New Legislation

Financial Modernization

Lawmakers have introduced three financial modernization proposals, renewing a debate over bank powers that is likely to dominate the industry's 1997 legislative agenda.

Senate Banking Committee Chairman Alfonse M. D'Amato and Rep. Richard Baker Tuesday introduced identical bills that would remove all barriers preventing banks from affiliating with other types of companies.

Proposals from House Banking Committee Chairman Jim Leach and Rep. Marge Roukema, introduced Jan. 7, don't go as far. Rep. Leach's bill would let bank subsidiaries enter many new businesses directly but would forbid any mixing of banking and commerce. Rep. Roukema's would let banking companies earn up to 25% of their revenue from nonfinancial business lines. Both proposals call for merging the bank and thrift charters.

An additional reform proposal is expected from the Treasury Department.

Credit Unions

Rep. Martin Frost introduced legislation that would let credit unions stretch beyond their original membership group to serve low-income areas.

Rep. Frost said his bill is necessary because credit unions are willing to serve poor neighborhoods that banks avoid.

The bill would weaken a recent federal court decision that prohibits employer-based credit unions from expanding beyond their "core" membership. The Supreme Court is expected to decide by Feb. 18 whether to review the ruling.

Individual Retirement Accounts

Key lawmakers in January introduced legislation to overhaul individual retirement accounts, signaling bipartisan support for change.

The leading proposals would allow penalty-free withdrawals for specific purposes such as education expenses or first-time home purchases.

Senate Finance Committee Chairman William Roth is expected to lead the debate over IRA reform. The Delaware Republican introduced his Super IRA bill Jan. 22. An identical measure was introduced in the House by Reps. Bill Thomas, R-Calif., and Richard Neal, D-Mass.

Their plan would: eliminate income limits for tax-deductible contributions, permit IRA contributions by 401(k) participants, and allow homemakers to contribute to an IRA, regardless of whether their spouses participate in employer pension plans.

CommunityReinvestment Act

Rep. Bill McCollum, R-Fla., introduced legislation Jan. 9 to eliminate most Community Reinvestment Act reporting requirements. Instead, his proposal would let banks file public notices detailing their community lending.

Rep. McCollum said his plan would allow activists and neighborhood leaders to raise concerns at any time without having "extraordinary authority" to hold up mergers or other bank business.

The bill also would make the practice of "redlining" a violation of fair-lending and housing laws. Currently no prohibition exists, but courts have ruled that lenders may not deny loans based on neighborhood characteristics.

Finally, the bill would bar officials from bringing discrimination charges based solely on statistical evidence, such as a lack of lending to a particular community.

Federal HomeLoan Banks

Rep. Richard Baker revived his effort to reform the Federal Home Loan Bank System in a bill introduced Jan. 7.

Legislation he introduced would let the 12 Federal Home Loan banks make advances for community and economic development lending. Co-sponsored by Rep. Paul Kanjorski, D-Pa., the bill also would make membership in the system voluntary, even for thrifts, and would eliminate the cap on advances to commercial banks.

The bill is identical to a proposal they introduced last year, but Rep. Baker plans to unveil revisions during the next month.

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