Financial Modernization

The House Commerce Committee is gearing up to make changes to pending financial reform legislation. First, the panel's finance and hazardous waste subcommittee is scheduled to vote on the package Sept. 17. A full committee ballot will follow Sept. 25.

Staff members for Commerce Committee Chairman Thomas Bliley, R-Va. and Rep. Michael Oxley, R-Ohio, spent most of August revising the bill approved by the House Banking Committee on June 20. The measure would let banks affiliate with securities, insurance, and nonfinancial firms.

Early drafts of the legislation would bolster state regulators' ability to restrict bank insurance sales and would strip the comptroller of the currency's ability to grant new insurance powers to national banks. They also would eliminate the National Council on Financial Services, which the Banking Committee bill would create to settle differences among financial regulators. The Commerce Committee is expected to retain a provision requiring federal thrifts to convert to national banks.

Business Checking Accounts/Sterile Reserves

Rep. Jack Metcalf, R-Wash. introduced legislation that would let banks pay interest on business checking accounts. The measure is intended to help small banks compete with large ones, many of which already offer businesses sophisticated money market "sweep" accounts.

Rep. Metcalf's plan also would require the Federal Reserve banks to pay interest on required reserves.

On the Senate side, Banking Committee Chairman Alfonse M. D'Amato has pledged to hold hearings on a the proposal this month. Senate sources said the measure may be included in a regulatory relief package being drafted by Sens. Richard Shelby, R-Ala., and Connie Mack, R-Fla.

Debit Cards

Reps. Henry Gonzalez, D-Tex., and Charles Schumer, D-N.Y., introduced a bill to cap consumer liability for stolen debit cards at $50. Their proposal also would require that debit card solicitations disclose that the card can be used without a personal identification number.

The bill would bring debit cards' consumer protections in line with those of credit cards, rather than automated teller machine cards. Liability for ATM cards would rise to $500 if the issuer were not notified within 48 hours after a card was lost. Liability would be unlimited if card loss were not reported within six months.

To head off growing sentiment for legislation, Visa U.S.A. and MasterCard recently announced they would cap liability for unauthorized debit card purchases at $50. Visa also said it would eliminate all liability on unauthorized credit and debit card purchases for consumers who reported problems within two business days. MasterCard International will waive liability if a consumer notifies it within 24 hours after discovering a lost or stolen card.

Federal Home Loan banks

As part of his effort to revamp the Federal Home Loan Bank System, Sen. Lauch Faircloth will hold a Sept. 24 hearing on the Federal Housing Finance Board, the system's regulator.

The North Carolina Republican recently charged that the board had overstepped its authority by issuing a new mission statement that could force Home Loan banks to fulfill unmet credit needs in their communities.

Sen. Faircloth is expected to introduce legislation on the Federal Home Loan Bank System similar to a measure tacked on to the House Banking Committee's financial modernization bill.

That measure, sponsored by Rep. Richard Baker, R-La., would make membership in the system voluntary, even for thrifts. It also would remove the 30% cap on advances Home Loan banks may make to commercial banks.

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

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. Sen. Faircloth's bill is not expected to include this provision.

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