For the first time ever, the House approved legislation May 13 that would overhaul the financial services industry and allow mergers among banking, securities, and insurance firms.
Lawmakers approved the bill 214 to 213 on the strength of strong lobbying by Speaker Newt Gingrich. But prospects for enactment are slim this year. The Senate is preoccupied with other issues, and the Clinton administration remains adamantly opposed to a provision requiring banks to enter new businesses through holding company units.
Senate Banking Committee Chairman Alfonse M. D'Amato has scheduled a June 17 hearing on the bill. He plans to use the House version as a starting point. That bill would prohibit financial holding companies from owning any commercial businesses. Grandfathered companies would have to divest themselves of commercial activities within 10 to 15 years. Lawmakers soundly defeated amendments proposed by Rep. John J. LaFalce, D-N.Y., and Rep. Richard H. Baker, R-La., that would have broadened bank operating subsidiary powers.
The House was scheduled to vote June 10 on a consumer bankruptcy reform bill. (See story on page 1.)
The House Judiciary Committee approved the legislation, which was pushed by Rep. George W. Gekas, R-Pa., on an 18-to-10 vote May 14. It would use a formula based on income and living expenses to determine whether borrowers may eliminate unsecured credit in Chapter 7 or must repay at least some debts in Chapter 13.
The Senate Judiciary Committee adopted a consumer bankruptcy bill May 21 that would give judges more authority to force debtors to repay at least some unsecured credit. A Senate vote has not yet been scheduled.
As part of a temporary compromise, the House and Senate on May 22 approved a 50-basis-point federal subsidy to help pay for a cut in student loan rates that takes effect July 1. The measure, which was included in a $216 billion transportation spending bill, would cover loans made until Oct. 1.
Bankers praised the short-term fix because it would keep the student loan business profitable. Under a 1993 law, the rate that students pay will drop 80 basis points next month.
President Clinton opposes any long-term solution that involves compensating lenders for lost revenue. Bankers object to a proposal by the administration and Sen. Ted Kennedy, D-Mass., that Congress establish a pilot program that would determine whether rates could be set by auction.
The House approved a permanent 50-basis-point subsidy for bankers May 6. The Senate is expected to vote within two weeks on a similar subsidy as part of a higher-education spending bill. Sen. Kennedy wants the auction pilot included in that spending bill.
House and Senate negotiators reached a compromise by Wednesday on conflicting versions of legislation that would expand education savings accounts. Facing a presidential veto threat, lawmakers aim to vote on the bill next week.
The Senate passed legislation, which was sponsored by Sen. Paul Coverdell, R-Ga., on a 56-to-43 vote April 23 that would raise to $2,000 the amount parents may deposit in savings accounts for their children's education expenses and get a tax break. The House version of the legislation-which was sponsored by Speaker Newt Gingrich and Ways and Means Committee Chairman Bill Archer and approved on Oct. 20-would set the deposit limit at $2,500.
Lawmakers met June 5 and agreed to the Senate's $2,000 deposit maximum, which would be four times the current ceiling. To ease passage, negotiators dropped other controversial issues in the bill.
The Senate is expected to vote in mid- to late July on legislation that would let occupation-based credit unions serve an unlimited number of small companies. Action has been delayed because lawmakers are arguing behind the scenes about possible amendments and the Senate is distracted by budget and other issues.
The House on April 1 approved 411 to 8 a bill that would let occupation- based credit unions serve any unrelated company, provided it employs no more than 3,000 people. The Senate Banking Committee bill, passed 16 to 2 on April 30, would ease membership limits similarly but impose stricter supervisory and commercial lending requirements. Both bills would gut a Feb. 25 Supreme Court decision requiring credit union members to share a single, common bond.
Sen. Phil Gramm, R-Tex., is expected to propose an amendment stripping the bill of its community reinvestment requirements, and Sen. Richard C. Shelby, R-Ala., is expected to offer an amendment exempting small banks from community reinvestment requirements. Also, Sen. Chuck Hagel, R-Neb., is expected to propose tightening commercial lending limits further and tack on Federal Home Loan Bank System reform.
Senate Banking Committee Chairman Alfonse M. D'Amato demanded June 4 that Congress vote on stalled legislation that would reform private mortgage insurance.
The Senate approved a bill in November that would require lenders to automatically cancel private mortgage insurance when a borrower's equity in a home reaches 22%. For high-risk borrowers, however, lenders could require that insurance remain in place for half the life of a mortgage. The House bill, passed in April 1997, would terminate insurance when equity reaches 25% and gives lenders no slack for high-risk loans.
Lawmakers aim to vote on the legislation by the July 4 recess.