings on the bill sometime this month.

HR 1317 would open the door for states to shut down bank sales of annuities, a power the Comptroller of the Currency authorized as incidental to banking.

The Bliley bill is not likely to pass as a free-standing measure. Instead, it is expected to play into the debate over repeal of the Glass- Steagall Act. Rep. Bliley may offer it on the House floor as an amendment to the securities bill, a step that most observers believe would spell the end of Glass-Steagall legislation this year. However, others believe Rep. Bliley intended only to warn the Banking Committee against trying to expandbank insurance powers.

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