No one could ever accuse Senate Banking Committee Chairman Phil Gramm of being an admirer of F.D.R.'s big-government philosophy or his penchant for creating a plethora of alphabet agencies, many of which endure three generations later.
However, the senator's recent zealous approach to the "sunshine" provisions in the Gramm-Leach-Bliley Act of 1999 might make many bankers shudder and reconsider the unflattering parallels between F.D.R.'s and Sen. Gramm's approaches to government.
A few weeks ago four federal banking agencies issued "Proposed Rule on the Disclosure and Reporting of Community Reinvestment Act-Related Agreements," a Kafkaesque document more than 50,000 words long Raising far more questions than it resolves, this amorphous and artless document made clear that the new law's sunshine provisions, which Sen. Gramm insisted on:
- Are unworkable.
- Violate the First Amendment rights of both banks and community groups.
- Could create billions of pages of new reporting requirements from bewildered and underfunded nonprofits.
- Could create the need for a new alphabet agency, the Sunshine Enforcement Agency, or SEA.
Many mere mortals would have stepped back from their Frankenstein-like creation in horror. But not the fearless Texas Republican. The senator attacked this unworkable big-government intrusion as grossly inadequate.In a dramatic John Wayne flourish, Sen. Gramm stated that he "was shooting with real bullets here" and denounced the agencies' 140-page densely worked document as improperly excluding "probably 90% of all CRA contacts" from the law's disclosure requirements.
At a minimum, it is likely that any bank grant exceeding $10,000 and most loans over $50,000 to any community group that discusses CRA issues with a bank would be potentially reportable by any bank with a written CRA agreement. And the community group would have to report in specific detail how it spent the grant. (Last year banks made an estimated $1 billion in grants to over 100,000 nonprofits, most of which are likely to be subject to these sunshine provisions.)
One clear virtue of Sen. Gramm's comprehensive, "real bullets" approach to sunshine is the certainty of court challenges and the likelihood that most of the intrusive and unworkable bank/community grant reporting provisions will be declared unconstitutional.
Missing in the one-sided "debate" is a discussion of the real purpose behind the sunshine provisions.
Sen. Gramm, correctly in our opinion, has decried the secrecy of some CRA agreements and demanded that they be made public. This is a noble purpose, and we strongly support such.
Most community CRA groups, such as the California-based and multi-ethnic Greenlining Institute, have always made their CRA agreements public at the time of the agreement. Greenlining's modus operandi, for example, is to file the CRA agreement with the Fed and the supervising regulator and issue a press release or hold a press conference. Often the bank CEO joins in the press conference and then sends detailed reports on the agreement to thousands of nonprofits and local government agencies.
Assuming, as is likely, that the federal regulators buckle under to Sen. Gramm, as the President did last year, we offer some Kafkaesque examples of "contacts" that Sen. Gramm appears to believe trigger his "real bullets" approach and are likely to cause a nonprofit to hire a CPA to avoid being "hit."
- Under Texas common law, a handshake could be the equivalent of a written agreement that triggers a complex CRA reporting system. Does an oral greeting in San Antonio, consummated by a handshake between Bank of America's CEO and a community group, constitute a CRA contract if the CEO states that he's committed to inner city economic development?
- A nonprofit food program that is part of a 200-member umbrella CRA group and receives $10,000 to feed the hungry may have to report the details of its grant expenditures even if it never met with any financial institution.
- Can any $10,000 grant from a major bank ever escape CRA reporting, since banks such as Bank of America continually undergo CRA exams, close branches, or involved in mergers subject to community protests?
- Is a CRA advocacy group that has a history of criticizing major mergers covered if it refrains from objecting to a particular merger? From Sen. Gramm's perspective, the failure to protest may trigger the same onerous reporting system for all of the group's members.
We look forward to the congressional hearings Sen. Gramm has threatened to hold on the new CRA reporting requirements. Our first request will be to ask him to voluntarily secure a "sense of Congress" informal vote on his inadvertent efforts to create the need for a Sunshine Enforcement Agency. Should the senator refuse, we anticipate many court challenges and an eventual Supreme Court review.Or perhaps Alan Greenspan, the world's best-known advocate of minimal government intrusion, will step up to the plate and hit a metaphorical "Gramm slam" for free markets and First Amendment rights.
Mr. Dean is president and chief executive officer of the Greater Phoenix Urban League. Mr. Gamboa is executive director of the Greenlining Institute, a public policy and leadership training center in San Francisco.
|Note to Readers|
"Viewpoints" is a regular feature in American Banker, appearing every Friday. It serves as a forum for discussion and debate on a wide range of issues in the financial services industry, including management approaches and strategies, legislative and regulatory matters, and public policy in general.
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