Action On Legisation

Financial Modernization

Financial reform legislation moves on to the House Commerce Committee following the Banking Committee's June 20 approval of a sweeping plan to let banks affiliate with securities, insurance, and nonfinancial firms.

Republican leaders gave Commerce Committee Chairman Thomas Bliley, R- Va., until Sept. 15 to make changes to the bill.

Sponsored by House Banking Committee Chairman Jim Leach, the legislation also would require federal thrifts to convert to national banks.

Under the Banking Committee's plan, banks would be allowed to earn up to 15% of their U.S. revenues from nonfinancial businesses, while commercial firms would be allowed to derive 15% of their revenues from banking assets. Banks acquired by nonfinancial companies would be required to have less than $500 million of assets and be at least five years old.

Interstate Branching

President Clinton last week signed into law a bill that makes it easier for state-chartered banks to branch across state lines.

The new law would let state banks exercise powers allowed by their home state regulators when they branch into other states. However, these activities would be limited to those also permitted to national banks. The bill was sponsored by Rep. Marge Roukema, R-N.J.

Individual Retirement Accounts

Congress is set to overhaul individual retirement account rules for the first time in more than 10 years.

Two weeks ago both the Senate and the House passed tax measures that would create a new type of IRA, reversing traditional account rules by letting people withdraw earnings tax-free. Contributions, however, would be taxed.

The Senate proposal, pushed by Finance Committee Chairman William V. Roth, also would allow penalty-free withdrawals by unemployed people.

His plan would double the income limits for tax-deductible contributions to traditional IRAs. Also, homemakers would be allowed to contribute up to $2,000 tax-free, even if a spouse participates in an employer-sponsored retirement plan.

Federal Home Loan banks

A host of problems facing the Federal Home Loan Bank System would be remedied as part of its financial modernization bill approved by House Banking.

Sponsored by Rep. Richard Baker, R-La., these provisions would make membership in the system voluntary, even for thrifts. The measure would remove the 30% cap on the share of advances Home Loan banks may make to commercial banks.

Member banks with less than $500 million of assets would be allowed to use system advances for small-business, agriculture, rural, and low-income community development loans.

The bill also would fix each Home Loan bank's obligation to pay interest on Resolution Funding Corp. bonds at 20% of net earnings. If this yields less than $300 million, each bank would be assessed equally to make up the shortfall.

Similar legislation is expected from Sen. Lauch Faircloth, R-N.C.

Asset Seizure

The House Judiciary Committee approved legislation June 20 that would make it harder for the government to seize assets of innocent individuals whose property is used in the commission of a crime.

The legislation, sponsored by Judiciary Committee Chairman Henry Hyde, would benefit banks because the seized property is often collateral for loans.

Under Rep. Hyde's plan, law enforcement officials would have to show "clear and convincing" evidence that the property is subject to seizure. Current law requires individuals to prove they are innocent after the assets have been confiscated. Also, the length of time an individual may challenge a seizure would increase from 10 days to 30 days.

ATM Fees

Senate Banking Committee Chairman Alfonse M. D'Amato on June 11 introduced legislation prohibiting banks from charging noncustomers who use their automated teller machines.

Rep. Bernard Sanders, Independent-Vt., introduced similar legislation Feb. 13. Banks would be forced to post surcharge fees on ATM screens and give customers the option of canceling a transaction under a bill introduced by Rep. Roukema.

PENDING LEGISLATION

Reverse Mortgages

The Senate approved legislation April 25 that would let the Department of Housing and Urban Development prohibit excessive fees on reverse mortgages.

Sen. D'Amato, who sponsored the bill, said the legislation would also prevent "scam artists" from charging senior citizens for information on reverse mortgages that HUD provides for free.

If the bill is enacted, HUD Secretary Andrew Cuomo has said, lenders that do business with lawbreakers would be banned from all agency programs.

Similar legislation has been introduced in the House by Rep. Rick Lazio, R-N.Y.

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