The industry's top legislative priority cleared a major hurdle June 29 when it was approved by the House Banking Committee, but it still faces an uncertain future.
The major stumbling blocks are two insurance provisions. One, added by Banking Committee Chairman Jim Leach, would bar the comptroller of the currency from expanding national bank powers. Most banks oppose this section of the bill.
A second provision, permitting banks to affiliate with insurance companies, was added by an unlikely coalition of conservative Republicans and Democrats. The amendment, sponsored by Rep. Richard Baker, R-La., is opposed by the Independent Bankers Association of America and the Independent Insurance Agents of America.
If the insurance issues can be dealt with, the bill would be a major plum for banks. It would make a number of laws, from the Community Reinvestment Act to Truth-in-Lending, easier to live with, and addresses the Rodash court decision, which allows borrowers to repudiate mortgage contracts.
The bill also would allow financial institutions to share customer information among affiliates and subsidiaries. It would also transfer nearly all rulemaking authority for the Real Estate Settlement Procedures Act from the Department of Housing and Urban Development to the Federal Reserve.
The Senate version of regulatory relief is S 650.
with mug of Sen. Alfonse M. D'Amato, R-N.Y.
The Senate Banking Committee last month approved by voice vote a bill that would strengthen the federal government's power over state-chartered credit unions.
The Credit Union Reform and Enhancement Act would limit the lending and investment powers of federally insured state-chartered credit unions, as well as handing the National Credit Union Administration oversight over corporate credit unions.
Legislative sources expect S 883 to be taken up by the full Senate later this month.
Bank Enterprise Act
with mug of Rep. Floyd Flake, D-N.Y.
The House last month approved a package of spending cuts package that would provide financial incentives for community development lending.
The package would make $50 million available for President Clinton's community development bank program.
It also stipulates that one-third of the money be channeled to financial institutions through the Bank Enterprise Act, as amended by last year's community development bank law. The enterprise act, a 1991 law sponsored by Rep. Floyd H. Flake, D-N.Y., encourages banks to lend in low-income communities.
President Clinton vetoed an earlier package of cuts that would have dropped funding for community development banks but spared $36 million for the enterprise law. Community development banks were a top Clinton priority during the 1992 campaign.
The Senate last month took up legislation similar to the House's new version, but the bill hit a procedural snag. It was not clear when deliberations might resume.
Rep. Bill McCollum, R-Fla., has became the House's point man in the quest to shore up the Savings Association Insurance Fund. His bill, HR 1769, would make banks shoulder 75% of the annual interest tab on Financing Corp., or Fico, bonds. In return for help on Fico, the bill would reinstate the Federal Deposit Insurance Corp.'s authority to rebate money to banks once the fund's reserve ration climbed above the mandated 1.25%.
The measure would also merge the Office of Thrift Supervision and the Office of the Comptroller of the Currency. And once both bank and thrift insurance funds were fully capitalized, they would be merged as well. Under the bill, one year after the funds were merged, thrifts would be forced to convert to bank charters.
Individual retirement accounts
A budget agreement reached by House and Senate GOP leaders last month aims to expand individual retirement accounts. Though legislative sources said that congressional tax committees will have to hammer out exactly what sort of IRA expansion will be included in the budget, lawmakers are expected to include a tax-free account for non-working spouses.
Banks would benefit handsomely from expanded IRAs, which represent long-term core deposits.
Sens. William V. Roth, R-Del., and John Breaux, D-La., cosponsored a measure earlier in this Congress that would make IRA contributions fully deductible. A similar measure was introduced in the House by Rep. Bill Thomas, R-Calif.
Federal Home Loan Bank System
The House Banking subcommittee on capital markets is expected to begin consideration today of legislation that would modernize the Federal Home Loan Bank System.
The bill, introduced by subcommittee Chairman Richard Baker, R-La., would make membership voluntary for both banks and thrifts while limiting the ability of departing institutions to pull capital out of the system.
The allocation of Resolution Funding Corp. bond interest among the 12 Home Loan banks had proved to be the most contentious issue in the quest to modernize the system, since it would create as many winners as losers.
So Rep. Baker decided this week to leave out a proposed allocation formula from the bill. He also made a number of changes that have caused concern among industry representatives.
Gone is a provision that would have allowed commercial banks to increase their borrowings above the current ceiling of 30% of Home Loan Bank System advances. And Rep. Baker added a provision that would make it tougher for small banks to join the system.
The administration has proposed a plan similar in many respects to Rep. Baker's.
HR 1317, sponsored by House Commerce Committee Chairman Thomas Bliley and Rules Committee Chairman Gerald Solomon, would give states the right to limit insurance powers for national banks. Bank lobbyists are worried that the measure could be tacked onto Glass-Steagall repeal legislation or the regulatory relief bill.
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.