Aiming to Stop Overregulation

George Bush says regulatory relief would be his highest legislative priority for banking if elected to a second term.

In a written statement prepared exclusively for American Banker, President Bush highlights his plans for the banking industry and lays and blame for restrictive banking laws on Democrats in Congress. He warns hat more such laws would be forthcoming should Bill Clinton win the election.

"With a Democratic Congress and a Democratic administration working hand in glove, the trend toward more burdensome regulations on the banking industry would go unchallenged-and even would be encouraged," the President said in the statement.

"I know that many of you feel besieged by the excessive regulatory mentality prevailing in some parts of Washington, and the hostile, reactionary political environment on Capitol Hill engendered by the savings and loan collapse. I, too, am concerned and believe in November that you have a clear choice."

Against Market Intervention

Mr. Bush said Mr. Clinton favors government intervention in credit market,s noting that the Arkansas governor's proposal for a more progressive version of the Community Reinvestment Act shows that Democrats view and banking industry as a tool to achieve social ends.

"How many progressive changes in the banking laws have reduced your regulatory burden in the past?" Mr. Bush asked.

The President said he shared bankers' faith in a free market and their frustration with "an overreactive Congress that has consistently failed to give the banking industry the tools it needs to compete in the 21st century, instead piling on more and more social policy responsibilities and creating a climate that discourages prudent risk-taking."

He called the Federal Deposit Insurance Corporation Improvement Act of 1991 "the highest expression of the over-regulatory mindset."

If reelected, Mr. Bush said he would build on this year's unsuccessful Credit Availability and Regulatory Relief Act, which was an attempt to roll back some of the regulatory excesses of the improvement act.

"I will also continue the effort at the administrative level to ensure that unnecessary rules are eliminated, surviving rules are as reasonable, as possible, and paperwork reduced," said the President.

"Congressional overreaction has created a chilling effect, seriously retarding risk-taking by bankers, creating a climate of fear in a system that must assume prudent risk to fulfill the economy's credit needs," he said.

Mr. Bush said he would continue to press for legislation to modernize the banking system so that bankers can compete equally with nonbank firms.

"The traditional domestic banking franchise continues to erode as prime business borrowers fund directly in the capital markets; and as automobile manufacturers make car loans and join department stores, gas stations, and telephone companies in issuing credit cards; and as mutual funds attract investors' money away from bank deposits," Mr. Bush said.

"The distinction between my agenda and that of my opponent could not be sharper. I need your support on Nov. 3 to ensure that a revitalized and competitive bank and thrift industry serves as a healthy catalyst of economic growth for years to come."

Community Help With a Capital |C'

If Arkansas Gov. Bill Clinton becomes President, a central feature of his economic program will be the creation of a national network of community development banks, he said in a letter to American Banker.

Gov. Clinton was responding to a request from this newspaper for his views on the banking industry and his plans to address its problems.

President Bush responded to a similar request, marking the first time in several elections that both candidates have discussed the needs of the industry.

Gov. Clinton pledged that he would instruct bank regulatory agencies to "review federal regulations, examination procedures, and loan-classification standards to increase lending activity to small business."

He said his administration would ensure that banks, S&Ls, and other financial institutions operate safely and soundly.

"The collapse of hundreds of savings and loans is one of the starkest examples of Ronald Reagan and George Bush's mismanagement of the economy.

"The financial cops were pulled off the beat, letting deregulated S&Ls operate with virtually no supervision.

"Now the middle class, who played by the rules during the 1980s, has to pay the bill - a taxpayer tab of more than $ 500 billion."

Under Gov. Clinton's community-development bank concept, commercial banks would be encouraged to place deposits in the nonprofit institutions in return for credit toward Community Reinvestment Act requirements.

"In rural and low-income areas, entrepreneurship often involves a level of risk that prevents traditional banks from supplying capital.

"Many entrepreneurs and homeowners are thwarted just because they can't obtain financing, and people and neighborhoods suffer as a result," Gov. Clinton said.

The governor's concept is modeled on 19-year-old South Shore Bank, which has invested $260 million in Chicago's South Side and boasts a default rate of only 0.05%. Southern Development Bancorp., established in Arkansas in 1988, has made $12.5 million in loans and investments.

"A community development bank is actually a holding company that encompasses a federal deposit institution offering traditional bank services, a for-profit real estate development company, an SBA-approved small-business development company, and one or more non-profit corporations that provide consulting services," Gov. Clinton said.

No Usury Ceiling Planned

The Democratic presidential candidate said he would create a national information clearing house to teach people how to start and run a development bank and to provide technical assistance.

"Simply disseminating information will play a key role in establishing community development banks," he said.

Gov. Clinton was asked about campaign statements he made in New Hampshire during the primary that he would force down credit card interest rates.

Did that means he plans to reinstitute federal usury ceilings?

"In New Hampshire, I called on banks to lower the interest rates they charge good credit card customers and on federal bank regulators to avoid causing good loans to be called. I never have proposed and do not now propose reinstating federal usury ceilings," he said.

The Bush Agenda

In his second term, Bush says he would:

* Provide bankers with relief from regulations that are found to be overly burdensome.

* Create more "reasonable" procedures for regulatory agencies to follow when examining banks.

* Push to permit banks to branch across state lines and underwrite securities.

The Clinton Agenda

As President, Clinton says he would:

* Create a nationwide network of 100 community development banks to provide credit in low-income communities.

* Push to overhaul the Community Reinvestment Act to emphasize "performance over paperwork."

* Order bank examiners to end what he perceives as a crackdown on lenders.

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