May 5, 1999 CONGRESSIONAL RECORD—SENATE 8405 between community banks and global between these entities are carefully So today I want to pay particular at- institutions, between the regulators constructed to ensure institutional tention to our Mississippi Teacher of and the regulated, between the States safety and soundness and that the tax- the Year, Mary Beth Black. She teach- and the Federal Government, and be- payer-insured deposits of retail bank- es chemistry, physics, and advanced tween ordinary people and the money ing institutions are protected. placement physics. I remember those they need to finance their hopes and The structure provided for in this courses. They are the reason I didn’t go dreams. In recent years, we have wit- legislation will end the ad hoc expan- into pharmacy or med school. Biology, nessed a wave of high-profile mergers, sion and administration of our banking chemistry, physics—I took all the col- as institutions across the sectors hope sector and provide the industry with a lege preparatory courses, and I look to create ‘‘synergy’’ from offering a clear roadmap for the 21st century. In back now and I know that I was wast- broad range of financial products to an my view, it will lead to greater sta- ing space. I was really never destined expanding global customer base. For bility, enhanced safety and soundness, to major in the sciences. But it is so their part, many smaller, community- and improved choices for customers important that we have teachers who based institutions are using the new and consumers. inspire students in that area. If we are regulatory authorities to offer their So I urge my colleagues to support going to be competitive in the future, customers one-stop shopping for indi- passage of this important bill and de- in the next millennium, and partici- vidual financial needs—from ordinary feat the Sarbanes substitute. pate in the world economy, we are retail banking to insurance products With that, I yield the floor. going to have to have students who are and securities instruments. Mr. LOTT addressed the Chair. good in science, physics, computer All of this is very important to the The PRESIDING OFFICER. The ma- sciences, and the sciences in general. continued financial well-being of our jority leader is recognized. In order for them to learn what they Mr. LOTT. What is the parliamen- Nation and to the global competitive- need to know and to be inspired in that tary situation? field, you need great teachers like this ness of our financial services industry. The PRESIDING OFFICER. The time However, the expansions I speak of are teacher, the ‘‘Teacher of the Year’’ in is under the control of the Senator Mississippi, who teaches at Emory, MS, not taking place with the approval of from Texas and the Senator from a wonderful lady with a wonderful the Congress and are not occurring Maryland. record. through any action on our part to Mr. LOTT. I yield myself time out of She points, interestingly enough, to change the law. Rather, these things my leader time. her second-grade teacher who, she are happening because—as the 1991 re- The PRESIDING OFFICER. The ma- noted, inspired her when she was 7 port mentioned—court decisions and jority leader is recognized. years old—that she knew when she was the broadened interpretations of Mr. LOTT. Mr. President, I will be 7 she could be anything she chose to be: present law by the banking regulators brief because we have to get back to She could be a brain surgeon, she could have allowed them to take place in an this Financial Services Modernization drive a fire truck, or go to the Moon. ad hoc manner. In order to access the Act. I know the two managers man- But this second-grade teacher inspired right to affiliate with other sectors, fi- aging this are working on it stu- her to want to be a teacher. She always nancial companies have to jump over diously, and we will be having votes wanted to be a teacher—and to be more increasingly complicated regulatory later today. It looks to me as if we can than just a teacher, to be an inspira- hurdles in order to adapt and survive. make good progress. tion to young people. It is high time Congress weighed in on f She said: this important trend. It is high time Second grade can be challenging. My prob- we cleared the way for these affili- MARY BETH BOYER BLACK, MIS- lem was cursive writing or ‘‘real writing’’ as ations and repealed the underlying web SISSIPPI’S 1999 TEACHER OF THE we second graders called it. No matter how of Depression-era restrictions on our YEAR hard I tried, my loops and swoops and tilts banking industry. Mr. LOTT. Mr. President, I join my were never as good as my peers. That is what we accomplish in the other colleagues here today in recog- ‘‘Until now,’’ she said, ‘‘school had bill before us today, Mr. President. nizing National Teacher Appreciation been great.’’ But in this instance it got This legislation allows companies to Week. I am the son of a schoolteacher. to be a problem and a challenge. But diversify holdings by lifting the prohi- My mother taught school for 19 years, her second-grade teacher, Mrs. Hurt, bitions on affiliations among banks, in- between first and the sixth grade. She worked with her and taught her and surance companies, and securities finally had to leave teaching because then became an inspiration to her. So today I give thanks and apprecia- firms, thus allowing them to compete in those days teachers basically could tion to all of our teachers across our fully in a free-market environment. If not make enough money to live on. She great country, and in my State of Mis- Congress fails to act, we will once wound up in bookkeeping and broad- sissippi to the ‘‘Mrs. Hurts’’ who again limit the potential of our finan- casting. I also worked for a university taught in those small, sometimes one- cial sector and we will continue to im- for 3 years, and I have a very serious and two-classroom buildings as my pose needless and unnecessary regu- appreciation for our teachers and the mother did, who not only taught the latory burdens on individual financial jobs they do. course but inspired a generation of institutions. The other body is moving I have stayed in touch, over the more teachers such as Mary Beth with its own legislation. The Senate years, with my second-, third-, and Black, Mississippi’s Teacher of the needs to act now to ensure that our fi- fourth-grade teachers at Duck Hill, Year. nancial sector is on solid footing for MS. I don’t know why, but I particu- An 18th-century American historian, the new century. larly remember those three and have Henry Brooks Adams, said: ‘‘A teacher The bill before us repeals the Depres- always appreciated them. I guess we re- affects eternity; (she) can never tell sion-era Glass-Steagall law prohibiting member the ones who teach us to write where (her) influence stops.’’ affiliations between commercial and and do the basic reading. They were So our teachers influence our young investment banks. It allows banks and wonderful women and wonderful peo- people, and they affect the future of insurance companies to affiliate under ple, and they inspired me in many our country and the world. Thanks to the same corporate umbrella. It con- ways. all of them. tains provisions outlining the appro- So in appreciation of this National I yield the floor. priate regulation of bank sales of in- Teacher Appreciation Week, I will f surance, and it allows banks with as- quote from the Bible. It says: sets of less than $1 billion to engage in Train up the child in the way he should go, FINANCIAL SERVICES a broader range of financial services and when he’s old, he will not depart from it. MODERNIZATION ACT OF 1999 through operating subsidiaries. Of Those were the words of Solomon. The Senate continued with the con- course, Mr. President, the relationships That is good advice from Solomon. sideration of the bill.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00012 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8406 CONGRESSIONAL RECORD—SENATE May 5, 1999 Mr. DASCHLE addressed the Chair. by every civil rights group. It is op- American neighbors. If anything, the Mr. SARBANES. Mr. President, I posed by community groups, commu- globalization of our economy makes a yield such time as the minority leader nity organizations, and local govern- reasonable separation between banking may consume. mental officials. and other commercial activities even The PRESIDING OFFICER. The Instead of a clear path to enact- more important now than it was when Democratic leader. ment—which is what we would have those laws were first enacted. Mr. DASCHLE. Mr. President, I had had we stayed with the bipartisan Unfortunately, as the distinguished thank the distinguished ranking mem- approach to H.R. 10—financial services Senator from Maryland has observed, ber, the Senator from Maryland. I reform is now on two tracks. There is the underlying bill weakens the separa- thank him and the Democratic mem- the veto track. And make no mistake, tion of banking and commerce in a bers of the Banking Committee for the S. 900 is on this track. It will be vetoed number of ways. Our alternative does tremendous leadership and patience if the President receives it in its cur- not. It reflects the careful com- that, in particular, Senator SARBANES rent form. Then there is the enactment promises developed last year. It pre- has demonstrated in getting us to this track. That is the track our substitute serves the separation between banks point. and the bipartisan House Banking bill and other commercial activities with- I also want to acknowledge the ef- are on. out in any way limiting the flexibility forts of all my colleagues on the Sen- We are not saying, ‘‘It is our way, or financial service companies need in to- ate Banking Committee, and especially no way.’’ Neither side should ever issue day’s economy. It strikes the right bal- the fellow Democrats of the Banking such an ultimatum. That is not the ance between opportunity and respon- Committee, who have put so much ef- way of the Senate. We have discussed sibility. fort and energy and diligence into with the majority leader our desire to Let me interject here that, should bringing us to this very important de- find a bipartisan way to get the finan- our substitute fail, my colleague from bate, and ultimately this vote which cial services modernization bill back South Dakota, Senator JOHNSON, in- we will shortly have. on the enactment track. We have tends to offer a related amendment. It I might add, as I know the distin- agreed to a floor procedure which will would close a loophole which commer- guished Senator from Maryland has al- enable us to finish this bill in an expe- cial companies currently use to mix ready noted, that every Democratic ditious manner. banking and commerce by acquiring member of the Senate Banking Com- We do not want to delay this bill any existing unitary thrift holding compa- mittee is a cosponsor of the substitute longer. That has already happened. It nies. I will strongly support his effort. we will be voting on shortly. Together, has already been delayed. As I said, we A third difference between our sub- my colleagues on the committee have want to pass financial services mod- stitute and S. 900 has to do with con- produced a proposal to give financial ernization this year, and perhaps even sumer protection. H.R. 10—the bill the service companies new freedoms and this week. So the choice for the Senate Banking Committee passed out last new flexibility—without risking the fi- is clear. It is partisan brinkmanship, or year with overwhelming support—in- nancial well-being of our economy or of bipartisan accomplishment. cluded a number of consumer protec- individuals. It is a balanced, respon- We stand ready on this side of the tions having to do with such things as sible proposal—one the President can aisle to deliver a bill that the Presi- risk disclosure and licensing of per- sign—and, on behalf of the entire dent can sign. He has cited four serious sonnel. Those protections were essen- Democratic caucus, I thank them for flaws in S. 900 which he has said will tial for its passage last year. They re- producing it. force him to veto the bill. Our sub- main essential to the American people. Let me be very clear, Mr. President. stitute corrects all four flaws. They have all been stripped out of the Senate Democrats support financial First and foremost, our substitute underlying bill—every one of them. services modernization. We want to see does not gut CRA—the Community Re- They are all included in the Demo- a bill passed. There is no good reason investment Act—as S. 900 does. The cratic alternative. They must be in- that can’t happen this year—in fact, CRA has proven a huge success in ex- cluded in any financial services bill this week. panding access to credit and invest- this Congress passes, or the President This should not be a partisan issue. ment in low- and moderate-income will veto it. Historically, it has not been one. communities. Investment capital is the There is a fourth way in which our Our substitute is based on last year’s lifeblood of these communities. That bill differs from both the committee H.R. 10. The Senate Banking Com- capital must continue to be available bill and from last year’s bill. It in- mittee passed H.R. 10 on a vote of 16 to to qualified borrowers in all commu- volves what financial activities can 2—16 to 2. Republicans on the Senate nities. We cannot draw red lines around take place in subsidiaries of banks, and Banking Committee supported H.R. 10 the American dream. Democrats will under what conditions. last year. So did virtually every major not support a bill that undermines the As the legislative process has pro- financial services industry group. effectiveness of the CRA. gressed, the Treasury Department has In the House, the House Banking The second major difference between agreed to significant additional safe- Committee passed a very similar bill our substitute and the underlying bill guards regarding the financial activi- this year. Again, the vote was over- is the way the two proposals deal with ties of banks’ operating subsidiaries. whelmingly bipartisan—51 to 8. the separation of banking and com- Our alternative incorporates these Until recently, Democrats and Re- merce. safeguards. At the same time, it would publicans have agreed overwhelmingly For nearly 70 years, since the col- permit banks to structure certain new that the path laid out in our substitute lapse of the banking industry during activities in these so-called ‘‘op-subs’’ was the right path. That has all the Great Depression, U.S. law has sep- as they see fit. Again, it balances op- changed. Reform has suffered a major arated banking from other commercial portunity and responsibility. setback this year. In the Senate Bank- activities. An army of experts—from Mr. President, that is where we ing Committee, the majority forced Chairman Greenspan to Secretary stand—the juncture of two tracks: The through a new, harshly partisan bill on Rubin to former Federal Reserve Chair- veto track, and the enactment track. a party line vote of 11 to 9. This new man Paul Volcker—believe that sepa- S. 900—as it is currently written— bill shattered the consensus that so ration must be maintained. will put us on the veto track. We know many people worked so long and so But you don’t have to look in the his- that: hard to create. tory books to understand why mixing It undermines the Community Rein- In place of the broad support enjoyed banking and other commercial activi- vestment Act. by H.R. 10, the committee bill is op- ties is risky business. Look at the re- It breaches the separation of banking posed now by every Democrat on the cent currency crisis that started in and commerce. Banking Committee. It is also opposed Asia and spread to some of our Latin It ignores consumer protection.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00013 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8407 And, it fails to strike a responsible tain a satisfactory or better CRA rat- Mr. SARBANES. I thank the Chair. balance on the question of bank oper- ing. Currently, the enforcement action Mr. President, I rise in very strong ating subsidiaries. authorized for the banking agencies is support of the substitute amendment, The failure to proceed on a bipartisan the ability to deny the noncompliant which is the provisions contained in S. track has placed this bill at risk. Un- banks’ application to acquire another 753, introduced by Senator DASCHLE less we negotiate with each other once facility. and all of the Democratic members of again in good faith, I must say this bill The substitute would expand the the Senate Banking, Housing, and will be vetoed. reach of CRA to noninsured institu- Urban Affairs Committee. If that happens, it would represent a tions or wholesale financial institu- We have been at this for a long serious failure on the part of this Sen- tions, and they don’t even deal with time—those on the committee and ate. consumers. Previously it had been ar- other Members who have been inter- More important, it would deprive gued that banks and thrifts convey an ested in the issue of financial services American businesses, and the Amer- economic benefit as a result of deposit modernization. We have been seeking ican people, of important tools and insurance, and thus the CRA is justifi- to find a way to pass a bill to protect safeguards they need in this new global ably imposed on those institutions. But safety and soundness, to protect con- economy. now, for the first time, this amend- sumers, to ensure that CRA not be un- We appeal to our colleagues: Let’s ment would expand CRA to the non- dercut or eroded; and that permits fi- get this bill back on track. Let’s adopt FDIC-insured institutions. nancial service institutions within the this alternative. Let’s pass financial It would allow a Federal banking realm of financial services, in effect, to services modernization. This year. This agency to take enforcement action, enter into new arrangements in terms week. We can do it. I hope we will. such as the cease and desist order, civil of affiliations and the activities they Mr. GRAMM. Mr. President, I thank monetary penalties, or even criminal can conduct. the distinguished Democrat leader for sanctions, all for not complying with This is something that has been the effort he has made to get the Sen- the CRA. That is an expansion. These urged on us. Those in the industry ate to this point. Obviously, when we penalties could even be extended to an think it would be helpful to them. have votes on contentious issues, ulti- officer or director of the holding com- Some of this has been taking place mately Members come to the floor and pany or bank. without statute, but it is uncertain, vote. Somebody wins and somebody In addition to extraordinary CRA ex- unsure. It happens through regulation; loses. I think on many of the votes we pansion, I found several other problems it happens through court decision. I are going to have, neither of us knows with the substitute amendment. First, think most people think if we could ar- what the outcome will be. it reduces the authority of State insur- rive at a statutory framework in which We are beginning a process that will ance commissioners and creates the to place these developments that that go through conference. We have a bill National Association of Registered would be a desirable objective. in the House that is very different. I Agents and Brokers, NARAB. The in- That is why we introduced S. 753. think we all want to write a bill that surance agents in Wyoming oppose the That is why we are offering it as a sub- the White House can sign. NARAB provision because they believe stitute amendment to the committee Yesterday, the President came out it is the precursor to Federal regula- bill. It essentially tracks the language with six conditions for signing the bill, tion of insurance and Federal bureauc- of the bill that was reported last year two of which your substitute does not racy. on a vote of 16–2 from the committee comply with. Obviously, we are going The substitute amendment also re- with one exception with respect to op- to have to work with the White House duces the ability of the bank to engage erating subsidiaries. This substitute on a continuing basis. in trust and fiduciary activities. On the permits banks to conduct some activi- I want to assure you, Mr. Leader, I other hand, S. 900 allows a bank to en- ties in an operating subsidiary—not all will also sit down, roll up my sleeves, gage in traditional trust and fiduciary of the activities they can now engage and try to work. Maybe we can’t solve activities, just as they have done for so in—and that reflects, in part, an effort these problems, but if it is possible to many years. by Secretary Rubin to try to reach an solve them, I want to do it. Additionally, it is apparent that accommodation to ensure that some of I thank the Senator for his help. there is not consensus in the substitute the concerns that were raised are ad- Mr. President, how much time re- bill, and it differs from the product of dressed. mains on both sides? last year. I voted for H.R. 10 last year. There is a conflict, a difference of The PRESIDING OFFICER. The Sen- I will not vote for this substitute. It is view here, a very strong difference of ator from Texas has 11 minutes, and not the same bill. The most significant view here between Secretary Rubin and the Senator from Maryland has 7 min- difference lies in the operating sub- Chairman Greenspan, both of whom are utes 24 seconds. sidiary provisions. Last year, H.R. 10 saying to have a bill we have to have a Mr. GRAMM. I yield 5 minutes to the only passed the House by one vote. good bill, and their definition of a good distinguished Senator from Wyoming. Just last week the House Commerce bill, each of them, is one that cor- Mr. ENZI. Mr. President, I thank the Committee held a hearing on H.R. 10, responds to their views, particularly on chairman of the Banking Committee. I which is nearly identical to the sub- this important issue of the op-sub thank him for the time. I also thank stitute amendment, and the Members versus the affiliate, as far as carrying him for the leadership and direction on both sides of the aisle were very on activities. and focus he has had on this issue and critical of the bill. In this regard, I point out as we lis- his willingness to talk to others about I strongly encourage my colleagues ten to Secretary Rubin that we are the issues. to oppose the substitute amendment. It also listening, of course, to the possi- I rise to oppose the substitute does not represent a consensus, and it bilities of a Presidential veto. We can’t amendment offered by the ranking is certainly more burdensome and ex- get a bill into law without the Presi- member of the Banking Committee. pansive on the affected industries. It is dent’s signature—that is obvious and Most of the reasons for my opposition not the product of compromise. clear—and the President has taken a lie within the great expansion of the I yield back the remainder of my very strong position on this legisla- Community Reinvestment Act, or time. tion. In fact, he has sent a letter to the CRA. Mr. SARBANES. Mr. President, what committee stating in the clearest pos- For example, the amendment would is the parliamentary situation? sible terms that he would veto the allow the Federal banking agencies to The PRESIDING OFFICER. The Sen- committee bill if it was presented to take actions, including divestiture, ator from Texas controls 7 minutes 37 him in its current form. That is when forcing people to sell off parts of their seconds, and the Senator from Mary- we began the markup in the com- business if an institution fails to main- land has 7 minutes 24 seconds. mittee. The committee has issued a

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00014 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8408 CONGRESSIONAL RECORD—SENATE May 5, 1999 statement of administration policy in LEADERSHIP CONFERENCE from public comment unless individuals which they say: ON CIVIL RIGHTS present ‘‘substantial verifiable information’’ Washington, DC, March 18, 1999. to the contrary arising since the last exam- Nevertheless, because of crucial flaws in Hon. PHIL GRAMM, ination. Since over 95% of banks receive a the bill, the President has stated that if the Chairman, Committee on Banking, Housing, satisfactory rating, the provision would fun- bill were presented to him in its current and Urban Affairs, U.S. Senate, Wash- damentally undercut the right of community form, he would veto it. ington, DC. groups and others to comment on a bank’s We have had extended debate on the DEAR SENATOR GRAMM: We are writing to CRA performance.7 Community group par- differences between the committee bill express our deep concern over your public ticipation in the CRA process has been crit- and the substitute amendment. Sen- mischaracterizations of the Community Re- ical to the success of CRA. Public comment investment Act (CRA), and over the treat- on other aspects of a bank’s performance, ator GRAMM and I and others are par- ment of CRA in the Financial Services Mod- such as management or financial resources, ticipating in that. I am frank to say I ernization Act of 1999 as reported out of the would not face similar limitations on the thought the minority leader, Senator Senate Banking Committee on March 4. scope of information that may be introduced DASCHLE, just laid out a very clear, The Leadership Conference on Civil Rights nor be subject to the same burden of proof. concise, extremely well-stated position is the nation’s oldest, largest, and most di- Third, the bill exempts banks with less with respect to the differences between verse coalition of organizations committed than $100 million in assets from CRA. This 8 these approaches. to the protection of civil rights in the United represents 63% of all banks. If enacted the States. As leaders of the civil rights commu- provision will have devastating consequences We differ in banking and commerce. nity, we take strong issue with your descrip- for rural communities because small banks The substitute seeks to, in effect, reaf- tion of CRA as a vehicle for ‘‘fraud and ex- are often the only source of credit in rural firm, make clearer, the division be- tortion’’ 1 and to your characterization of areas. Despite claims that small banks by tween banking and commerce. We dif- CRA as ‘‘perhaps the greatest national scan- their nature serve the credit needs of local fer, as I indicated, with respect to the dal in America.’’ 2 To the contrary, we agree communities, data from regulators reveal operating subsidiary issue, which of with President Clinton that the Community that these institutions have disproportion- Reinvestment Act is ‘‘a law that has helped ately poor CRA records. course involves the sharp difference be- We would note that the financial services tween the Secretary of the Treasury to build homes, create jobs, and restore hope in communities across America.’’ 3 bill reported out of the House Banking Com- and the Chairman of the Federal Re- CRA has proven to be an effective means of mittee last week on a bipartisan vote of 51– serve. We differ very strongly on CRA. encouraging federally insured financial insti- 8 did not contain any of these shortcomings It is asserted that the substitute ex- tutions to extend prudent and profitable in regard to CRA. This is in sharp contrast pands CRA. In fact, what the substitute loans in underserved urban and rural com- to the 11–9 party line vote by which the Sen- seeks to do is to ensure that if banks munities. CRA has been credited with the ate Banking Committee reported out its bill, in significant measure because of the con- move into securities and insurance, dramatic increase in homeownership rates among minority, and low- and moderate-in- troversial CRA provisions. that those banks should have a satis- Fair access to credit, which is the purpose come individuals. Since 1993, the number of factory CRA rating before they can un- of CRA, is a critical civil rights issue. As the home mortgage loans extended to African- President has said, ‘‘CRA is working, and we dertake such a merger or affiliation. Americans has increased by 58%, to His- must preserve its vitality as we write the fi- It requires the banks to be in compli- panics by 62%, and to low- and moderate-in- nancial constitution for the 21st century.’’ 9 ance with CRA. It in effect says that a come borrowers by 38%.4 CRA has similarly As reported out of the Senate Banking Com- served as the impetus for revitalizing dis- bank with an unsatisfactory CRA rat- mittee, the Financial Services Act of 1999 tressed rural and urban communities ing is not going to be able to use this would drastically weaken CRA. Unless this through small business and small farm lend- additional power now being given to shortcoming is addressed, we would urge ing and community development invest- them to move into securities and to strong opposition to this legislation. ments. move into insurance. At the moment, Data from federal bank regulators reveal Sincerely, they do a limited amount of that activ- that the CRA has not been used arbitrarily Dr. Dorothy I. Height, Chairperson, ity. But if they are going to actually to block or delay bank applications to the Leadership Conference on Civil Rights; go into it in a full-scale way, which is regulators. Community groups and others Barbara Arnwine, Executive Director, Lawyers’ Committee for Civil Rights what this legislation offers—which rarely file adverse comments to bank appli- cations based on CRA. Less than 1% of bank Under Law; Andrew H. Mott, Executive both pieces of legislation offer to the Director, Center for Community banks, we do not differ on that propo- applications have received adverse com- 5 Change; Wade Henderson, Executive sition; both as a part of the financial ments. Moreover, assertions that banks pro- vide commitments to community groups and Director, Leadership Conference on services modernization approach are others because they are afraid that regu- Civil Rights; Karen Narasaki, Execu- prepared to permit that—but we feel lators will deny or substantially delay the tive Director, National Asian Pacific very strongly that they should be in processing of their application is not sup- American Legal Consortium; JoAnn K. compliance, the banks should be in ported by the record. Bank applications that Chase, Executive Director, National receive adverse comments are denied only Congress of American Indians. compliance with CRA, if they intend to Shanna L. Smith, Executive Director, 1% of the time.6 In addition, few applications do that. National Fair Housing Alliance; Hugh A number of very important groups are substantially delayed due to an adverse CRA comment. B. Price, President and Chief Executive in the community support the sub- Despite the strong record of CRA success Officer, National Urban league; Hilary stitute. I will have printed in the and the lack of evidence of abuse, the bill Shelton, Washington Bureau Director, RECORD letters from civil rights orga- that was reported out of the Senate Banking National Association for the Advance- nizations—from Hispanic organiza- Committee seriously weakens CRA in three ment of Colored People; Raul Yzaguirre, President, National Council tions, which have been very strong in ways. First, it does not require that all banks in a bank holding company have a of La Raza; Manuel Mirabal, President perceiving that CRA has made a big, and Chief Executive Officer, National big difference in their community in ‘‘satisfactory’’ CRA rating to exercise the new powers provided by the legislation. This Puerto Rican Coalition, Inc. terms of home ownership and in terms would substantially roll back CRA by per- FOOTNOTES of investment, and that there has been mitting banks that are not meeting the cred- 1 Congressional Record, September 30, 1998. very significant benefit for Native it needs of their communities to benefit from 2 Congressional Record, October 5, 1998. American organizations that report on the expanded powers to affiliate with securi- 3 Letter from President Clinton to Senator Phil ties and insurance firms. Gramm, March 2, 1999. what has happened on the Indian res- 4 Second, the bill would provide a ‘‘safe har- Home Mortgage Disclosure Act data cited in Sec- ervations, from farm and rural groups, retary Robert Rubin’s letter to Senator Phil and from over 200 mayors, all of whom bor’’ from public comment on CRA perform- Gramm, February 23, 1999. prefer the substitute amendment. ance for banks with a ‘‘satisfactory’’ CRA 5 Comptroller of the Currency, Office of Thrift Su- rating. Under the bill, an institution receiv- pervision, Federal Deposit Insurance Corporation, I ask unanimous consent those let- ing at least a satisfactory CRA rating during and Federal Reserve Board. ters be printed in the RECORD. the previous 36-month period would be 6 Id. There being no objection, the letters deemed in compliance with CRA and immune 7 Federal Financial Institutions Examination Council. were ordered to be printed in the 8 Federal Deposit Insurance Corporation. RECORD, as follows: Footnotes at end of letter. 9 See supra note 3.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00015 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8409

APRIL 8, 1999. Third, the Act proposes to exempt all In its current form, we believe the Finan- Hon. PAUL S. SARBANES, small rural banks (those with less than $100 cial Services Modernization Act of 1999 Senate Hart Office Building, U.S. Senate, million in assets) from CRA, thereby releas- would seriously erode the effectiveness of Washington, DC. ing 76% of all rural banks from their CRA the CRA, a law that has certainly helped to DEAR SENATOR SARBANES: The undersigned obligations. As with the safe harbor provi- build homes, create jobs and restore hope in organizations write to express strong opposi- sion, this undermines the spirit and the ef- many of our communities. We are particu- tion to the Financial Services Modernization fectiveness of the law by exempting most larly concerned that the bill reported by Act of 1999 as reported out of the Senate rural banks. This would have particularly your committee would exempt small rural Banking Committee on March 4th. The Act adverse consequences in low-income rural banks from coverage by the CRA and would would restructure the financial services in- communities where often the only source of create a ‘‘safe harbor’’ under CRA for banks dustry in the United States by allowing credit is a small bank. Moreover, researchers with satisfactory or better ratings thus mak- broad affiliations among banks, insurance have found that small banks have dispropor- ing it much more difficult for the public to companies, and security firms. Currently, tionately poor CRA records compared to comment on problems with a bank’s CRA the law strictly limits ownership among dif- larger banks, thereby highlighting the need performance in conjunction with an expan- ferent financial entities and between finan- for CRA in rural communities and small sion application filed by a bank. We are also cial companies and commercial corporations. towns. concerned that your bill does not require The Act seeks to ease these restrictions, CRA is one of the strongest incentives to that all banks in a bank holding company without commensurate expansion of the encourage investment in low-income and mi- have a ‘‘satisfactory’’ CRA rating to exercise Community Reinvestment Act (CRA) to nority communities. Over the last twenty- the new powers provided by the legislation. cover insurance companies, securities firms, two years, neighborhoods across the country This would substantially roll back the CRA mortgage companies, and other financial en- have benefited from CRA-encouraged invest- by permitting banks that are not meeting tities allowed to affiliate with banks. The ments. This has resulted in increases in the credit needs of communities to benefit Act would undermine one of the most effec- homeownership and business development, from the expanded powers to affiliate with tive revitalization vehicles for underserved leading to the rebirth of many American securities and insurance firms. low-income and minority communities, in- neighborhoods. However, many communities We strongly urge you to reconsider these cluding Hispanic American communities remain underserved by capital and invest- provisions of the bill. As reported out of the across the country. ment vehicles. For this reason, reinforce- Senate Banking Committee, the Financial We have found, and research confirms, that ment, not weakening, of CRA is critically Services Act of 1999 drastically weakens the all too often the credit and financial needs of needed. We urge you to support the contin- CRA and unless this shortcoming is ad- these communities are severely underserved. ued strengthening of America’s communities dressed, we would urge strong opposition to Historically, many financial institutions by vigorously opposing the Financial Serv- the legislation. have avoided investing in these communities ices Modernization Act of 1999 as reported Sincerely, due to their perceived higher level of risk. out of Committee, and supporting amend- W. RON ALLEN, Unfortunately, ‘‘perceived higher level of ments that would strengthen the Bill’s CRA President. risk’’ is often code for ‘‘low-income’’ or ‘‘mi- protections. Thank you. (Also signed by 17 representatives of tribes nority.’’ But the facts show that low-income Sincerely, and tribal organizations.) and minority communities are not inher- Rick Dovalina, National President, ently riskier than other communities. In League of United Latin American Citi- THE UNITED STATES fact, most financial institutions find them to zens; Arturo Vargas, Executive Direc- CONFERENCE OF MAYORS be quite profitable, once they begin invest- tor, NALEO Educational Fund; Ruth Washington, DC, April 29, 1999. ing in them. Unfortunately, without the Pagani, Executive Director, National DEAR SENATOR: The Community Reinvest- CRA, many financial institutions have not Hispanic Housing Council (NHHC); ment Act (CRA) has played a critical role in and would not be encouraged to do so. Juan Figueroa, President and General encouraging federally insured financial insti- As the data show, Hispanics are the fast- Counsel, Puerto Rican Legal Defense tutions to invest in the cities of our country. est-growing population in the United States. and Education Fund (PRLDEF); Anto- Legislation reported out of the Senate Bank- We are a growing force in the expansion of nia Hernandez, President and General ing Committee on March 4, the Financial homeownership and small business develop- Counsel; MALDEF; Raul Uzaguirre, Modernization Act of 1999, would dramati- ment, two leading indicators of the economic President and Chief Executive Officer, cally weaken CRA. We strongly urge you to well-being of this country. For example, be- National Council of La Raza (NCLR); oppose this legislation unless CRA is pre- tween 1987 and 1992, Hispanic-owned business Manual Mirabal, President and Chief served and strengthened. grew by 76%, compared to 26% for U.S. busi- Executive Officer, National Puerto The United States Conference of Mayors is nesses overall. According to a 1997 Harvard Rican Coalition (NPRC). the nation’s largest nonpartisan organiza- study, ‘‘the number of Hispanic homeowners tion dedicated to ensuring the economic sta- has shown the most spectacular rise’’ in re- NATIONAL CONGRESS OF bility of the nation’s largest cities. As may- cent years compared to that of Whites and of AMERICAN INDIANS, ors, we recognize that CRA has been an es- other minority groups. Population projec- Washington, DC, April 14, 1999. sential tool in revitalizing cities around this tions forecast Hispanics to be the largest mi- Hon. PHIL GRAMM, nation. In fact, there is now increasing rec- nority group in the U.S. by the year 2005, Chairman, Committee on Banking, Housing and ognition that the strength and economic causing the U.S. economy to be increasingly Urban Affairs, U.S. Senate, Washington, health of whole regions require strong and dependent on the continued prosperity of the DC. vibrant cities. Creating new economic activ- Hispanic American community. Without the DEAR SENATOR GRAMM: On behalf of the ity—new businesses, new jobs, new home- CRA, this growth may be impeded. National Congress of American Indians owners—is key to the revival of urban areas As reported out of the Senate Banking (‘‘NCAI’’), we are writing to express our seri- and their surrounding regions, CRA has been Committee, the Financial Services Mod- ous concern over the treatment of the Com- a key component to creating this new eco- ernization Act of 1999 would hinder that munity Reinvestment Act (‘‘CRA’’) in the nomic activity. growth by weakening the CRA in the fol- Financial Services Modernization Act of Private sector investment encouraged lowing three ways. First, a ‘‘satisfactory’’ 1999. NCAI is the oldest, largest and most under CRA has helped to stabilize commu- CRA rating is not required in order for finan- representative national Indian organization nities suffering from economic decline. CRA cial institutions to enjoy the new powers af- devoted to promoting and protecting the has similarly helped to spur bank and thrift forded to them by the legislation, thereby al- rights of tribal governments and their citi- investment in multi-family rental housing lowing banks to exercise their privilege, zens. development and rehabilitation, small busi- even if they are not meeting the credit needs The CFA has proven to be an effective ness expansion, and community economic of the communities where they do business. means of encouraging federally insured fi- development. CRA is a crucial complement Second, banks receiving a ‘‘satisfactory’’ nancial institutions to extend prudent and to FHA Insurance, The HOME program, CRA rating would be given a ‘‘safe harbor’’ profitable loans in traditionally underserved Community Development Block Grants, and from public comment on CRA performance. areas including Indian Country. Specifically, the low-income housing tax credit. These Since over 95% of banks receive a ‘‘satisfac- the CRA has helped focus attention to the programs, which have built or financed the tory’’ rating, this would undermine the effec- challenges of extending credit to reserva- purchase of millions of units of affordable tiveness of the law by restricting a commu- tions under current law and has acted as a rental and ownership homes, work so effec- nity’s right to voice its experience with catalyst to reservation based economic de- tively because they leverage tens of millions banks. While a ‘‘satisfactory’’ rating pro- velopment. Since the implementation of the of private dollars. vides a helpful guide to a bank’s overall per- CRA, Native American groups and banks In light of the success of CRA and our ex- formance, it may not provide an accurate have negotiated agreements for lending more periences with community revitalization ef- picture at the neighborhood level. than $155 million within Indian Country. forts, we are very troubled by allegations

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00016 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8410 CONGRESSIONAL RECORD—SENATE May 5, 1999 that have been made that CRA has ‘‘since Garry Fazzino, Palo Alto, CA Jack Lynch, Butte, MT been corrupted into a system of legalized ex- Mary Rocha, Antioch, CA Patrick McCrory, Charlotte, NC tortion.’’ In contrast to the description of Shirley Dean, Berkeley, CA George W. Liles, Concord, NC community based organizations as ‘‘rack- Eunice M. Ulloa, Chino, CA Jerry Ryan, Bellevue, NE eteers’’ and ‘‘thugs’’ many of us have partici- Judy Nadler, Santa Clara, CA Ken Gnadt, Grand Island, NE pated in successful partnerships with private Chris Christiansen, Covina, CA James Anzaldi, Clifton, NJ institutions and members of the community. George Pettygrove, Fairfield, CA Anthony, Russo, Hoboken, NJ These relationships have resulted in a tre- Larry R. Green, Glendora, CA Sara B. Bost, Irvington, NJ mendous infusion of capital into underserved Chris B. Silva, Indio, CA Margie Semler, Passaic, NJ communities as well as increased banking Roosevelt F. Dorn, Inglewood, CA Albert McWilliams, Plainfield, NJ services. Cathie Brown, Livermore, CA Thalia C. Kay, Pemberton Township, NJ The bill that was reported out of the Sen- Donald E. Lahr, Santa Maria, CA Douglas Palmer, Trenton, NJ ate Banking Committee would have dire con- David Smith, Newark, CA Lavonne Bekler Johnson, Willingboro Town- sequences for the nation’s cities if it were William E. Cunningham, Redlands, CA ship, NJ enacted. First, the failure to require that Willie L. Brown, Jr., San Francisco, CA Jan Laverty Jones, Las Vegas, NV banks seeking to affiliate with securities and Harriett Miller, Santa Barbara, CA Sandra L. Frankel, Brighton, NY insurance firms have a ‘‘satisfactory’’ CRA Gary Podesto, Stockton, CA Anthony M. Masiello, Buffalo, NY rating would permit banks to ignore the Robert R. Nolan, Upland, CA James C. Galie, Niagara Falls, NY credit needs of their communities and ben- Wally Gregory, Visalia, CA William F. Glacken, Freeport, NY efit from the powers provided in the legisla- Robert Frie, Arvada, CO James A. Garner, Hempstead, NY tion. This is a substantial rollback of CRA Wellington E. Webb, Denver, CO Roy A. Bernardi, Syracuse, NY and would most certainly reduce the flow of John DeStefano, Jr., New Haven, CT Edward A. Hanna, Utica, NY capital in these areas—returning us to a Dannel P. Malloy, Stamford, CT Ernest D. Davis, Mount Vernon, NY time when banks and thrifts redlined com- Anthony A. Williams, Washington, DC Donald L. Plusquellic, Akron, OH munities with credit worthy borrowers. Gerald Broening, Boynton Beach, FL Richard D. Watkins, Canton, OH In addition, the bill provides a ‘‘safe har- Alex Penelas, Miami-Dade County, FL Michael B. Keys, Elyria, OH bor’’ from public comment on CRA perform- Mara Giulianti, Hollywood, FL Paul Oyaski, Euclid, OH ance to banks with a ‘‘satisfactory’’ or bet- Ralph L. Fletcher, Lakeland, FL Beryl E. Rothschild, University Heights, OH ter CRA rating. This provision effectively Richard J. Kaplan, Lauderhill, FL William L. Pegues, Warrensville Heights, OH eliminates public comment on a bank’s CRA James F. Fielding, Port St. Lucie, FL Thomas J. Longo, Garfield Heights, OH performance. As you are undoubtedly aware, Alex G. Fekete, Pembroke Pines, FL Debora A. Mallin, Bedford Heights, OH the opportunity to comment on a bank’s per- Joe Schreiber, Tamarac, FL Marilou W. Smith, Kettering, OH formance is a right given to every member of Bill Campbell, Atlanta, GA David Berger, Lima, OH the public. Public comment participation in Bob Young, Augusta, GA Joseph F. Koziura, Lorain, OH the CRA process is considered a critical com- Patsy Jo Hilliard, East Point, GA Cicil E. Powell, Lawton, OK ponent of the law’s success. The public often Felix F. Ungacta, Hagatna, Guam M. Susan Savage, Tulsa, OK raises community investment issues which Stephen K. Yamashiro, Hawaii, HI Bill Klammer, Lake Oswego, OR have been overlooked by regulators. This Lee R. Clancey, Cedar Rapids, IA Vera Katz, Portland, OR provision singles out CRA comments for un- H. Brent Coles, Boise, ID Donald T. Cunnigham, Jr., Bethlehem, PA fair treatment. Unlike CRA comments, indi- Gregory R. Anderson, Pocatello, ID Timothy M. Fulkerson, New Castle, PA viduals seeking to comment on other aspects Neil Dillard, Carbondale, IL Joyce A. Savocchio, Erie, PA of a bank’s performance would not face limi- Richard Daley, Chicago, IL Stephen R. Reed, Harrisburg, PA tations on the scope of information that Jerry P. Genova, Calumet City, IL Ted LeBlanc, Norristown, PA they may introduce or be required to carry a Angelo A. Ciambrone, Chicago Heights, IL Edward Rendell, Philadelphia, PA burden of proof. Moreover, data from regu- Lydia Reid, Mansfield, IL Charles H. Robertson, York, PA lators indicated that the comment process Stanley F. Leach, Moline, IL William Miranda Marin, Caguas, PR has not been abused. Barbara Furlong, Oak Park, IL James E. Doyle, Pawtucket, RI Finally, the bill exempts small banks in R. David Tebben, Pekin, IL Vincent A. Cianci, Jr., Providence, RI rural areas (assets less than $100 million in Ross Ferraro, Carol Stream, IL James E. Talley, Spartanburg, SC assets) from CRA obligations. These institu- Stephen J. Luecke, South Bend, IN Jon Kinsey, Chattanooga, TN tions represent 76% of banks and thrifts in Joseph R. Zickgraf, Columbia City, IN Kirk Watson, Austin, TX rural communities. This provision would se- James P. Perron, Elkhart, IN David W. Moore, Beaumont, TX riously compromise the capital needs of Duane W. Dedelow, Jr., Hammond, IN Ronald Kirk, Dallas, TX rural residents who depend almost exclu- Paul W. Helmke, Fort Wayne, IN Jack Miller, Denton, TX sively on small banks and thrifts to meet Carol Marinovich, Kansas City, KS Mary Lib Saleh, Euless, TX their credit needs. Residents in these com- David L. Armstrong, Louisville, KY Charles Scoma, North Richland Hills, TX munities rely on CRA to encourage banks to Waymond Morris, Owensboro, KY Lee P. Brown, Houston, TX make mortgage, small farm, and small busi- Edward G. ‘‘Ned’’ Randolph, Jr., Alexandria, Michael D. Morrison, Waco, TX ness loans. LA Kenneth Barr, Fort Worth, TX Prior to the enactment of CRA, banks, and Ruth Fontenot, New Iberia, LA Deedee Corradini, Salt Lake City, UT thrifts routinely redlined low- and moderate- Walter Comeaux, Lafayette, LA William E. Ward, Chesapeake, VA income neighborhoods in our nation’s cities. Marc Morial, New Orleans, LA Paul D. Fraim, Norfolk, VA The modest requirement in CRA that finan- John Barrett, III, North Adams, MA Peter Clavelle, Burlington, VT cial institutions meet the credit needs of Nicholas J. Costello, Amesbury, MA Mark Asmundson, Bellingham, WA their communities has lead to the successful Thomas M. Menino, Boston, MA Lynn Horton, Bremerton, WA channeling of billions of dollars into local- David Ragucci, Everett, MA Paul Schell, Seattle, WA ities. Patrick J. McManus, Lynn, MA Paul F. Jadin, Green Bay, WI As reported out of the Senate Banking Richard C. Howard, Malden, MA John D. Medinger, La Crosse, WI Committee, the Financial Services Act of Thomas V. Kane, Portland, ME Susan J. Bauman, Madison, WI 1999 would severely weaken CRA and our na- James L. Barker, Garden City, MI Maricolette Walsh, Wauwatosa, WI tion’s cities. Unless the onerous CRA provi- Dennis Archer, Detroit, MI John Lipphardt, Wheeling, WV sions are addressed and CRA is preserved and Woodrow Stanley, Flint, MI strengthened, we would urge strong opposi- Aldo Vagnozzi, Farmington Hills, MI APRIL 29, 1999. tion to the Senate bill. Robert B. Jones, Kalamazoo, MI Sincerely, David C. Hollister, Lansing, MI FAMILY FARM AND RURAL ORGANIZATIONS Richard Arrington, Jr., Birmingham, AL Jack E. Kirksey, Livonia, MI SUPPORT COMMUNITY REINVESTMENT ACT: Patrick Henry Hays, North Little Rock, AR Linsey Porter, Highland Park, MI OPPOSE THE FINANCIAL SERVICES MOD- Robert Mitchell, Casa Grande, AZ Walter Moore, Pontiac, MI ERNIZATION ACT OF 1999 Alex J. Harper, San Luis, AZ Donald F. Fracassi, Southfield, MI DEAR SENATOR: As organizations working Neil Giuliano, Tempe, AZ Sharon Sayles Belton, Minneapolis, MN with and representing rural residents, we George Miller, Tucson, AZ Chuck Canfield, Rochester, MN write to register our strong opposition to the Richard F. Archer, Sierra Vista, AZ Joseph L. Adams, University City, MO Financial Services Modernization Act of 1999 Marilyn R. Young, Yuma, AZ Larry R. Stobbs, St. Joseph, MO as reported out of the Senate Banking Com- Ralph Appezzato, Alameda, CA Harvey Johnson, Jr., Jackson, MS mittee in late March. We are very concerned

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00017 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8411 that the bill substantially undercuts the ex- compliance requirements are unfounded. The law, I urge them to vote for the sub- isting Community Reinvestment Act (CRA) CRA regulations were revised in 1995 in part stitute. and totally ignores the need to modernize to reduce compliance burdens on small I assume the chairman will probably CRA to meet the dramatic changes in finan- banks. The new rules provide for a stream- make a motion to table. cial services across the country. lined examination for banks with less than Mr. GRAMM. I will. Rural America remains in desperate need $250 million in assets including an exemption Mr. SARBANES. Therefore, I urge of affordable credit. CRA has been a law that from data collection and reporting require- Members to vote against the motion to has significantly expanded access to credit ments. Small bank ratings now focus exclu- in rural areas of our country. Despite this in- sively on lending and lending related activi- table the substitute, thereby giving us creased access, there remain widening gaps ties. The need to reduce an already minimal the opportunity to then go forward and and unmet needs in ensuring credit access to regulatory burden on small banks should not adopt the substitute. all rural residents. A recent Small Business outweigh the credit needs of residents of I thank the Chair and yield the floor. Administration (SBA) report analyzing the rural communities. The PRESIDING OFFICER. The Sen- June 1998 Federal Reserve Data shows a 4.6% Third, unlike last year’s H.R. 10 voted out ator from Texas. decline in the number of small farm loans. of the Senate Banking Committee and this Mr. GRAMM. Mr. President, let me The value of total farm loans was $74.5 bil- year’s House Banking Committee version of begin by noting that not one single or- lion. Of great concern is the statistic that re- financial modernization, the Senate Banking ganization which represents anyone veals a troubling trend; the value of very Committee reported bill fails to require that who makes a living in any industry di- large farm loans (over $1 million) increased banks have a ‘‘satisfactory’’ CRA rating in rectly affected by this bill supports the by 25% while ‘‘small’’ farm loans (under order to affiliate with securities and insur- Sarbanes substitute. The Sarbanes sub- $250,000) increased a mere 3.9%. Larger loans ance firms. In the absence of this require- are going to fewer operations. ment, a bank could ignore the credit needs of stitute is opposed by insurance compa- Rural areas continue to suffer from a seri- its communities and still benefit from the nies, by those who represent the com- ous shortage of affordable housing. Farmers new affiliations and powers provided under panies; it is opposed by the American are facing the worst financial conditions in this legislation. Bankers Association, by the Bankers more than a decade due to declining com- The Small Business Administration (SBA) Roundtable, and by the Independent modity prices. Rural Americans continue to report on bank holding company lending in Bankers of America. It is opposed by need the tools of the CRA to ensure account- rural communities reaffirms this concern. every organization that represents any ability of their local lending institutions. While the 57 largest bank holding companies facet of the securities industry. This CRA helps to meet the credit demand of mil- held 68.6 percent of all domestic bank assets substitute is literally a substitute in June 1998, they made just 10.7% or 160,000 lions of family farmers, rural residents, and which has no support by anyone who is local businesses. of all the outstanding farm loans. These We strongly oppose three provisions in the loans totaled just .18 percent of total assets going to be directly affected by these Senate Banking Committee reported bill in these bank holding companies. This in- laws. which would have particularly negative con- creasing concentration and consolidation in What are the major problems with it? sequences for our communities. financial services comes at a time when the There are more problems than I can First, the bill contains a ‘‘safe harbor’’ for community role in determining whether this possibly outline in 6 minutes, so let me banks that have achieved a ‘‘satisfactory’’ expansion is appropriate is being reduced. just take a couple of them. We all CRA rating in each of its examinations in In closing, CRA has been a valuable tool know Alan Greenspan. We know he is the prior 36-month period. This provision for over twenty years to encourage financial the most respected person in America would make banks and thrifts immune to institutions to help meet the credit needs of on economic matters. We all know if public comment during pending expansion rural communities across this nation. Access to affordable capital is important to restor- there is anybody on this planet who applications unless individuals or groups are can lay any legitimate claim to the able to provide ‘‘substantial verifiable infor- ing economic prosperity in our nation’s rural mation’’ that the bank is not in compliance areas. In its current form, the Financial current level of prosperity in America, with CRA. This provision would essentially Services Modernization Act of 1999 permits it is Alan Greenspan, because of his eliminate the public’s opportunity to com- banks to ignore the needs of our commu- banking and monetary policies. ment on a bank’s performance in meeting nities and remove one of the few tools that We also know that Alan Greenspan is the credit needs of its communities. More has resulted in a level of accountability. We not someone who goes out looking for than 95% of banks consistently receive ‘sat- urge you to vote against the Financial Serv- a fight. If he has to say something that isfactory’ or higher ratings. Rural residents ices Modernization Act of 1999 unless these anybody does not want to hear, he play an important role in bringing CRA per- objections are addressed. Please contact (202) tends to go all around the barn before formance issues to the attention of regu- 543–5675 with any questions. he says it. You need to know those lators and making banks responsive to com- Sincerely, American Corn Growers Association things to understand how strongly munity needs. This provision would deny Chairman Greenspan feels in his oppo- citizens and community based organizations Center for Rural Affairs the opportunity to comment on the credit Federation of Southern Cooperatives sition to the Sarbanes substitute. In needs of their community. Intertribal Agriculture Council fact, he has said, ‘‘I and my col- Two, the bill exempts from CRA banks and Iowa Citizens for Community Improvement leagues’’—and by ‘‘colleagues’’ he thrifts with less than $100 million in assets Land Loss Prevention Project (NC) means every member of the Board of located in non-metropolitan areas. These in- Missouri Rural Crisis Center Governors of the Federal Reserve, most stitutions represent 76% of banks and thrifts National Black Caucus of State Legislators of whom were appointed by Bill Clin- in rural communities. This provision would National Catholic Rural Life Conference ton—‘‘are firmly of the view that the seriously compromise the capital needs of National Family Farm Coalition long-term stability of the U.S. finan- rural residents who depend almost exclu- National Farmers Union National Neighborhood Housing Network cial markets and the interests of the sively on small banks and thrifts to meet American taxpayer would be better their credit needs. Banks and thrifts in rural National Rural Housing Coalition areas face little competition from other fi- North American Farm Alliance served by no financial modernization nancial services institutions. Presbyterian Church (USA), Washington of- bill rather than one that allows the In addition, despite assertions from the in- fice proposed new activities to be con- dustry, many small banks do not by their na- Rural Coalition ducted by the bank. . ..’’ ture serve the credit needs of their commu- Sin Fronteras Organizing Project Alan Greenspan says in the strongest nities. In fact, data from the regulators show United Methodist Church, General Board of way possible, in the most passionate that small banks do not invest more in their Church and Society terms that he has ever spoken on any communities, on average than larger banks. Wisconsin Rural Development Center issue in his public life: You would be In addition, small banks have a dispropor- Mr. SARBANES. Finally, let me sim- better not to pass a bill than to pass tionately high share of less than satisfactory ply say, as the Democratic leader indi- the Sarbanes substitute. CRA ratings. A Congressional Research Serv- cated, unless we can get the substitute Why? Because the Sarbanes sub- ice study of data from 1997 to mid-1998, found in place, we are on a veto track with S. that banks with less than $100 million in as- stitute lets banks engage in these ex- sets received 70% of the below ‘‘satisfactory’’ 900. The substitute will eliminate the panded financial services within the CRA ratings. veto problem. So, for those who want bank, thereby putting at risk the tax- In addition, arguments that CRA subjects legislation, who want to see financial payer through FDIC insurance. By per- small banks to intrusive and time consuming services modernization enacted into forming these services in banks, they

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00018 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8412 CONGRESSIONAL RECORD—SENATE May 5, 1999 get an implicit subsidy from FDIC in- For example, financial services re- that would make a bank, if it fell out surance, from the discount window, form would make it easier for banks, of compliance with CRA, potentially from the Federal wire, that will make securities firms and insurance compa- subject to a $1 million fine, not just on banks able—not because they are more nies to merge into oligopolies. The sav- the bank but on the bank officer or on efficient, but because of this subsidy— ings of many would be controlled by a the bank director. ultimately able to dominate the securi- few. Americans will know less about We have two letters here, one from ties industry and all other industries where their deposits are kept and how the Independent Bankers and one from which would be affected. We would end they are used. the ABA, raising the point that one of up with a banking system that looks What would be the effect of these the toughest things to do now in this very much like the Japanese banking mergers on consumers? I am concerned period of massive lawsuit liability is to system, totally dominating our finan- that these mega institutions could lead get good people to serve on a bank cial markets. Alan Greenspan is op- to higher fees and fewer choices for board. Both the Independent Bankers posed to that. It is very dangerous for consumers. of America and the ABA have written the American economy. It is dangerous Marylanders used to have savings ac- urging us not to adopt a provision that for the taxpayer. I urge my colleagues counts with local banks where the tell- would make it virtually impossible for to reject this substitute. er knew their name and their family. small banks, especially, to get quali- A second issue I want to talk about is We have already seen the trend toward fied officers and board members be- CRA. The current bill preserves CRA. mega-mergers, accompanied by higher cause of the liability costs. I urge my The current bill makes two modest fees, a decline in service, and the loss colleagues to reject this substitute. changes. One, it says that if a bank has of neighborhood financial institutions. The PRESIDING OFFICER. Under a long-term history of compliance This legislation accelerates that trend. the previous order, the hour of 12 noon —has been in compliance three years in In addition, what would be the affect having arrived, the Senator from Texas a row and is currently in compliance— of this legislation on the alarming in- is recognized to make a motion to that if a protest group or individual crease in foreign takeovers of US table. wants to inject themselves into the banks? I support increased Mr. SARBANES. Mr. President, I ask process, they can do it. They can say globalization, but what will happen for 1 minute so I can pose a question to whatever they want to say. But the when home town banks are taken over the Senator from Texas. regulator can’t hold up the bank’s ac- by companies that have no roots or The PRESIDING OFFICER. Is there tion in the name of CRA, given their commitments to the community? objection? long history of compliance and given With a globalization of financial re- Mr. GRAMM. Mr. President, I want 1 that they are currently in compliance, sources, the local bank could be bought minute to respond. unless the protester has more than a by a holding company based outside Mr. SARBANES. How does the Sen- scintilla of evidence; unless the pro- the United States. Instead of the ator get this $1 trillion figure? tester can present such relevant evi- friendly neighborhood teller, con- Mr. GRAMM. We have had 16,380 ex- dence as a reasonable mind might ac- sumers would be contacting a com- aminations of small, rural institutions cept as adequate to support the claim; puter operator in a country half-way since 1990. Those small, rural institu- unless the protester has real, mate- around the globe through an 800 num- tions report to us that it costs them rial—not seeming or imaginary—evi- ber. Their account could be subject to about $80,000 a year to keep the records dence. In other words, if you are going risks that have nothing to do with to comply with these examinations, to stop a bank from doing something their job, their community or even the and that is where the number came that it has been found qualified to do, economy of the United States. I know from. you have to present some evidence— that impersonalized globalization is Mr. SARBANES. My arithmetic— hardly, a demanding constraint. not what banking customers want first of all, I do not concede the figures. Second, we exempt very small rural when they talk about modernization of In any event, even if I accept them, it banks from CRA. Why? We exempt very financial services. is 1 billion, not 1 trillion. small rural banks from CRA for a very So I will support the Sarbanes Mr. GRAMM. If it is a billion or a simple reason: amendment. It goes further in answer- Ms. MIKULSKI. Mr. President, I rise trillion, it is a lot of money. ing my concerns. But I hope we will be in support of the Sarbanes substitute Mr. SARBANES. A lot of money, but able to address these concerns more amendment to the Financial Services there is a big difference between a bil- fully as we move forward with this leg- Modernization Act. I salute him for his lion and a trillion. That is one of the leadership in seeking financial services islation. they generally do not have a problems with this debate, I under- reform that prepares us for the new city to serve, much less an inner city. score. Third, in the last 9 years, Federal century. Mr. GRAMM. I have my trusty calcu- I agree that we should reform our fi- regulators have performed 16,380 CRA lator, and I will make the calculation nancial services. There is no doubt that evaluations of these banks—evaluating again. But lest my colleague be cor- changes in law have lagged behind them annually. These banks report rect, let me just restate it in his terms. changes in our banking and financial that it costs them between $60,000 and The term is, does it make sense to services industries. $80,000 a year to comply with CRA. Yet, make little banks spend $1.3 billion to This amendment is a great improve- at the end of 9 years and 16,380 evalua- comply with keeping paperwork when ment over the underlying bill. It would tions, just three small rural banks in 9 years, only three banks out of provide greater protections for con- have been found to be substantially out 16,000 audits have been substantially sumers. It would also maintain the of compliance. One million—excuse me, out of compliance? Is that not overkill? Community Reinvestment Act—which one trillion. Excuse me, let me be sure Is that not bankrupting every small is so important in enabling low income I have my figure here. At the end of bank in America? The answer is yes. communities to help themselves. this process, with small banks having Mr. GRAMM. I move to table the However, I would like to raise a num- spent perhaps $1,310,400,000,000 com- pending substitute, and I ask for the ber of what I call ‘‘flashing yellow plying with paperwork in the name of yeas and nays. lights’’ or warning signals that we evaluating community lending, we The PRESIDING OFFICER. Is there a should be aware of before enacting fi- have found just three banks out of sufficient second? nancial services modernization. We compliance. Not only does the sub- There appears to be a sufficient sec- should proceed with caution to avoid stitute eliminate this provision that ond. irrevocable changes when the savings ends this senseless wasting of small The yeas and nays were ordered. of hard working families and the via- bank resources that cost local commu- The PRESIDING OFFICER. The bility of our communities could be put nities and deny them access to credit, question is on agreeing to the motion in jeopardy. but it imposes confiscatory penalties to table the amendment. The yeas and

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00019 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8413 nays have been ordered. The clerk will The PRESIDING OFFICER. Without ‘‘(E) each insured depository institution af- call the roll. objection, it is so ordered. filiate of the national bank has achieved a The legislative clerk called the roll. Mr. LOTT. Mr. President, for the in- rating of ‘satisfactory record of meeting Mr. FITZGERALD (when his name formation of all Senators, Members community credit needs’, or better, at the was called). Present. should be aware that votes will occur most recent examination of each such insti- Mr. REID. I announce that the Sen- tution under the Community Reinvestment today on the CRA issue and possibly Act of 1977; and ator from North Dakota (Mr. DORGAN), other banking issues. If debate is com- ‘‘(F) the national bank has received the’’. is necessarily absent. pleted before the 7 o’clock hour, there On page 66, line 12, strike ‘‘subparagraph I also announce that the Senator are other amendments that could be (D)’’ and insert ‘‘subparagraphs (D) and (E)’’. from Louisiana (Ms. LANDRIEU), is ab- considered. There will certainly be one On page 66, line 16, insert before the period sent attending a funeral. at 7 o’clock on this CRA issue. ‘‘, except that the Comptroller may not re- I further announce that, if present If the Senate is able to complete this quire a national bank to divest control of or and voting, the Senator from Louisiana otherwise terminate affiliation with a finan- banking bill by the close of business on cial subsidiary based on noncompliance with (Ms. LANDRIEU), would vote ‘‘no.’’ Thursday, then I would be prepared to paragraph (1)(E)’’. The PRESIDING OFFICER (Mr. announce at that time that there On page 96, strike line 23 and all that fol- BURNS). Are there any other Senators would be no votes on Friday. So if we lows through page 98, line 4. in the Chamber desiring to vote? can get this work completed—and it On page 104, strike line 20 and all that fol- The result was announced—yeas 54, looks as if we may be able to; the man- lows through page 105, line 14. nays 43, as follows: Redesignate sections 304 through 307 and agers are working together. And we [Rollcall Vote No. 100 Leg.] sections 309 through 311 as sections 303 have a couple of issues that will have through 309, respectively. YEAS—54 to be debated and considered carefully, Amend the table of contents accordingly. Abraham Frist McConnell plus there are other amendments that Mr. BRYAN. Mr. President, we are Allard Gorton Murkowski Ashcroft Gramm Nickles won’t take as long to be debated. This about ready to debate an important Bennett Grams Roberts could be completed by Thursday night. issue dealing with the Community Re- Bond Grassley Roth If that is the case, we will not have any investment Act. Let me say that I Brownback Gregg Santorum Bunning Hagel Sessions votes on Friday. If we are not able to think there has been considerably more Burns Hatch Shelby finish it Thursday night, we may have heat than light generated in the debate Campbell Helms Smith (NH) to go over until Friday and complete surrounding this issue. I thought it Chafee Hutchinson Smith (OR) it. I wanted Members to be aware of might be helpful to my colleagues to Cochran Hutchison Snowe Collins Inhofe Specter that possibility. explain how the provisions of this act Coverdell Jeffords Stevens I yield the floor. work, what is involved, what is not in- Craig Kyl Thomas Mr. SARBANES. Mr. President, I volved, the provisions that currently Crapo Lott Thompson yield to the distinguished Senator from DeWine Lugar Thurmond exist in the bill we are debating, and Domenici Mack Voinovich Nevada. the contents of the amendment. Enzi McCain Warner The PRESIDING OFFICER. The Sen- The Community Reinvestment Act NAYS—43 ator from Nevada is recognized. has been in operation now for 21 years. AMENDMENT NO. 303 Akaka Feingold Lincoln The act itself is triggered in either of Baucus Feinstein Mikulski (Purpose: To make amendments relating to two circumstances—one, as part of a Bayh Graham Moynihan the Community Reinvestment Act of 1977, periodic review, and that depends upon Biden Harkin Murray and for other purposes) the size of the institution. It applies Bingaman Hollings Reed Mr. BRYAN. Mr. President, I send an only to insured depository institutions, Boxer Inouye Reid Breaux Johnson amendment to the desk and ask for its so we are talking about banks and Robb immediate consideration. Bryan Kennedy Rockefeller thrifts. It also is triggered when a de- Byrd Kerrey Sarbanes The PRESIDING OFFICER. The Cleland Kerry pository institution files an applica- Schumer clerk will report. Conrad Kohl tion for a charter conversion, for merg- Torricelli The legislative assistant read as fol- Daschle Lautenberg er, acquisition, or requesting authority Wellstone lows: Dodd Leahy for additional branches. Durbin Levin Wyden The Senator from Nevada [Mr. BRYAN], for Those applications, then, are re- Edwards Lieberman himself, Mr. DODD, and Mr. KERRY, proposes viewed by the appropriate bank regu- ANSWERED ‘‘PRESENT’’—1 an amendment numbered 303. lator, or the thrift regulator, whether Mr. BRYAN. Mr. President, I ask Fitzgerald that be the OCC, the Federal Reserve, unanimous consent that reading of the NOT VOTING—2 or the OTC. Notice is then given, and amendment be dispensed with. Dorgan Landrieu the community groups have an oppor- The PRESIDING OFFICER. Without tunity to comment on the application. The motion was agreed to. objection, it is so ordered. Mr. LOTT. Mr. President, I ask unan- The amendment is as follows: So you have a periodic review, which may be annually or a longer period of imous consent that notwithstanding On page 14, strike lines 8 and 9 and insert the agreement of May 4, Senator SAR- the following: ‘‘are well managed; time, or you have the circumstances in BANES now be recognized to offer a CRA ‘‘(C) all of the insured depository institu- which an insured depository institu- amendment with all other provisions of tion subsidiaries of the bank holding com- tion seeks either a charter conversion, the previous consent agreement still pany have achieved a rating of ‘satisfactory a merger, an acquisition, or additional intact. record of meeting community credit needs’, branches. I further ask that a vote occur in re- or better, at the most recent examination of Notice is given. Now, 97 percent of all lation to the CRA amendment at 7 p.m. each such institution under the Community depository institutions—banks or Reinvestment Act of 1977; and thrifts—get a satisfactory CRA rating. tonight, and if debate has been com- ‘‘(D) the bank holding company has filed’’. pleted prior to that time, the amend- On page 14, line 20, strike ‘‘and (B)’’ and in- The penalties that can be provided are ment may be laid aside in order for sert ‘‘, (B), and (C)’’. that, No. 1, an application could be de- Senator GRAMM, or his designee, to On page 18, between lines 4 and 5, insert nied, an application could be accepted offer an additional amendment. the following: subject to certain conditions, or the Mr. SARBANES. Mr. President, re- ‘‘(5) LIMITATION.—A bank holding company application can be approved without serving the right to object, I think the shall not be required to divest any company conditions. I think it is important to agreement should be ‘‘or a designee,’’ held, or terminate any activity conducted understand who is making the decision pursuant to, subsection (k) solely because of and Senator BRYAN is going to offer the a failure to comply with subsection (l)(1)(C). here. It is not the community groups amendment. On page 66, strike lines 7 and 8 and insert that have a veto power. These are deci- Mr. LOTT. I modify it to say Senator the following: ‘‘bank is well capitalized and sions that are essentially made by SARBANES or his designee. well managed; bank regulators—regulators that have

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00020 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8414 CONGRESSIONAL RECORD—SENATE May 5, 1999 traditionally evinced no hostility to These loans have financed businesses I will explain shortly how S. 900, the the banking industry. And even an in- which have been critical to revitalizing bill before us, would substantially stitution which gets the lowest rat- the distressed communities. weaken the CRA provisions, and the ing—substantial noncompliance is the Mr. President, it seems to me that position taken by the Home Builders, lowest rating you can get—may still has a desirable result for every mayor and others, is to support the amend- have its application approved. So noth- of every major community in America ment which is presently before the ing in the language of CRA compels a struggling to revitalize the inner core body. regulator to disapprove an application, of his or her State. That is the experi- Mr. President, the distinguished even if the financial institution that is ence in my own State. That is the ex- chairman of the committee and I have applying for the relief sought gets the perience, I suggest, of every State. a difference of opinion. And he will lowest evaluation possible. As a result of CRA, we are seeing have an opportunity, I am sure, to ar- What is the history in the last 21 more money being invested and loaned ticulate his point of view. The chair- years of the act? There have been some in inner cities with minority busi- man—it is entirely appropriate for him 86,000 applications filed over the last 21 nesses. to do so—sent out letters to various years and, of those, only 660 have re- That, it seems to me, makes sense, groups to get their comments. ceived adverse comments. So less than and good public policy. A letter from a small banker dated 1 percent of all of the applications re- Who, then, objects to CRA? March 26 of this year responds to lating to CRA that have been received We are dealing with a piece of legis- that—a copy of which was made avail- have been subject to objections or ad- lation that will substantially trans- able to those of us who serve on the verse comments by any of the regu- form the way in which modern finan- committee—a letter addressed to: lating groups over a period of 21 years. cial institutions will be regulated— Dear Senator Gramm: I received a copy of What has CRA accomplished? Well, it banking, securities and insurance. your letter to Scott Jones— has accomplished a great deal. In point Mr. President, those groups are in Mr. Jones is the President of the of fact, the CRA, over the years, has re- support of CRA, and they are in sup- American Banking Association— sulted in a substantial increase in lend- port of the amendment which I have of- regarding the proposed exemption from CRA ing and other financial activity within fered. requirements for small banks. While I appre- the inner-city and minority groups in Indeed, in the last session of the Con- ciate your efforts on our behalf, I have to say America. CRA encourages banks to gress, H.R. 10, which contains CRA pro- that this exemption ‘‘Don’t mean jack to meet the credit needs of the entire visions virtually identical to the ones me.’’ community, including low- and mod- that are contained in the Bryan That is a quote. That is his language. erate-income areas. amendment, were passed by the House We have two bank charters, and have al- Over the last 21 years, the CRA has of Representatives, and emerged from a ways received an outstanding rating. The been one of the strongest incentives to Senate Banking Committee by a vote burden is not onerous, especially under the encourage investment in low-income of 16 to 2—broad bipartisan support. revised requirements now in effect for the and minority communities. In this Congress, the financial insti- past two or three years. The information I gather to determine in-area versus out-of- Under the law, federally insured fi- tution restructuring bill that is mak- ing its way through the other body was area loans is useful to me outside of the CRA nancial institutions have made billions requirements. I probably spend less than 5 of dollars in profitable market rate approved by a vote of 51 to 8—51 to 8— hours a year on the issue. I don’t think it is loans and investments in underserved and the CRA provisions contained in worth squandering any political capital you urban and rural areas. And it has done that piece of legislation are essentially have to eliminate the CRA. so without creating a large Federal bu- identical to the provisions that the That is the essential text of the let- reaucracy, or jeopardizing the safety Bryan amendment addresses. ter that our distinguished chairman re- and soundness of any financial institu- Banks are supportive, the insurance ceived. That small banker made ref- tion. industry is supportive, and the securi- erence to some provisions in CRA that CRA has been an important tool in ties industry—the major players are were changed in 1996. improving access to credit for minority supportive. Moreover, banks have Mr. President, recognizing that a and low- to moderate-income Ameri- found not only that it is good public small bank has a much smaller staff to cans. policy, but it makes sense financially. deal with compliance issues, substan- The dramatic increase in home own- The National Association of Home tial changes were made in the CRA re- ership rates for minorities is attrib- Builders, which has participated in an quirements for small banks. Essen- utable in large part to increased focus enormous growth in the rate of new tially, we are talking about institu- on banks’ CRA performance. Between housing starts, and has seen a remark- tions under $250 million. 1993 and 1997, the number of conven- able increase in the percentage of home No. 1, with respect to CRA, those tional home mortgage loans extended ownership in America, has this to say small banks have no CRA reporting re- increased for African Americans by 72 about CRA. quirements. percent; for Hispanics, 45 percent; for The National Association of Home Let me reemphasize that. They have Asian Americans, 31 percent; for Native Builders: no CRA reporting requirements. Americans, 30 percent; for low- and Therefore, the NAHB, the National Asso- And the standards which are applied moderate-income census tracks by 45 ciation of Home Builders, supports any to larger banks that are involved in a percent. amendments offered to remove or replace the lending, a service, and an investment Small business owners in low- and provisions in S. 900— criteria are not applicable to small moderate-income communities have That is the bill that we are debat- banks. Indeed, small banks do not have seen a substantial increase in their ac- ing— to compile any data. They don’t have cess to credit under the law. that deals with a much more restrictive and to submit any reports. Under the emphasis of CRA, banks a roll-back provision of CRA. They have to have records available have made loans to African Americans, The Home Builders go on to say: so that when the bank examiner comes Native Americans, Hispanic and Asian While the CRA may not be the perfect so- in pursuant to this periodic request, or Americans, and, according to the Small lution to ensuring housing credit is available if a small bank requests some activity Business Administration, loans to Afri- to all communities, financial institutions of which triggers the application of CRA, can-American-owned firms increased all sizes, through their compliance with they simply say to the bank examiner, by 145 percent between 1992 and 1997. In CRA, have provided crucial community de- ‘‘Our records are contained in the file velopment loans and affordable housing pro- 1997 alone, banks made more than $34 duction loans that have benefited millions of cabinet over there.’’ There is no report- billion in loans to entrepreneurs lo- people across the United States. We see no ing requirement and no affirmative cated in low- and moderate-income public good served by a weakening or a re- burden on their part other than to have areas. duction in the CRA requirements. the records which, as the small banker

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00021 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8415 who wrote the letter to our distin- strikes me that the Senator’s provi- the course of financial modernization guished chairman pointed out, a bank sions impose limitations that do not discussions. This is a Depression-era would want to have for itself inde- currently exist in the law. I know the piece of legislation. I like it. It neatly pendent and separate and apart from able chairman well understands, even if compartmentalizes banking regulation, the CRA requirements. there were a finding under current law insurance regulation, and security reg- So, indeed, there has been an ac- that the particular financial institu- ulation. It makes a lot of sense. In the knowledgment and an attempt to tion has the lowest possible rating— aftermath of the financial collapse of streamline the requirements that small substantial noncompliance—that does the 1920s and the Great Depression that bankers are subject to. And that has not preclude the bank regulator from followed, a number of abuses were been acknowledged by the cor- approving the application. pointed out. This legislation was in re- respondent who wrote to our distin- CRA is not an onerous burden. Under sponse to those abuses. It served the guished chairman. the current law, which would remain in Nation effectively for many decades. What do we have in the current bill? place with the Bryan amendment, a As a result of court decisions and ac- The current bill does a couple of things bank that seeks a merger approval or tions taken by bank regulators, today which, in my view, roll back the provi- charter provision change or a new much of Glass-Steagall has been effec- sions of CRA. branch, even if that bank had a sub- tively emasculated and the market- It says, in effect, that if a financial stantial noncompliance, the lowest rat- place is dictating new products that in- institution has a CRA rating of satis- ing possible in the CRA, under the law, volve combinations of insurance, secu- factory or above for a period of 36 nothing precludes the bank regulator rities, and banking functions. I agree months, 3 years, it would be deemed in from approving that application. with the distinguished chairman that compliance for purposes of CRA, and I understand the concern of the Sen- we need a piece of legislation which ef- for any one of the applications for ei- ator from Texas in terms of balancing fectively deals with that. In effect, ther a merger, an acquisition, or grant the equities here. It strikes me that we what we are doing is establishing that of extension, there would be no oppor- ought not to put that additional bur- modern framework. We have estab- tunity for community groups to com- den of proof on community groups who lished essentially a system of func- ment. may want to file some legitimate con- tional regulation. That would roll back the provisions. cerns they have about a proposed merg- It appears from the testimony we Mr. GRAMM. Will the Senator yield? er, acquisition, or a branch extension. have received from the Banking Com- Mr. BRYAN. I am happy to yield to I think the record reflects, of 86,000 mittee and others who have offered the Senator. applications, we have had fewer than 1 comment that the new financial world Mr. GRAMM. I know the Senator, percent, 660, that have availed them- will deal not so much in terms of merg- and I know he would not want to state selves of this. I respectfully submit, in ers and acquisitions but will seek to something that is incorrect. I will be response to the comments of my friend avail itself of the new financial serv- brief. from Texas, that is not, in my judg- ices that banks will be able to partici- The amendment says if a bank has a ment, unduly burdensome. pate in under the provisions of S. 900, long history of compliance, they have The Senator also provides in his the financial restructuring bill we are been in compliance for 3 years in a row, version of S. 900 a small bank exemp- debating. Those services involve, essen- they are currently in compliance, in tion. The effect of that would be to tially, securities and insurance func- order for the regulator to prevent them eliminate about 37 percent of all of the tions. This is testimony offered before the from taking the action that they are banks in the country from the current House Banking Committee by Treasury allowed to take by being in compli- provisions of CRA. Again, I think it is Secretary Rubin. I think he makes a ance, that a person who protests has to a balance. It is not the purpose of the point far more effectively than I. present some substantial evidence. Senator from Nevada nor of those who Banking industry experts agree that most ‘‘Substantial evidence’’ is defined in support the Bryan amendment to want of the consolidations within the banking the law as more than a scintilla. It to impose an onerous, unreasonable, community have occurred and that the new does not in any way say they are unfair burden upon a financial institu- frontier will involve mergers among banks, deemed to be in compliance, other than tion. However, I must say, I think the securities and insurance firms. that they are innocent until proven track record would indicate that is not As a side point, that is the kind of guilty if they have a good record. Any- the case. activity which the S. 900 restructuring body can protest, anybody can file a Responding to a legitimate concern bill will authorize. complaint, but the regulator can’t stop of small banks, as I pointed out, in 1996 According to Treasury Secretary the process or delay it unless the chal- the rules were changed so that small Rubin, if we wish to preserve the rel- lenging party presents some ‘‘substan- banks do not have a reporting require- evance of CRA at a time when the rel- tial evidence.’’ ment. All they must do is maintain ative importance of bank mergers may This isn’t for everybody. It is only records so that the bank examiner who decline and the establishment of for the banks that have a long history comes in periodically to review, or nonbank financial services will become of compliance. whenever the application is filed that increasingly important, the authority I didn’t want to have any confusion. triggers the CRA review to look at the to engage in newly authorized activi- That is exactly what it says. records, can make sure in effect that ties should be connected to a satisfac- I thank the Senator. the bank is lending in the community. tory CRA rating. Mr. BRYAN. I thank the chairman. It strikes me that is good public policy. That is the philosophical underpin- The chairman states correctly the Indeed, banks have profited from that ning. We will be dealing with a new contents of the bill. However, let me activity. world, a new financial structure, and say in response to the Senator’s posi- Those are the two provisions that the that, we believe, is appropriate in light tion, we have in effect a 97-percent Senator’s version of S. 900 would con- of the changes in market conditions. compliance rate. Mr. President, 97 per- tain. Also, it would eliminate CRA What are the requirements that cent of the financial institutions in the from the new activities which would be would be imposed upon a depository in- country receive satisfactory or better. permitted under the provisions of this stitution under the provisions of this In the entire history of the Community law. amendment which would seek to avail Reinvestment Act, with some 86,000 ap- The thrust of this legislation is to itself of these new activities—insur- plications, we have had fewer than 1 provide a regulatory framework that ance and securities? No. 1, as a condi- percent of those protested in any way. deals with the reality of the market- tion precedent, a depository institution In terms of balance, to give commu- place. Many of those who do not serve would have to have a satisfactory rat- nity groups an opportunity not only to on the Banking Committee have heard ing. That is not, it seems to me, an un- comment but to register concerns, it Glass-Steagall mentioned frequently in reasonable provision.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00022 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8416 CONGRESSIONAL RECORD—SENATE May 5, 1999 What kind of action must the regu- cent—have objections or adverse com- tion, the safe harbor issue, that if we lator consider? If the institution has a ments been made. previously had a satisfactory rating or satisfactory CRA rating and all other I think the amendment is fair. It better, they could not take into ac- regulatory issues nonrelated to CRA strikes a middle ground. It acknowl- count people’s comments, unless they are in place, that application could be edges the concerns of small banks with had substantial, verifying information, approved, it could be subjected to cer- the changes that were made in 1996. I and then we are being told that a lot of tain conditions, or it could be denied. hope my colleagues on both sides of the cases were read that indicated that An agreement could be entered into be- aisle will support this legislation. ‘‘substantial’’ means a scintilla of evi- tween the financial institution and the I see the Senator from Maryland—— dence. regulator if, indeed, there were some Mr. SARBANES. Will the Senator The Senator was a distinguished at- concerns about maintaining the CRA, yield for a question? torney general for the State of Nevada and the regulator would have the abil- Mr. BRYAN. I am happy to yield to for a number of years before he became ity to do several things if there were a the Senator from Maryland. the Governor. Wouldn’t he read the noncompliance with the agreement en- The PRESIDING OFFICER (Mr. phrase ‘‘substantial, verifiable infor- tered into. BUNNING). The Senator from Maryland. mation’’ as a more exacting standard On balance, what we are talking Mr. SARBANES. First of all, I com- than ‘‘scintilla’’ of evidence? about is preserving the relevance of mend the able Senator from Nevada for Mr. BRYAN. The Senator from Mary- CRA in this new financial world we are an extremely fine statement in support land makes a good point. I think any talking about that will deal with merg- of this amendment which I very strong- fair reading, in terms of the standards ers and acquisitions involving broker- ly back. of proof, is that a ‘‘substantial’’ stand- age and insurance type of services The Senator made reference—I think ard is much higher than a scintilla. which are not currently authorized it is an extremely important point—to In effect, what this provision would under the regulatory framework. the fact that the decisions with respect do is raise the bar substantially, I say So I think, just by way of concluding, to complying with CRA are made by to my friend from Maryland, for com- what we are talking about is not a bold the regulators. As I understand it, munity investment groups being able or reckless expansion of CRA. We are community groups or anyone else can to, in effect, make their case for the really talking about, No. 1, maintain- come in and make comments when consideration—the consideration of the ing the status quo with respect to CRA some of these steps are to be taken for regulator. I come back to the point. Even if and its traditional functions as it deals which an institution would have to they make their case that, indeed, the with the mergers and the acquisition meet CRA muster, and some of those bank has not been responsible, has not and charter changes and the new comments, I assume, can be right on point, others may wander about. But done what it ought to do under CRA, branch request, which is the current the regulator may disregard that and whatever the case, it is not the people part of the law. And we are simply say- still grant that approval. So it strikes who comment who make the judgment; ing, with respect to these new services, me that by posing a standard before it is the regulators who make the judg- these new opportunities which finan- they even get into the ball game of ment. So they can take it into account, cial institutions will be allowed to par- ‘‘substantial,’’ you indeed cut off ac- give it some weight, give it no weight— ticipate in, which as Secretary Rubin cess to much of the input the commu- isn’t that correct? points out is where the action is going nity groups ought to have before a reg- Mr. BRYAN. The Senator from Mary- to be, that is where the field of play is. ulator makes a decision. To say that with respect to those new land is absolutely correct. It is the reg- Mr. SARBANES. It is interesting. activities no CRA would be applicable, ulators, whether it is the OTS, or Fed- The current system I think is seen by no requirement would be in place, is, in eral Reserve, or the OCC. most people as working fairly well. In effect, to roll back the application of As the Senator from Maryland fact, many fine financial institutions CRA to the range of financial services knows, because of his longstanding do not complain about it. They are pre- that banks are currently allowed to membership on the committee, much pared to continue to work under the participate in. can be said about bank regulators. I do current system, and many of them In my judgment, this is a reasonable not believe anybody would indicate or have even said they see strong positive and fair amendment. Bankers support suggest the record would indicate that value in it. So it seems to me this is an it. Securities firms support it. Insur- there is a hostility by the regulators to effort to institute an important change ance companies support it. It enjoys a the institutions they regulate. In ef- that would really cut off open com- broad range of support. fect, the regulators have the oppor- ment. Let me emphasize to my colleagues tunity to consider the CRA issues pre- You see, none of this is done, as I un- that, unlike some issues which have sented among a range of other issues— derstand it, in the committee bill with tended to divide us in terms of partisan capital adequacy, a whole host of respect to management or capital or differences, the House of Representa- things that may be unrelated. any of the other issues the regulators tives, in considering banking legisla- As the Senator from Maryland look at when they undertake to con- tion and financial restructuring—the knows—and I think this is something sider one of these mergers or affili- same type of legislation we are debat- that needs to be pointed out—even if ations. It is being applied only to CRA. ing here today—in a vote of 51 to 8 ap- the institution which has the applica- I mean CRA is being singled out for the proved CRA provisions which essen- tion has the lowest possible rating— application of this kind of tially track the Bryan amendment. In substantial noncompliance, which, in prescreening, as it were, of people’s the last Congress, when we came with- effect, means they have done virtually ability to come in and make their com- in a gnat’s eyelash of getting financial nothing—the regulator can still ap- ments. restructuring legislation enacted, it prove the application. They can still Mr. BRYAN. The Senator makes a was approved by a bipartisan majority approve it. So there is no requirement good point. That is absolutely correct. in the House and it cleared the Senate under the existing law with respect to As the Senator knows, as a practical Banking Committee on a vote of 16 the kinds of mergers, acquisitions, matter, although CRA is triggered ge- to 2. charter changes, and branch expan- nerically in two circumstances—one, So this should not be, and I hope it sions that requires a financial institu- part of a periodic review; the other, will not be, a partisan vote. tion to even have a satisfactory rate. when applications are made for charter In the 21 years that CRA has been So this is hardly an onerous provi- changes or new branches or mergers or around, 86,000 applications have been sion, I say to my friend from Maryland. acquisitions—as a practical matter, the received that were triggered by the Mr. SARBANES. The Senator from only opportunity community groups provisions of the existing law. And in Texas interrupted the Senator to make have is in this application process fewer than 1 percent—fewer than 1 per- the point on this ‘‘comments’’ ques- which the Senator has described.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00023 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8417 That is the only opportunity. So if priate, in my judgment, and they are Mr. SARBANES. The Senator’s you foreclose them by a standard that dramatic. amendment, I think, has an extremely is unreasonable and difficult to meet, No small bank under the size of $250 important provision which says that if you have, for all intents and purposes, million has to report CRA. There is no a banking institution wishes to go into foreclosed community groups from reg- reporting requirement for CRA that is securities or into insurance, which istering any effective concerns that incumbent upon a small bank, as de- would be permitted in a comprehensive they have. fined in the provisions. way for the first time by this legisla- Mr. SARBANES. I think that is an The responsibility of the small bank tion, that banking institution must extremely important point. The chair- is simply to make available to the pass the CRA test in order to do that. man has said they have court opinions. bank examiner, when he or she comes It is asserted that this is a, I think the I have not seen these cases that inter- in periodically or when the examiner is language was used by my colleague, pret ‘‘substantial’’ to mean ‘‘a scintilla reviewing the records for an applica- the chairman, a massive expansion of of evidence.’’ tion, the fact that the bank is serving CRA. Mr. GRAMM. More than a scintilla. the community. I take a very different view of that. Mr. SARBANES. The chairman cor- Moreover, the standards which are It seems to me it is only keeping CRA rects me and says ‘‘more than a scin- required for a larger bank dealing with abreast of the developments that are tilla.’’ I don’t know how much more, a lending standard, a service standard taking place with respect to financial but more than a scintilla. and investment standard are inappli- modernization, because heretofore In any event, isn’t it the case that no cable to small banks. banks could not reach out and do—they full hearings have been held on CRA? In trying to balance the inequities did some of those activities within the We come to the floor, and we get all of here, as I know the distinguished Sen- bank of a very limited nature that had these assertions about abuses of one ator from Maryland is interested in been permitted either by regulation or sort or another, sort of radical changes doing and all of us share in a very bi- by court opinion but which were highly in a program that is seen as having partisan way, dealing with the very controversial and contested, and one of been the lifeblood, enabling commu- special concerns of small banks has the things this bill is intended to do is nities to renew themselves. To my been addressed, we have eliminated the to resolve those questions in terms of knowledge, we have not had within the reporting requirement and have simply the structure of the financial services committee any sort of comprehensive said, if I might respond to my friend industry. Both the Senator and I are hearings to examine those questions; is from Maryland, that when the bank ex- supportive of trying to do that. that the Senator’s understanding? aminer comes in, the only obligation It seems to me that if the bank is Mr. BRYAN. That is the under- on the part of the financial institution now going to be permitted to move out standing of the Senator from Nevada, is to direct the bank examiner to the to do these other activities, it is not we have had no hearings at all. file drawer and say, ‘‘Those are our some massive expansion of CRA. That I must tell the Senator from Mary- records.’’ The bank examiner examines CRA requirement would be placed upon land that the financial institutions in those records, and that is the burden the bank before they could move to do my State are supportive of CRA. If we that is imposed. those other activities. Otherwise, it want to take anecdotal evidence, I I must say, in terms of the balance, seems to me, over time, you will erode have to say financial institutions in as the Senator from Maryland knows, CRA, as institutions begin to shift my State have indicated, one, it is coming from a State which has major their assets out from under the bank- good public policy, and, two, they have metropolitan areas that fight urban ing activity into the securities and the financially benefited. But there is no decay, as does every major community insurance activities. record before us, based upon any hear- in America, CRA is one of the most ef- This amendment, the proposal the ings or testimony—and I must say I fective redevelopment tools for the Senator has, does not extend CRA to think that there is opportunity for inner cities in America that we have. It the securities and insurance affiliates; hearings to be held. When we are deal- has poured hundreds of millions of dol- am I correct on that point? ing with some other regulatory relief lars of new investments into the inner Mr. BRYAN. The Senator is correct. issues in the Banking Committee, that cities. That benefits not just the inner Mr. SARBANES. Which in fact has might be an appropriate time to bring cities, but that benefits all of us. been strongly urged by a number of the people in so we can build a record. The tragedy that occurred in Little- community groups that are supportive My understanding is that we have ton, CO, 2 weeks ago occurred in a sub- of CRA. They in effect want to extend had nothing to that effect and, indeed, urban area, but I think it is increas- it out. If that were to be done, I would this Senator has been on the com- ingly apparent to America, whether recognize that as an expansion, and we mittee now for 11 years. Financial in- you live in the inner city or live in the could fight that issue, as it were. But stitutions in my own State are very suburbs, the problems that our inner that is not what is in this amendment. supportive of the provisions. cities have in America spread like a This amendment puts the require- Mr. SARBANES. Isn’t it also the contagion. So it is in the best interest ment only on the bank, if it seeks to go case, I ask the Senator, that in the of every American, wherever he or she out and do those activities. That seems mid-1990s, when a number of banks lives, that those inner cities which face to me to be perfectly reasonable. In were complaining about the regulatory all the problems of urban decay, crime, fact, it seems to me failure to do that burden associated with CRA, Secretary and drugs, that what we can do to help is really a setback or an erosion of Rubin undertook a major effort to ad- to build those inner cities and CRA. dress the question of regulatory burden strengthen the hands of mayors, Demo- I ask the Senator his view on that and made very substantial changes in crats, Republicans, nonpartisan, is im- question. the requirements, which were greeted portant public policy, and CRA has Mr. BRYAN. I share the observation by the various banking associations at done the job. That is why the U.S. Con- and the conclusion reached by the dis- the time as being very forthcoming in ference of Mayors, as the distinguished tinguished ranking member. That is dealing with this question of overregu- ranking member knows, has been so precisely the case. As the Senator from lation? strongly supportive of the provisions in Maryland knows, we are dealing with a Mr. BRYAN. The Senator from Mary- the BRYAN amendment that we offer changing dynamic in the financial land is correct. Recognizing that small today. marketplace. That really is the cata- banks are in a different situation than Mr. SARBANES. The Senator has lyst that brings us into this financial larger banks in terms of staff capa- been very patient. Will he indulge me restructuring debate. bility, the Secretary did precisely that. for one further question? The Senator may have been off the In January 1996, these new provisions Mr. BRYAN. The Senator from Ne- floor when I shared the observation went into effect, and they are appro- vada is happy to do so. that the Treasury Secretary made,

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00024 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8418 CONGRESSIONAL RECORD—SENATE May 5, 1999 which reflects the view that the Sen- The Glass-Steagall Act—which pro- sumer and to ensure that all parties ator has expounded upon. He says, in hibits commercial banks from are playing on a level playing field. effect: affiliating with companies predomi- As part of this system of functional [I]f we wish to preserve the relevance of nantly engaged in the securities regulation, the bill retains the current CRA at a time when the relative importance busines—was passed at a different system of State regulation of insur- of bank mergers may decline and the estab- point in time and in a dramatically dif- ance. While I strongly support State lishment of non-bank financial [services] ferent economy. In response to the nu- regulation of insurance, I believe there will become increasingly important, the au- merous commercial bank failures dur- is a role for some Federal oversight. I thority to engage in newly authorized activi- ing the depression, the Glass-Steagall believe that because Congress dele- ties should be connected to. . .CRA. Act was enacted as part of President gates the authority to regulate the in- He is saying that much better than I. Roosevelt’s economic recovery pack- surance activities of national banks, it He is saying, in effect: Look, this mar- age. One premise leading to the law also has the responsibility to ensure ketplace is shifting, it is moving. From which has since been proven incorrect, that State regulation does not result in what we have seen historically, since by the way—was that commercial bloated, burdensome, and unresponsive CRA has been in effect, with the tradi- banks which were involved in securi- regulation. Also, I will be holding hear- tional consolidation and mergers of one ties underwriting failed at a higher ings this year in the Securities Sub- bank with another, that is not likely rate than other banks due to losses in committee to explore where any flaws to be where the dynamic is in the mar- their securities business when Wall exist and will work hard to address ketplace in the future. We have already Street collapsed. Subsequent studies them with all of the interested parties. seen it. have proven that these very same Another major area of functional reg- What we are going to see are consoli- banks actually fared better than other ulation contained in S. 900 is the regu- dations and mergers with other aspects banks which had not diversified by of- lation of securities activities. The bill of the financial services community— fering broad securities products. Unfor- provides a workable compromise which insurance and securities. And if you tunately, as with most of the flawed eliminates the bank’s existing broker- say that CRA has no reference or appli- legislation on our books, the law was dealer exemption and substitutes a sys- cation to those applications, in effect not sunset and has hindered America’s tem of targeted exemptions which pro- you are relegating CRA to the dustbin financial institutions—banks and secu- tect traditional banking products while of history; by and large, it is no longer rities firms alike—since its enactment requiring other securities activities to as relevant as it is currently. in the 1930s. be offered by a broker-dealer. Also, the So, in effect, what we are trying to Although commercial banks in re- bill requires the SEC and the Federal do is simply keep CRA as relevant in cent years have been able to conduct Reserve Board to work together to de- the new financial world as we have in limited securities underwriting activi- termine how future products will be the old financial world. I do not view ties through Section 20 affiliates, S. 900 regulated. this as an extension of CRA. It simply appropriately repeals the Glass- There has been some talk around reflects a change in the marketplace Steagall prohibitions on common own- Washington that an amendment may that we are likely to see with respect ership of commercial banks and securi- be offered to delete these bank exemp- to the way the financial services are ties firms and will allow these activi- tions and give the SEC complete au- provided to Americans. ties to be conducted without the arbi- thority to determine how future prod- Mr. SARBANES. In fact, unless we do trary restrictions which govern these ucts will be regulated. this, you could have a bank in substan- activities currently. Let me be clear that if this amend- tial noncompliance with respect to the The Bank Holding Company Act also ment is offered, it is done so for only CRA test which would then be able to includes similar restrictions in Section one reason—and that would be to kill reach out and exercise these additional 4(c)(8) which have prevented safe, the bill. If the bank exemptions are powers? sound, and well managed commercial eliminated and traditional activities, Mr. BRYAN. That is precisely the banks from affiliating with insurance such as trust activities, are not statu- case. companies. Although insurance is un- torily protected, the entire banking in- Mr. SARBANES. I thank the Sen- questionably a financial product, banks dustry will unite against this bill. ator. I thank him very much for his have been prohibited from under- Again, I urge my colleagues to oppose strong opening statement on this im- writing insurance, and insurance com- any amendments which significantly portant amendment. panies have been restricted from fully alter the bill’s securities provisions. Mr. BRYAN. I thank the Senator for entering the business of banking. This When repealing current law affili- his comments, which I think helped bill removes the Bank Holding Com- ation restrictions, the question is also elucidate a number of comments which pany Act restrictions and it preempts raised about what activities the new are going to be important in this de- State laws which prohibit these affili- broader bank holding companies will bate. ations. be able to conduct. The bill contains a I yield the floor. I note that the Sen- Although there always seems to be standard—financial in nature—by ator from Minnesota may wish to broad agreement that the time for re- which all activities of a bank holding speak. form is now, every recent effort has company must comply. This provision Mr. GRAMS addressed the Chair. failed because the devil has been in the maintains the current separation of The PRESIDING OFFICER. The Sen- details of how to regulate the new enti- banking and commercial activities, ator from Minnesota. ties. S. 900 successfully incorporates a while providing appropriate flexibility, Mr. GRAMS. I thank the Chair. wide array of negotiated agreements again, subject to Federal Reserve Mr. President, I want to take time between the interested industries to Board oversight. Some have criticized today to first outline my support for provide functional regulation—mean- even the narrow flexibility which is the bill overall, and then also to talk a ing regulation by product and not by provided in this bill. However, without little bit about the current pending the entity offering it. Under the bill’s this flexibility many financial compa- business, and that is the question con- regulatory structure, banking products nies will not be able to take advantage cerning CRA. will be regulated by bank regulators, of the new structure contained in the As a member of the Senate Banking securities activities will be regulated bill and will continue to expand their Committee, I rise in strong support of by the Securities and Exchange Com- activities outside of the bank holding S. 900, the Financial Services Mod- mission, and insurance will continue to company model and, thus, outside the ernization Act of 1999, and urge my col- be regulated by State insurance com- oversight that the structure would en- leagues to take the committee’s rec- missioners. This system will ensure sure. Also, while on the topic of bank- ommendation to pass this very impor- that the experts in each area will over- ing and commerce, I want to briefly tant piece of legislation. see the activities to protect the con- touch on the unitary thrift holding

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00025 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8419 company. There are three thrift related thrifts to also sell to banks, sell to se- shared also proved that CRA is a bot- provisions either in S. 900 or which are curities firms, or insurance companies. tom-line issue, costing small rural expected to be considered as floor Now I want to take a moment to dis- communities precious dollars, a lot of amendments. First, as reported by the cuss the issue which will likely be the money. His bank is Committee, the bill prevents the for- most contentious during the debate on . . .an $18 million bank located in a town mation of any new unitary thrift hold- this bill. That is the Community Rein- of 600 people in southwestern Minnesota. ing companies after February 28, 1999. vestment Act or CRA. During consider- CRA is a requirement that does absolutely This provision will protect any applica- ation of this bill, the Banking Com- nothing to protect the people of my commu- tions which were ‘‘in the pipeline’’ at mittee approved two balanced amend- nity except to cost them money. The last exam we had lasted 3 days and proved what that time, on the date the bill was un- ments designed to bring rationality to a law which has ventured far from we already knew. We service our community. veiled but will prevent any new unitary If we did not, we would not be in business. charters, thus providing a finite uni- what I believe was its original purpose. Mr. SARBANES. Will the Senator verse of unitary charters. CRA was enacted in 1977 to encourage yield on that point? Mr. President, another provision financial institutions to help meet the Mr. GRAMS. I will yield to the Sen- which is included in the base text of credit needs of the local communities ator. the bill extends the assessment dif- in which they were chartered. Al- Mr. SARBANES. I am quite prepared ferential between banks and thrifts on though noble sounding, CRA has drift- to concede that there are a lot of small the payment of interest on bonds that ed far afield from that original pur- banks that do, in fact, service their were issued by the Financing Corpora- pose. S. 900 includes a small bank ex- community, as the Senator has indi- tion as part of the savings and loan cri- emption, approved on a bipartisan vote cated by the quotes. We have never sis. In 1996, Congress enacted legisla- of the committee, which exempts held extended hearings on this issue, tion requiring thrifts to make a one- banks with assets of under $100 million but the material from the Federal De- time assessment into the Saving Asso- and which are outside of a metropoli- posit Insurance Corporation says that ciation Insurance Fund or better tan statistical area for the CRA. 57 percent of small banks and thrifts known as SAIF, to fully capitalize the Although I have received a number of have a loan-to-deposit ratio below 70 then-undercapitalized fund. This as- calls of opposition from constituents in percent and that 17 percent of those sessment was included predominantly urban areas in my State, which will have levels less than 50 percent. Con- because it was scored as a revenue gain not be affected by this exemption, I do ceding that there are small banks who under budget rules, and it could be think it is important to listen to what really pay attention to their commu- used as the offset that Congress needed some of the bankers in rural Minnesota nity, it is obvious that there are also to grant the President added spending are also saying. I am sure this is true small banks which are not doing that. that he was demanding in return for not only in Minnesota but in rural banks across the country. In fact, the Madison Wisconsin Cap- his support of the balanced budget Although these bankers are often ital Times, in an editorial a couple of plan. vilified, I believe that they play a very years ago, said: In order to lighten the blow to thrifts crucial role in ensuring that affordable and to ensure that the FICO bond in- Many rural banks establish a very dif- financial services are widely available ferent pattern than reinvesting in their com- terests payments were made in a time- in the rural America. munities where local lending takes a lower ly and also in a dependable manner, Just take, for example, the com- priority than making more assured invest- Congress for the first time spread the ments of John Schmid of the Security ment like Federal Government securities. assessment for FICO interest to the State Bank in Sebeka, MN. John Thus, such banks drain local resources of the commercial banks. Under that legisla- very localities that support them, making it writes: much harder for local citizens to get credit. tion, banks were to be assessed at a We are a small rural Minnesota bank with rate one-fifth of that which thrifts are assets of $21 million—$21 million, this is not I do not gainsay the examples that assessed until January 1, 2000, at which a large money center bank—and our town the Senator cited. But clearly, there time all institutions would be assessed population is 680 souls. We could not exist if are examples on the other side. And at the same rate. we did not support and reinvest as much as CRA, of course, is directed to get not The bill before us today extends for 3 we could in our town and surrounding area. at the good or the best actors, but the years the period during which there Gregory Morgan of First National ones that are not addressing needs. The will be an assessment differential. Not Bank of Montgomery, MN, also tells a statistics from the regulators seem to surprisingly, the thrift industry ada- similar story. He writes: indicate, and this editorial that we mantly opposed this provision. It is ex- Our bank is 36 years old, founded on the have—and we have other comments to pected that Senator JOHNSON will be of- idea of serving the entire community of the same effect—seems to indicate that fering an amendment, which I intend Montgomery and as such, we have been suc- there is a problem. to support, which strikes the FICO as- cessful. Our efforts of living and breathing Mr. GRAMS. I understand the con- community reinvestment are not driven by cern, and I know those numbers have sessment extension and eliminates the having to be in compliance with some law thrifts’ ability to affiliate with non- written in Washington but rather by listen- been raised in the questions. financial firms. ing and serving our friends and neighbors I also know, if you look at the other Although this amendment presents throughout the Montgomery area. side of the story, I have talked to some an unpopular choice for thrifts, I be- Yet another constituent committed of these small bankers who say they lieve that it is in the best interest of to his hometown is Romane Dold, of live in a town or work in a town of 300 the thrifts in my State because it will Currie State Bank. Romane writes: people. And if you look out in the rural positively impact their bottom line We are a small community bank located in parts of the country today, most of the while only slightly impacting their a town of 300 people. Our assets are $17 mil- population in these small towns is ability to affiliate. lion. Our bank has always adhered to the growing in age. So his concern was, al- I should note that if the Johnson regulations of CRA and, in fact, received an though we make all these loans avail- amendment were approved outside of ‘‘Outstanding’’ rating in our most recent able, there are not many home mort- the underlying modernization bill, it exam. The problem that we have with the gages being sought. There are not would be much more burdensome, be- regulations is that it just is not necessary. Our bank has been in this town since 1931 many automobiles being bought. There cause thrifts would then be limited to and quite honestly, if we hadn’t been rein- are not many washers and dryers for selling only to banks or to other vesting in this community for over 60 years which loans are being asked. There thrifts. However, the bill’s expansion of we wouldn’t be here. CRA has just been an- isn’t the demand for the loan. the ability of bank holding companies other ‘‘little burden’’ that we have to con- You have to expect that these bank- to affiliate with insurance companies tend with to appease some regulator. ers are going to have to put the money and securities firms passes through to Finally, the message Kieth Eitreim to some use, if there is nobody out thrifts and will now permit nonunitary of Jasper State Bank in Jasper, MN, there asking for the loan. The question

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00026 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 8420 CONGRESSIONAL RECORD—SENATE May 5, 1999 I have for the Senator is, how many of needs, not because Washington tells eliminate the competition, regulators those loans have been asked for and them to do so or says they have to, but, would have no incentive to be respon- then denied? again, because it is in their best inter- sive to the institutions they regulate The story I have—and I don’t have est and it is in the best interest of and American banks would have no this information in front of me—is that their community and their town, it where to turn if they are unhappy with he said it is awfully hard to loan proves the need for the small bank ex- their treatment. money to my community when there is emption. Mr. President, in closing I again urge no request for loans. What do I do, let The Committee also included a provi- my colleagues to support this impor- the money sit in the safe overnight? sion which has mistakenly been tant legislation so that we can move No, he has to invest it, maybe in some deemed a ‘‘safe harbor.’’ Unlike a safe the bill through conference and to the of these other government or other fi- harbor, which gives an institution a President for his signature. nancial institutions or financial mech- free ride, the rebuttable presumption I yield the floor. anisms. included in S. 900 simply gives meaning The PRESIDING OFFICER (Mr. I think there are two sides of that to the work of the regulators during VOINOVICH). The Senator from Illinois. story. It is not that these banks are CRA exams. CRA’s stated purpose is to Mr. DURBIN. I thank the Chair. turning down loans. In many cases, in require each appropriate federal bank- Mr. President, the bill which is be- these small communities in rural parts ing regulator to use its authority when fore the Senate, S. 900, is known in the of the country, there is no demand for examining financial institutions to en- shorthand form as the Financial Mod- these loans. The bank is a good, safe courage such institutions to help meet ernization Act. It is a 150-page bill place to keep it, but not always to be the credit needs of the local commu- which has been the subject of debate able to use the bank’s facilities. nities. By providing a rebuttable pre- and deliberation on Capitol Hill for al- Mr. SARBANES. That is a reasonable sumption, the bill gives the regulator most 10 years—a 10-year effort by the point. It ought to be examined in a set the benefit of the doubt that they are House and the Senate to try to mod- of careful hearings, because, in fact, meeting the requirements of CRA by ernize the laws and regulations in the particular institution may con- encouraging action by the institution Washington relative to banks and fi- front that problem, although it may be during the exam. However, the bill pro- nancial services. Of course, anyone who overlooking loan possibilities, which vides a safety that if someone feels has paid any attention understands has frequently been the case and is cer- that the regulator has not properly as- that while we have been debating, tainly the case in many instances in sessed the institution, provided the in- there has been a revolution taking which areas people were neglected in dividual can prove the regulators fail- place. terms of the availability of credit. We ure, it can still protest an action. I am reminded that just a few years have never done those kinds of hear- Thus, this amendment simply protects ago we passed major reform in the area ings. We have never really looked at federal banking regulators against har- of telecommunications—years of hear- this problem in some sort of objective, assment by individuals who simply ings, extraordinary testimony from ex- comprehensive way. want to criticize their work. pert witnesses, the best staff work, the And we hear all these kinds of ad hoc Finally, Mr. President, I regret to best lawyers, the best efforts by the stories, as it were. But, you know, have to include a negative comment in Members of the House and Senate—and there are counter-ad hoc stories. I am this statement about an otherwise out- we delivered the Telecommunications frank to say I don’t think we ought to standing bill. However, I believe that Act modernizing regulation when it be making the kind of significant the operating subsidiary provisions in- came to this industry. changes in the CRA that are in the cluded in S. 900 are inadequate and Now, a few years later, we take a committee bill without having gone should be amended. As the Senator who look at that work product. I was through the sort of process I am talk- worked on a bipartisan basis last year amused to find someone who came to ing about. with Senator REED of Rhode Island to I thank the Senator for yielding. my office and reported to me that they Mr. GRAMS. Mr. President, by put- draft a compromise operating sub- had found in that 1,000-page bill only ting a face on the businesspeople work- sidiary amendment, I have vested a two references to the Internet. Think ing day in and day out trying to help great deal of time studying the pluses of that. We modernized our tele- America’s rural communities strive and minuses of this option. I have come communications law and almost over- and survive, I hope we can eliminate to the conclusion that it is appropriate looked the most amazing phenomena the vilification which is cast upon for national banks to conduct full fi- that is taking place in telecommuni- them. We are talking about banks nancial activities, with the exception cations. under $100 million. As the gentleman of insurance underwriting and real es- I hope we don’t make the same mis- from Sebeka said: 680 people is not a tate development. I enthusiastically take here. I hope in our effort to mod- major financial center, and we have support the op sub amendment of Sen- ernize financial institutions that we done the best we can to meet the re- ator SHELBY which will be offered to are thoughtful, that we modernize quirements. We would not be in exist- this bill. It is identical to the amend- them in a way that is good for every- ence and would not be able to survive ment I authored last year and again one—consumers and families in Amer- in our community if we didn’t reinvest this year in Committee. The amend- ica as well as the owners of those insti- and if we had turned down these loans. ment provides adequate safeguards to tutions. There is a commonsense way to look ensure that the sub poses no greater Twenty-two years ago we took a look at it. According to the stories we have risk to the bank than a holding com- at banking in America. We decided heard and the bankers we have talked pany affiliate. Another benefit of this that we had some interest as a nation to, a lot of times these are banks with amendment is to provide competition in making certain that the banks three or four employees. Many times among regulators. A recent conversa- served the communities where they they are asked to have a full-time em- tion I had with a banking lawyer con- were located. That is not a radical no- ployee just to work on government reg- vinced me that this amendment is pru- tion, is it—to say if you have a bank in ulations, which takes a lot of money dent public policy. The attorney shared a town that is holding the savings and that could be used for loans, et cetera, with me that in his dealings with the checking accounts of individuals and out of the bank, and, as one banker Federal Reserve Board and the Office families and businesses, that when that said, it does absolutely nothing for his of the Comptroller of the Currency, one bank does business it should do busi- community. That is where we have to of the agencies have been cooperative ness in that same community where look at some of this. This is common in helping his client work through the people live, where the businesses sense. issues and find creative ways to deal are located, where the farmers have By using their words to show that with their problems while the other their farms, and where the ranchers they are meeting their communities’ has done nothing to help. If we were to have their ranches.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00027 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8421 We found that some banks were, in as a condition for exercising new finan- lend it back into the communities. effect, in a parasitic capacity. They cial powers. To put it in common They turn around and buy government were drawing out the resources of com- English, if you want to take your bank securities instead of lending it to the munities and regions and not putting and holding company and expand it in businesses and families that need those the money back in. In its worse situa- some direction, we are going to take a assets to make investments in the tion, you would find in some of the look to see if you have been good citi- communities. urban areas redlining, where banks zens in the communities where you are I don’t think the small bank exemp- would take the money out of a commu- located. tion is the way to go. I think the provi- nity and refuse to write mortgages for I think that is a reasonable sugges- sion in the CRA change relating to the people who wanted to build homes, tion. That is the law. But this bill that overlooks the fact that just a few or to modernize their homes. They changes it. This bill removes that re- years ago we put in new regulations to wouldn’t put money into the small quirement and says you can’t take a streamline CRA investigations in businesses in the same communities look at their records and see if they smaller banks, banks of less than $250 where they were drawing the money. have been helping local farmers and million in assets. We exempted many In 1977, we decided there was a need businesspeople, families, with mort- small banks from reporting require- for legislation called the Community gages. ments and eliminated a lot of docu- Reinvestment Act. It speaks for itself— Does that make sense, at a time mentation and paperwork. We need to when bank ownership is becoming fur- that the banks reinvest in the commu- continue to focus on banks of all sizes ther and further removed from the peo- nities where they are located. It is not to make sure they are doing the right ple who bank, that we are going to a radical concept. In fact, I think it is thing. somehow absolve them of responsi- a rational concept. It is one that, After 22 years of the Community Re- bility to the neighborhoods, the com- frankly, has served us very well for 22 investment Act, what do we have to munities, the towns, the counties show for it? Has it worked? I think, years. Now, as part of Senate bill 900, around them? I don’t think that makes quite honestly, it has worked very there is an effort to radically change any sense at all. community reinvestment. The second thing, the so-called safe well. My State of Illinois is very di- I don’t know what the experience of harbor provision. If an institution had verse, with a large city like Chicago other Senators might be. But I can tell a good conduct ribbon for 36 months and many small towns. In the Chicago you what my experience has been in under the Community Reinvestment area, thanks to a strong economy and my hometown of Springfield, IL. I have Act, this bill basically says leave those CRA, the number of home loans to low- lived in that town for about 30 years, banks alone, don’t ask any more ques- income borrowers almost doubled be- practiced law there, and raised a fam- tions. tween 1990 and 1996, enabling 30,000 ily. There was a time when I not only I don’t think that makes sense ei- families to become homeowners. Is it knew the name of every bank down- ther. of value to those families that those town, but I knew the bank presidents. The Community Reinvestment Act banks put the money back into the I might not have socialized with them, examinations take place about once community? I think it obviously is. but I sure knew where they were. I every 18 to 24 months. In fact, for the I want to take a look at some of the knew where they lived, and I knew who smaller institutions, they have been other areas of my State. Voice of the their families were. I had a feeling that streamlined more dramatically. I don’t People, in the Chicago Uptown area, those banks were going to be around think we ought to say that after some has provided quality, affordable hous- for a long time. You could just tick 3 years of good conduct we are no ing for low-income families. The ra- them off: The First National Bank, the longer going to ask basic questions as cially and economically diverse com- Illinois National Bank, The Springfield to whether or not you are making an munity of Uptown Chicago, on the far Marine Bank. investment in your community. north side of town, partnered with the But over a span of 10 or 15 years a The final provision, which the pre- Uptown National Bank of Chicago and dramatic change has taken place. I vious speaker, the Senator from Min- completed the International Homes think a lot of Americans find them- nesota, addressed from his point of project, a development of 28 town selves in the same situation that I am view, was whether or not a bank—rural homes constructed on five vacant lots in. I struggle to remember the latest bank in this instance—with less than within a four-square-block area in Up- names of these latest banks. Which one $100 million in assets should be re- town. This made homeownership pos- is the First National Bank? Which one quired to meet the requirements of the sible for 28 lower-income minority and is the Planters and Growers Bank? I Community Reinvestment Act. An ar- immigrant families. Half of these first- can’t keep up with it. It seems every 6 gument can be made, and has been time homeowners are families earning or 12 months there is a change, and not made by some, that these are smaller under 50 percent of median income. just a change in name, there is a institutions and, as such, should not be At the same time, down in my old change in ownership. The bank that burdened by regulators and paperwork, hometown of East St. Louis is used to be run downtown in Springfield let them do their business, they are Winstanley/Industry Park Neighbor- may be run out of someplace in Ohio, good neighbors, and things will work hood Organization, a new nonprofit New York, or Europe. out. corporation representing 8,000 people. If Members ask whether or not we Yet in the report filed with this bill, For those not familiar with it, my old need this law of 1977, this Community we find the statistics do not bear out hometown has had a tough time for the Reinvestment Act, to make certain that point of view. Let me read: last 20 or 25 years. They struggled to that as these changes are taking place Over 76 percent of rural U.S. banks and keep the community together and to thrifts have assets less than $100 million. in the banking industry—whoever owns survive. The Winstanley/Industry Park them, wherever their home might be— We are talking about more than Neighborhood Organization has been a that they still serve the communities three-fourths of the bank and thrift in- plus. It is a mixed-use area comprised where they draw their money from, I stitutions in the smalltown areas. of residential, commercial, and aban- think is still a very sound concept. It is asserted these small rural banks by doned industrial sites. What they have Yet this bill, S. 900, suggests it is a their nature serve the credit needs of their tried to do is to work with Magna Bank local neighbors. However, small banks have concept that should be largely aban- historically received the lowest Community of Illinois to change the area. They doned, because in three specific areas Reinvestment Act ratings. Institutions with have created a farmers market, com- there are changes in the law. less than $100 million in assets accounted for munity owned and operated, which was First, it eliminates the requirement 92 percent of institutions receiving non- developed by this organization. What that all banks within a holding com- compliance ratings under the CRA. makes the market particularly unique pany have and maintain satisfactory What many do is take the money is 14 of the 16 vendors are local resi- Community Reinvestment Act ratings from the community and then do not dents.

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If your bank were located somewhere The PRESIDING OFFICER (Mr. ROB- within that history I am going to try in Europe and you came into the ERTS). The distinguished Senator from to explain the problems that we are branch in your hometown and said, Texas is recognized. trying to fix in the underlying bill. ‘‘We have some people here who are Mr. GRAMM. Mr. President, I want Then I want to talk at some length struggling to make a living; they are to respond to the amendment that has about those problems and about the low income and they want a chance to been offered. I apologize if anybody has underlying bill. I think I will have cov- start a farmers market,’’ is it more the idea, listening to this debate, that ered the whole waterfront. likely that you are going to get a sym- there is not another side to the argu- Let me remind our colleagues the pathetic response from someone who ment. We had several people who had current Community Reinvestment Act knows the community, has a responsi- time constraints and wanted to speak. basically has two provisions. The first bility to the community, rather than Senator SARBANES and I are being held provision is that bank regulators have someone who is just hammering away hostage here, in managing the bill. So to consider how a bank has been meet- at the bottom line? I think the answer as a courtesy to others, we have let ing local credit needs only when a bank is obvious. them speak first. But I now want to applies to open a new bank, branch or A residential loan counseling pro- give a comprehensive response to this to merge. Second, bank regulators may gram of the same organization has issue. Let me begin. deny application based on a CRA launched a response to the victimiza- Mr. SARBANES. Will the Senator record. So basically, in terms of the ex- tion of over 1,400 lower-income families yield for a minute? isting CRA law, the way it was written, who were being misled by unscrupulous Mr. GRAMM. I am happy to yield. there is no violation for simply failing realtors into home purchase agree- Mr. SARBANES. How long would the to comply. The enforcement mecha- ments known as bond-for-deed. The re- Senator expect to go? nism is that if you apply to open a new altors who engaged in this often held Mr. GRAMM. I think it is going to branch or open a bank or to merge, the title to the properties throughout take me probably a minimum of about then the bank regulator—whichever the length of the contract without re- 30 minutes to go through the entire one you are subject to, based on your cording the transaction and without group of issues. charter—looks to see if you are meet- hazard insurance for the purchaser. Mr. SARBANES. Could we then put ing the needs of your community. And Most of these agreements contain no Senator BAYH and Senator EDWARDS in community reinvestment, I would like terms and have open-end type mort- line to speak after you finish? to remind our colleagues, is focused on gage balances. This organization coun- Mr. GRAMM. I do not know that any lending. The primary focus of commu- seling program helped these same resi- Republican has spoken on this issue. nity reinvestment is lending in the dents, lower-income families, refinance Did Senator ENZI speak? communities where you take deposits. with conventional mortgages on their To this point, if I might say, the dis- A bank regulator can deny an appli- own homes. tinguished Senator from Nevada spoke cation based on your CRA record. at length. You engaged in a lengthy There is no penalty involved other Finally, West Humboldt Park is a colloquy with him. We then had a non- than the denial of the application. low-income, predominantly minority relevant speaker. That is current law in CRA. What the neighborhood on Chicago’s west side. It Mr. SARBANES. Senator GRAMS substitute that has been offered by is plagued by poverty, illiteracy, wel- spoke for you. Senator BRYAN fare dependence, street and domestic would do—I have ‘‘The Mr. GRAMM. By nonrelevant I do not violence, alcohol and substance abuse, Sarbanes Substitute,’’ because Senator mean the Senator was irrelevant on and a lack of job opportunity. In 1989, SARBANES offered this in committee the issue. It had no relevance to this Orr High School and the 12 neighbor- and we assumed he would offer it issue. It was about another issue com- hood elementary schools formed a part- today, but it is the same provision—is pletely. Senator GRAMS really talked nership with Bank of America—then this: about the bill itself. The Bryan substitute would add Continental Bank—establishing a com- So it is my turn to speak. I intend to eight more requirements to CRA than munity network of schools in West speak and answer the points that have the are required under current law. In Humboldt. The partnership has grown been raised. Then I would like to con- fact, this would be a good opportunity to include over 25 programs providing tinue going side to side. We only have to ask unanimous consent to have education and social services. They in- one other person here. I do not know if printed in the RECORD a letter from clude Boys and Girls Clubs, the cre- he is going to speak at any great Chairman Greenspan that outlines ation of the BUILD project, which is a length. what the CRA provisions of this sub- group of parents who are really trying Mr. SARBANES. Then I guess our stitute are, what the CRA provisions of to keep the streets safe for their kids. colleagues know in about 30 minutes the bill are, and exactly what they It amazes me that in our efforts to they could hope to get recognition to would do. Because, as I am sure all of modernize the laws involving banks speak. our colleagues are aware, what tends to and thrift institutions, one of the first I thank the Senator. happen in these debates is people set up casualties proposed in the Republican Mr. GRAMM. Mr. President, I think straw men. In this case the straw man majority bill before the Senate is to it is important for people to step back is that somehow the underlying bill eliminate the Community Reinvest- and look at what is being proposed. I undoes CRA —that is straw man 1. ment Act. A party which dedicates have to break the discussion down into Straw man 2 is that the substitute vir- itself to the premise that local control two parts. No. 1, what it is that Sen- tually leaves CRA as it is. is best is virtually ready to give it ator SARBANES would do with his The reality, as I will paint in some away. To say that when it comes to amendment, and, second, what it is he detail, is that the underlying bill tries local control of banking assets so crit- would undo with his amendment. to deal with two clear abuses in CRA: ical for building and rebuilding a com- Mr. SARBANES. Senator BRYAN. One, an integrity provision; and, two, a munity, it will no longer hold them re- Mr. GRAMM. So let me explain what relevancy provision. It in no way does sponsible, I think that is shortsighted. he would do with his amendment, then violence to the basic idea of CRA. And For 22 years, the Community Rein- explain what he would undo, and then the second reality as compared to the vestment Act has worked. I hope we de- explain why both what he would do and straw man is that this substitute is the feat this provision if we can muster a what he would undo is bad. most massive expansion of CRA in its direct vote on it. If not, defeat the bill First of all, let me begin with current history and would literally impose a if it continues to push the things which law in CRA, then what I am going to do penalty structure that goes far beyond are not in the best interests of con- is go through what the Senator’s anything ever contemplated in CRA sumers and families across America. amendment would do. I am then going when it was adopted in 1977, or that has I yield the floor. to talk about the history of CRA and ever been discussed since. In fact, our

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00029 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.000 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8423 colleague keeps wondering where the would subject the newly established unin- Section 121 of H.R. 10 also would permit a hearings are concerning the two mod- sured wholesale financial institutions to the national bank to control an operating sub- est changes that we have made in the CRA. sidiary engaged in financial activities per- underlying bill, without ever raising 2. The CRA currently requires that the missible for a financial holding company, Federal banking agencies consider the CRA but only if the national bank and its deposi- the question: Where are the hearings performance of an insured depository insti- tory institution affiliates have and maintain on which these massive punitive pen- tution in connection with proposals by the at least a ‘‘satisfactory’’ CRA rating.1 Na- alties would be based? Where is the institution, or the institution’s holding com- tional banks and affiliated depository insti- abuse that they seek to address? The pany, to acquire or establish a deposit-tak- tutions that did not maintain such a rating point is, the rhetoric of Senator SAR- ing facility (e.g., open a branch or acquire or could be subject to the same type of correc- BANES applies more to his substitute merge with another insured depository insti- tive measures as discussed above for finan- than it does the underlying bill. tution). It does not require that an institu- cial holding companies. So let me ask unanimous consent tion’s CRA record of performance be consid- The bill passed by the Senate Banking that the letter from Alan Greenspan ered in connection with proposals to engage Committee does not contain provisions simi- lar to those discussed above. The Senate bill, with regard to the CRA provisions of in, or acquire a company engaged in, non- banking activities. H.R. 10 would allow a fi- however, would exempt from the CRA any the substitute and the CRA provisions nancial holding company to engage in new fi- insured depository institution that has $100 of the underlying bill be printed in the nancial activities only if all of the com- million or less in total assets and that is lo- RECORD. pany’s subsidiary depository institutions cated outside a Metropolitan Statistical There being no objection, the letter have and maintain at least a ‘‘satisfactory’’ Area. Data indicate that approximately 3,871 was ordered to be printed in the CRA rating. Thus, H.R. 10 would link CRA insured banks and thrifts, representing ap- RECORD, as follows: performance to the ability of a banking orga- proximately 37 percent of all insured banks nization to engage in, or acquire a company and thrifts and 2.7 percent of the assets of all BOARD OF GOVERNORS OF THE engaged in, a nonbanking activity. More such institutions, would meet these criteria, FEDERAL RESERVE SYSTEM, as of December 31, 1998. In addition, under Washington, DC, April 7, 1999. than 95 percent of the depository institu- tions examined for CRA compliance in 1997 the Senate bill, an insured depository insti- Hon. PHIL GRAMM, tution would be presumed to be in compli- Chairman, Committee on Banking, Housing, received a ‘‘satisfactory’’ or better CRA rat- ance with the CRA until its next examina- and Urban Affairs, U.S. Senate, Wash- ing. tion if the institution received at least a ington, DC. 3. Current law does not authorize a Federal ‘‘satisfactory’’ rating at its most recent CRA DEAR MR. CHAIRMAN: You have asked for banking agency to take any type of enforce- an analysis of how the financial moderniza- ment action against an insured depository performance examination and at each CRA tion bills recently passed by the House Com- institution that has a less than satisfactory examination in the preceding three years. mittee on Banking and Financial Services CRA rating, other than denying proposals by This presumption would not attach if the ap- (H.R. 10) and the Senate Committee on the institution (or the institution’s holding propriate Federal banking agency receives Banking, Housing, and Urban Affairs affect company) to establish or acquire a deposit- substantial verifiable information, arising the Community Reinvestment Act of 1977 taking facility. Thus, current law does not since the date of the institution’s most re- (CRA). Enclosed is a memorandum from the permit the Federal banking agencies to take cent CRA examination, that demonstrates Board’s General Counsel discussing the im- actions, including enforcement actions or di- the institution is not in compliance with the pact of these bills on the CRA. vestiture proceedings, outside the applica- CRA. That memo indicates that H.R. 10 would tions process if an institution fails to main- Mr. SARBANES. Will the Senator affect the CRA in three principal ways. It tain a ‘‘satisfactory’’ CRA rating on an ongo- yield? I understood the Greenspan let- would require at least a ‘‘satisfactory’’ CRA ing basis. See Memorandum from Walter ter compared the provisions in the performance rating as a precondition for en- Dellinger, Assistant Attorney General, U.S. Department of Justice, to Eugene A. Ludwig, House bill with the committee bill, not gaging in the new financial activities, pro- the provisions of the substitute. vide for the enforcement of this requirement, Comptroller of the Currency, 18 U.S. Op. Of- including through penalties and divestiture, fice of Legal Counsel No. 39 (Dec. 15, 1994). Mr. GRAMM. They are virtually and apply the CRA to uninsured wholesale fi- H.R. 10 would require that the subsidiary identical, but I stand corrected. In fact, nancial institutions. Currently, the CRA depository institutions of a financial holding let me yield to you to tell us the dif- does not require that an institution’s CRA company maintain at least a ‘‘satisfactory’’ ference. record be considered in connection with pro- CRA rating for the holding company to con- Mr. SARBANES. They are not iden- posals to engage in nonbanking activities, tinue to engage in the new financial activi- tical. There are some significant dif- authorize enforcement of the Act outside the ties. If a subsidiary depository institution ferences between the two, and I will de- fails to maintain such a rating, the financial applications process, or apply to uninsured velop them after the Senator finishes depository institutions. holding company and subsidiary depository The bill recently passed by the Senate institution must execute an agreement with his presentation. Committee on Banking, Housing, and Urban the appropriate Federal banking agencies to But as I understand it, your request Affairs does not contain similar provisions. correct the deficiency and such agencies to the Fed and their response was to The Senate bill, however, does contain two could impose limitations on the activities of compare the House bill with the com- CRA-related provisions not contained in H.R. the financial holding company or subsidiary mittee bill. Am I correct in that? 10: an exemption from the CRA for small in- depository institution until the subsidiary’s Mr. GRAMM. I think that is correct. sured depository institutions that are lo- rating is restored. The failure by a financial I stand corrected. I would like it print- holding company or subsidiary depository in- cated outside metropolitan areas and a re- ed in the RECORD, but I would be happy stitution to comply with these requirements buttable presumption regarding an institu- to hear the distinguished Democratic tion’s compliance with the CRA. would constitute a violation of the Bank I hope this information is helpful. Holding Company Act. In such cir- ranking member of the committee ex- Sincerely, cumstances, the appropriate Federal bank- plain to us the differences. I assert that ALAN GREENSPAN, ing agency could take enforcement action there are no significant differences, but Chairman. (e.g., issue a cease and desist order, assess I would like to hear them. Enclosure. civil monetary penalties or, in the case of Let me go over basically what we MEMORANDUM REGARDING THE EFFECT OF RE- the Board, seek criminal sanctions) against have in terms of additions to CRA in CENT LEGISLATIVE PROPOSALS ON THE COM- the financial holding company, the sub- the pending amendment, if the Senate MUNITY REINVESTMENT ACT sidiary depository institution, or an indi- decided to adopt it. Chairman Phil Gramm has asked for an vidual participating in the violation (such as an officer or director of the holding company No. 1, by making noncompliance with analysis of how H.R. 10, as passed by the CRA or falling out of compliance with House Committee on Banking and Financial or depository institution). Finally, if the Services last month, and the bill passed by subsidiary depository institution’s CRA rat- the Senate Committee on Banking, Housing, ing is not restored to at least the ‘‘satisfac- 1 Part 5 of the OCC’s regulations, which purports and Urban Affairs on March 4, 1999, would af- tory’’ level by its next examination (or such to allow subsidiaries of national banks to engage in fect the Community Reinvestment Act of longer period as the Board determines to be activities that national banks are not permitted to appropriate), H.R. 10 would authorize the conduct directly, currently requires that a national 1977 (‘‘CRA’’). bank have and maintain at least a ‘‘satisfactory’’ H.R. 10 would primarily impact the CRA in Board to require that the financial holding CRA rating to control an operating subsidiary en- the following three ways. company divest the subsidiary depository in- gaged in principal activities that the bank cannot 1. The CRA currently applies only to feder- stitution or, alternatively, cease engaging in conduct directly. See 12 C.F.R. §§ 5.34(f)(3)(iii), ally insured depository institutions. H.R. 10 new financial activities. 5.3(g)).

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00030 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8424 CONGRESSIONAL RECORD—SENATE May 5, 1999 CRA a violation of banking law, offi- crease in the potential for fines and penalties quote my colleague from Maryland, cers and directors of banks for the first could provide further disincentive for service never has a hearing been held on this time could be fined up to $1 million a on a bank board. subject. Never has any justification day for CRA noncompliance. I will Here is the point. If a small bank is been given whatsoever for imposing a come back to this in a moment. going to hire somebody to be president million-dollar fine on bank board mem- Under this substitute, banks can be or be an officer or recruit somebody to bers and bank officers in the name of fined up to $1 million a day for falling be on a bank board, they are going to CRA. It is the most gross overkill and out of compliance. have to buy liability insurance to pro- regulatory burden that this Senator Under this substitute, cease and de- tect that person from this potential has seen in the entire time that I have sist authority for CRA noncompliance fine, which would literally put thou- been debating banking legislation. are brought into the system. sands of rural banks in America out of I remind my colleagues that I spent Bank regulators may place any re- compliance. 12 years of my life teaching money and strictions on any banking activities for If there is a problem here that needs banking in college. I have spent too CRA noncompliance. to be fixed, if there is an abuse that long of my life, 21 years, in the House Bank regulators may place any re- should be dealt with, then one might and Senate, and I have been serving on strictions on any insurance activities say that perhaps this is justified. But the Banking Committee every day I for CRA noncompliance. here is the record: There have been have been in the Senate, and I have had Bank regulators may place any re- some 16,380 examinations of small, the privilege this year of serving as strictions on any securities activities rural banks in America since 1990, and chairman. I have never seen such a for CRA noncompliance. of those 16,380 examinations, three massive regulatory overkill as these Bank regulators may place any re- banks and S&Ls have been found to be proposed provisions, and I am confident strictions on any other activities of the out of compliance to a substantial de- that they will be rejected. holding company for CRA noncompli- gree. (Mr. SANTORUM assumed the ance. Our ranking member of the com- Chair.) Any violation by any one bank in the mittee would bring in the potential for Mr. SARBANES. Will the chairman holding company can trigger penalties a million-dollar-a-day fine based on the yield on this point? against any and all activities of the en- fact that in 16,380 audits on CRA since Mr. GRAMM. I will be happy to yield. Mr. SARBANES. I am looking at a tire banking company. 1990—9 years—there have been three table from the Federal Deposit Insur- Insurance sales of bank subsidiaries banks substantially out of compliance. ance Corporation, from 1990 through can be restricted for CRA noncompli- What is the justification for these mas- 1998, that those 320 institutions were ance. sive punitive fines? There is no jus- given a ‘‘needs to improve’’ rating Finally, the provision adds new ex- tification. which, of course, is below compliance, pansions of CRA far beyond the exist- The justification basically is that and 18 institutions were given ‘‘sub- ing law. Under current law, banks sell this is seen as an opportunity to mas- sively expand CRA. That is what the stantial noncompliance.’’ insurance—small banks in cities of less The Senator is using this ‘‘three’’ fig- than 5,000, other banks depending on justification is. The second letter, on exactly the ure, and I don’t know where that comes their State regulation—and they do it same subject, is from the American from. without CRA approval. Bankers Association. Here is what they Mr. GRAMM. I can tell you where it The substitute would expand the de- say: comes from. It comes from looking at cision of banks or ability of banks to the banks and S&Ls that meet two sell insurance to require CRA approval. We would oppose amendments we under- stand may be offered that would contain pro- tests: One, they have less than $100 Some 20 banks now provide some secu- visions not only eliminating the two CRA million of assets; and, two, they oper- rity services. They do it without being provisions currently in the bill, but also add- ate solely outside standard metropoli- required to get CRA approval. The ing additional new CRA requirements. One tan areas. pending substitute would expand CRA strong concern the ABA has is that the po- And my figure is, that those banks approval to that activity. tential for such penalties could discourage have been subjected, since 1990, to The first point I want to make is, directors from serving on community bank 16,380 examinations. And in those 16,380 contrary to the rhetoric being used, we boards and increase the cost of officer and di- examinations, the average of which has are talking about the largest, most sig- rector liability insurance coverage for banks. There has been no justification given cost that little bank about $80,000, ac- nificant expansion of CRA in history— for inserting these new penalties into CRA, cording to some 488 banks which have none of which is based on any assertion particularly given the outstanding record written us on this subject, that these of any abuse—and we are talking about the banking industry has in serving commu- 16,380 examinations—this is from the imposing confiscatory penalties that nities across the country. Federal Financial Institutions Exam- are devastating to our banking indus- I remind my colleagues, this sub- ination Council—that in these 16,380 try. stitute seeks to impose these massive examinations, costing, on average, I want to read pieces of two letters punitive penalties against small banks $80,000 apiece—so this is $1.3 billion on this issue of the potential for a mil- in America when in 16,380 exams, which that has been taken out of these little lion-dollar-a-day fine. One letter is cost those banks cumulatively bitty communities and out of their from the Independent Community $1,310,400,000 to keep the records and banks, where people are paid higher in- Bankers of America. This is a letter comply with the exam—$1,310,400,000; I terest rates and have gotten less cred- from an organization of very, very have the decimal points right this it—the result of that has been that small, generally community banks, time—after all that money, after all three of these banks, over a 9-year pe- often in rural areas that would be af- those exams, three small, rural banks riod, have been found to be in substan- fected by this. Let me read the para- or S&Ls were found substantially out tial noncompliance. graph: of compliance. You do not have to have a Ph.D. in We also have grave concerns about expand- If this is not regulatory overkill that mathematics to figure out, if you have ing CRA enforcement authority to include drives working men and women in done 16,380 exams on these small, rural the levying of heavy fines and penalties America crazy and that threatens little banks, and only three of them have against banks or their officers and directors. banks all over the State of Kansas, the been in substantial noncompliance, you An ongoing challenge for many community State of the Presiding Officer, and all are spending a tremendous amount of banks in small communities is finding will- ing and qualified bank directors. Legislation over Indiana and all over Texas and all their money to find a very, very small following the savings and loan crisis of the over America, that threatens their number of bad actors—in fact, three 1980s and 1990s greatly increased the amount very existence, I don’t know what it is. one-hundredths of 1 percent. of civil money penalties to which bank offi- First of all, this is totally unjusti- What is even more astounding is that cers and directors may be subject. Any in- fied, makes absolutely no sense and, to all of these little banks combined

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00031 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8425 make up only 2.8 percent of the capital ing about the Government regulator; A Democrat Senator raised an objec- of the banking system. They are get- but cost the bank to comply with gath- tion to the provision, worrying about ting 44 percent of the examinations. ering all the information, spending the redtape and paperwork. Interestingly They make up only 2.7 percent of the week in the audit, keeping all the enough, the distinguished chairman at assets of the banking system, and out records, designating a CRA officer—and that time said, ‘‘No problem. The red- of 16,380 exams, only three of them I will later in my presentation read ac- tape and paperwork will be nominal. were out of compliance. tual letters from the banks—these lit- No big deal.’’ We have all heard it mil- Mr. SARBANES. If the Senator—— tle banks and these little communities lions of times when thousands of pro- Mr. GRAMM. What is wrong here? spent $1.3 billion of their money com- grams have become law. There was a What does not make sense here? plying with this law. vote in the Banking Committee to Mr. SARBANES. If the Senator will Of these 16,380 examinations, only strip out this provision. And that vote yield, he simply stated the point all three banks, over a period of 9 years, failed on a 7–7 tie. over again, but it hasn’t squared the only three banks were found to be sub- We then had the bill come to the factual discrepancy. stantially out of compliance. floor of the Senate. There was another According to our data from bank reg- Our colleague has taken a different vote. And I do not have the total here, ulatory agencies, more than 70 small, definition, ‘‘marginally out of compli- but I think it was 41–30. We had some rural banks and thrifts are currently ance,’’ and the number was bigger, huge number of Members of the Senate deemed not in compliance; that is, maybe 70 out of 16,380. The point being, who were absent. So the bill became below a satisfactory rating with CRA my statement is true, that only three law. this year alone. banks, out of all of these that are au- So here is the point I want to make. Since 1990, 338 small, rural banks and dited, have turned out to be substan- In 1977, we started out with a CRA re- thrifts received CRA ratings below sat- tially out of compliance. quirement. And in that year—and these isfactory. On the basis of that, our colleague figures are all from the National Com- Sure, the Senator can make the same would impose a $1 million-a-day fine on munity Reinvestment Coalition—in speech about those numbers, but I just officers and board members. And I that year there were about $50 million want to get those on the RECORD, be- stand by my point that that is the big- of CRA loans or cash payments or com- cause those numbers are very signifi- gest overkill I have seen. mitments to lend. And that number cantly different from the numbers I think I have dealt with the pro- was relatively small, until 1992. which the Senator is putting forward. posals made which would be added by Now, what happened in 1992? Well, Mr. GRAMM. If I might reclaim my the amendment that is pending. two things happened. One, we started time—and I think probably we would These proposals really boil down to having a rash of mergers, so that these be better off to let me go through and punitive, crushing, regulatory burden very large banks and also some small make my presentation and let the Sen- and fines, imposing a $1 million-a-day banks had to get CRA approval to ator do the same—let me go back and fine on bank officers and bank board merge. What happened is this number restate the facts. members, massively expanding CRA. started to grow very rapidly. Last What the Senator has done is basi- The justification in 1977 for CRA was, year, in loans, commitments to lend, cally taken a totally different classi- ‘‘Well, you’ve got deposit insurance. cash payments, the total was $694 bil- fication than I am talking about. I That’s a good subsidy. We ought to be lion. have been very clear in what I am say- able to force these institutions to allo- Now, to put that in perspective, the ing. Here is what I am saying. And it is cate capital for a public purpose.’’ But loans, commitments to lend, and cash devastating, there is no question about for the first time, this substitute would payments, and commitments to pay that. I am glad I am not on the other expand CRA to a noninsured institu- cash—and I am going to talk about side of this argument. I would be try- tion where there is no logic for its ex- cash payments at some great length ing to change the subject, if I were. But pansion. For the first time, CRA ap- here in a moment—totaled $694 billion here are the devastating facts. proval would be necessary for selling last year. That is bigger than the Cana- The devastating facts are, that of the insurance and selling securities within dian economy. That is bigger than the little banks in America—less than $100 a bank or at an affiliate of a bank hold- combined assets of Ford, General Mo- million in deposits; probably have 6 to ing company. tors, and Chrysler. That is bigger than 10 employees—that are outside stand- These are massive expansions of reg- the discretionary budget of the Federal ard metropolitan areas—so these are ulatory burden. They are totally un- Government. Yet our colleagues, who banks that do not have a city to serve, justified based on any facts, no matter will oppose these two very simple much less an inner city. how you read them. I cannot believe amendments, say there is no need to Mr. SARBANES. Those are the banks that a majority of the Senators would look at a potential reform in CRA. we are talking about. Those are the fig- vote to do those things. CRA is now bigger than General Mo- ures I am giving you. Let me talk about what we undo if tors. It has grown from virtually noth- Mr. GRAMM. Look, let me go ahead. we adopt the Senator’s amendment. ing to become larger than the discre- I will explain the difference in what And I want to take some time to go tionary budget of the Federal Govern- you are saying and what I am saying. through this. I have not done this at ment, and yet our Democrat colleagues OK. So let me start at the top. I will go great length. refuse to admit the possibility—or all the way down, make my point, and I want people to understand what is many of them do—that we might need then I want to go on and give my pres- the problem with CRA that we are try- some degree of effort to deal with entation. You all have had many op- ing to deal with in these two very mod- abuses which would naturally occur in portunities to give yours today. And I est amendments which the Banking a program that grew in a very short listened to them faithfully. Committee has written. time from $50 million to $694 billion. But here is the point, if you take First of all, let me talk about what Why do I think this is a relevant every bank in America that has less you can view as good news. In 1977, point? Well, let me give you one fact. than $100 million of deposits, and that there was a rider to a bill that was According to the community groups, $9 is also outside a standard metropolitan written by Senator Proxmire that cre- billion has been paid or committed in area, they make up 38 percent of the fi- ated what we today call CRA. It said cash. Had you gone to that committee nancial institutions in the country. that banks should lend in the commu- hearing in 1977 and said to the then They have 44 percent of the audits. In nities where they collect deposits. chairman of the Banking Committee, fact, they were audited for CRA 16,380 There was no enforcement mechanism. Senator Proxmire, ‘‘Well, what about times from 1990 through 1998. It was simply to be used when evalu- cash payments, what about people lit- In those 16,380 audits, that cost, on ating approval for bank mergers and erally giving community groups and average—cost the bank; I am not talk- branches. individuals money not to testify

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00032 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8426 CONGRESSIONAL RECORD—SENATE May 5, 1999 against their merger or not to oppose munity group involved. We have re- In other words, the community group it or actually paying them to support dacted those names. I just want to give is agreeing that in return for this 2.75 it,’’ what he would think about that? I you a flavor of what these agreements percent of the face value of all loans can tell you: he would have said, ‘‘It is looks like, and I have pieces of three of that are made, not only will they with- not possible.’’ them here. draw the complaint they have already This bill in no way contemplates that This is Bank A: Provide blank—and filed, but they will never make another cash payments would be made, but the this is a community group—with a one. They will never make another one, fact remains that as this program has grant of up to $20,000. Provide blank— no matter what. exploded, $9 billion of cash payments another community group—with a At blank’s request—listen to this and cash commitments have been grant of up to $50,000. Provide blank one. Many of you wonder why you have made. This basically represents an with a grant of up to $25,000 to pay rea- gotten letters from banks, and I got a abuse that needs to be dealt with. In sonable and necessary ‘‘soft costs’’ to letter from a big North Carolina bank, fact, in the one hearing we had on this be incurred by blank. Provide blank might I say, and I was shocked. Then I subject, the spokesman for these rein- with a grant of a reasonable read the letter and it, in essence, said vestment coalitions admitted there amount.... that they are required by a CRA agree- were abuses. He called it ‘‘green mail,’’ That is the quid; now the quo: ment to send me this letter saying and he said that it hurt the program. Blank agrees to withdraw on the date they support CRA. I said, how is it pos- Most people would call it blackmail. hereof the comment letter, dated blank sible that somebody could be required The point is, if these abuses exist—and 28, 19 blank, and any related materials to send me a letter? And this is a dif- no one disputes they do—why shouldn’t collectively, the comment letter filed ferent bank altogether and a different we begin to try to do something about with the Office of the Comptroller of agreement. Here is how it happens: them? the Currency, the Federal Reserve In addition, the bank agrees to send Now, let me turn to a quote, and then Bank, and the board. I don’t have the letters to customers of blank pre- I will get into some of these abuses. second sheet. viously contacted by blank—well, I will The point is, the community groups This is a quote from a Cornell Uni- get to the point on the next sheet. And gets all of these cash grants and then versity law professor, Jonathan Macey, then the community group agrees to agrees to withdraw the complaints who specializes in banking law and is purge their files and database of all in- they have filed, a classic quid pro quo. one of the most respected lawyers in Now, what happened to these com- formation related to this bank’s cus- banking law in the country. Here is plaints? Were they not meritorious or tomers. In other words, they get this what he said about CRA, as it exists in did the community groups suddenly no breakoff; they get these cash pay- 1999: longer care about the people they were ments. They agree to withdraw their You see really weird things when you look protesting against? What did all of objection. They will never do another at the Code of Federal Regulations . . . like those cash grants do that induced them objection. They are even going to de- Federal regulators are encouraged to leave to withdraw their comment? stroy the computer database they used the room and allowing community groups to to do it. negotiate ex parte with bankers in a commu- Bank A, one more thing, blank and blank agree—this is the community Now I think we are getting to the nity reinvestment context . . . Giving jobs thing I mentioned. The community to the top five officials of these communities group and the bank—agree not to dis- or shake-down groups is generally high up on seminate or otherwise make available group agrees to: immediately cease and the list (of demands). to the public copies of this agreement. desist all activities directed against So what we really have is a bit of old world So the community group gets these blank; to maintain the confidentiality Sicily brought into the United States, but le- cash payments and in return agrees to of this agreement, to maintain the con- gitimized and given the patina of govern- withdraw their protests, and then the fidentiality of this agreement and any ment support. bank and group agree that they will other agreements; to cooperate with It has never been stated more clearly keep the agreement secret. them in getting agreements with other than that. Now, let’s look at Bank B: Blank will banks. And then is the thing about Now, let me give you an example, if receive a fee of 2 and three-quarters sending letters. This is called ‘‘public you would give me those agreements. percent of the face amount of each pro- policy partnership.’’ Part of our problem—and this will be gram loan made by blank. This is an In this public policy partnership: discussed later, and I hope people will agreement whereby a community ac- blank will work with the blank to es- listen to this point—part of our prob- tivist and their community group re- tablish a clear written declaratory lem is that community groups, in nego- ceive a rake-off of 2.75 percent of the statement indicating support for the tiating with banks, in virtually every face value of every loan made under Community Reinvestment Act and the case negotiate for and insist on the this agreement. Home Mortgage Disclosure Act, and confidentiality of these agreements. So Do you think people receiving that the party’s opposition to any attempts one of the problems in evaluating this loan know that this individual and this to weaken the law. Blank will send the $9 billion is, we do not have any of the group will get 2.75 percent? In fact, final copy of this statement to the facts as to where this money goes, who they don’t. And, as you will see later, blank, the American Bankers Associa- it goes to, and what they do with it unless we open up this process, they tion, the Federal Reserve Board, the when they get it. never will. No one will ever know what Office of the Comptroller of the Cur- One of the amendments that Senator is happening. Continuing with the rency, the blank Congressional delega- BENNETT or someone else will be offer- Bank B’s agreement: tion, and all Members of the House and ing later in the Senate’s consideration Blank will receive a fee of $200,000 as Senate banking committees. of financial services modernization is a reimbursement; according to blank, So when you have letters from banks sunshine amendment, which says that $100,000 is payable upon execution and telling you what great things CRA is in the future these agreements have to delivery and $100,000 six months later. doing, many of those were dictated by be made public, that they have to go to We have the quid, now the quo. commitments they made as part of the regulator, that the regulator has to The community group or the indi- contracts, secret agreements they require that the information be pro- vidual agrees to withdraw all pending signed with protesters in order to get vided, and that they be made public. protests of blank regulatory applica- them out of the way to do their work. The logic of that is, nothing disinfects tions and related materials and not to Now, I could go into a hundred other like sunshine. sponsor, either directly or indirectly, examples—someone who graduates Now, it so happens that we have the protest or to supply information in from college, goes to graduate school, three of these agreements that we have connection with any protest relating to and goes to work for the Federal Re- obtained on the condition that we not pending or future blank applications serve in acquisitions and mergers, disclose the names of the bank or com- with regulators. quits and goes into business, spends 4

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00033 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8427 years harassing a bank and bank presi- or getting a cash payment is what com- Here is what it means. Here are four dents, and finally the bank craters and munity lending is about. I think it is definitions from Supreme Court rul- gives them $1.4 million, gives them wrong, but I don’t have the votes to do ings. ‘‘Substantial evidence’’ is under- $200,000 to set up their organization; it and I didn’t try to do it. stood to mean: they now have 20 offices, lending $3.5 So, here are the two modest changes No. 1, ‘‘more than a mere scintilla.’’ billion, getting 2.75 percent of every in our bill. Number 1, consider a bank More than a mere scintilla. penny they lend right off the top, that that has been consistently in compli- No. 2, ‘‘such relevant evidence as a nobody knows about, forcing people to ance with CRA. In fact, in its last 3 reasonable mind might accept as ade- participate in their program and pay evaluations it has consistently been in quate to support a claim.’’ $50 a month for 5 years in order to get compliance and is in compliance now. Not that they have to accept it. No- the loan, and the bank actually col- What do we require that Senator SAR- tice that the Court said that substan- lects the money for them as if some- BANES and others so strenuously object tial evidence is ‘‘such relevant evi- how it were part of the loan. I could go to? We require that if a bank has his- dence as a reasonable mind might ac- on and on. But we are not here to de- torically been in compliance, if it has cept.’’ They might not accept it. But bate dramatic reforms in CRA. We are been evaluated for meeting its commu- they might accept it as adequate to only trying to do two things, and here nity lending requirements by its Fed- support a claim. they are; here is the concern. You have eral regulator three times in a row and No. 3, ‘‘real, material, not seeming heard the number. was found to be in compliance, and if it imaginary.’’ Only in 1 percent of the cases is a is currently in compliance, then some- And, finally, ‘‘considerable in protest filed. Well, remember that in body can still protest. They can call amount, value and worth.’’ 90-some-odd percent of the cases, where the bank all the nasty names they I fail to understand why there is an somebody wants to open or close a want to call them. In fact, the regu- objection when a protester wants to branch, regulators generally get no lator is required to hold a hearing if come into a bank which has been in comments. Where the protests come they provide any complaint just saying compliance with the lending laws of are in the big mergers, and in some of ‘‘I oppose it.’’ There is a hearing. this country for three evaluations in a the smaller ones that get contentious. None of that has changed. Anybody row and is currently in compliance, But what happens more often than not can say whatever they want to say. All why anyone would object to saying is that rather than filing a protest, the our amendment says, however, is that that in order to stop the bank from ex- protest group simply goes to the bank before you can stop the action from ercising the right they have earned, and says: I am going to file a protest going forward in the normal time- the protester has to provide some evi- and I am going to say—to quote one of frame, the objector has to present sub- dence. I cannot understand why any- the protesters in what they said about stantial evidence. In other words, a body would object to that. Why is it a bank in New England—I am going to bank that is historically in compli- important? say, A, you are a racist; and, B, you are ance, and is in compliance now, is I have spent a lot of time talking a loan shark. That is my charge. I am deemed to still be innocent until prov- about why it is reasonable. But why is going to make that charge, and you en guilty. And a protester can protest it important? can either reach an agreement with all they want to. But the regulator It is important because it eliminates me, or I am going to do that. can’t stop or delay the process unless the worst abuses where someone comes Now, here is the problem, and I don’t some substantial evidence is presented. in, they have no evidence, they have no think it is that hard to visualize. You Now, I know we have some distin- facts, there is no abuse. They simply have a bank and it has agreed to merge guished attorneys here, and I am not say, ‘‘I will go away if you can give me with another bank. And people don’t going to get into any kind of legal de- some money.’’ In this case, if they know whether the merger is going to bate with distinguished attorneys. can’t provide substantial evidence, be approved or whether it is good or Number 1, I object to duels between they can’t stop the process. But it bad for the bank. So during that pe- armed and unarmed men, especially doesn’t prevent the regulator from say- riod, the stocks of these two banks are when I am the unarmed man. Every ing, ‘‘You have to do a new CRA re- just fluttering. The bank literally has once in a while, I have mercy on other view.’’ hundreds of millions—and sometimes types of issues where I am armed and Our colleague talked about what reg- billions with these big bank mergers— others are not. I don’t shoot down un- ulators could do. Nothing in our at risk. So it doesn’t take a lot of armed men. amendment would prevent the regu- imagination to see that when a pro- But I want to remind those who lator from saying, ‘‘Every time you tester shows up and says, ‘‘Look, I am aren’t legal experts that ‘‘substantial want to merge, we have to have a new going to go to the Comptroller of the evidence’’ is not a trivial phrase. It was CRA evaluation.’’ We don’t stop that. Currency and tell him you are a racist chosen because it is not trivial. It is re- All we are trying to do is to require and that you are a loan shark; I am ferred to 900 times in the United States some substance—and require someone going to file a complaint and I am Code. There have been over 400 in- to have the evidence—before they can going to hold up this merger,’’ the stances in case law where the term stop the application process and cost bank is under immense pressure to act ‘‘substantial evidence’’ has been de- taxpayers and investors hundreds of as quickly as possible. What is hap- fined. Let me give you some definitions millions of dollars. pening in America today is that banks that came from the Supreme Court, It is a strange thing to say in Amer- that are risking hundreds of millions, and they are important because they ica. But I am going to say it, because or billions, of dollars are settling these give examples of the evidence that is I believe it. I will never forget when threats with secret agreements that required to be submitted by a protester the American Airline pilots were get- the public knows nothing about, and in order to stop a bank from doing ting ready to go on strike. I met with they are often paying thousands, or something that they are qualified to do some Members of Congress to talk hundreds of thousands, of dollars in based on their record. about what Congress could do because cash payments. In other words, what do you have to of the disruption that might be caused Now, who ever said CRA had any- have in order to say, ‘‘This person is by the strike. I finally said, ‘‘Look. thing to do with cash? Yet, according not meeting the requirement of law You know, it is no secret that most to the CRA groups, $9 billion of cash and I want him stopped’’? Knowing unions do not love me, but I believe in payments have been made under CRA. that it may cost them hundreds of mil- freedom. And people have a right to I would like to ban cash payments, lions of dollars, even billions of dollars, strike, if they want to strike. And I am quite frankly. I don’t think they are what is the standard you have to meet? not voting for a bill that prevents them what CRA is about. I don’t think some What does ‘‘substantial evidence’’ from striking.’’ One Member of Con- protester getting a rake-off of interest mean? gress, who will go unnamed, said,

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00034 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8428 CONGRESSIONAL RECORD—SENATE May 5, 1999 ‘‘Well, wait a minute. These pilots rural areas, and only three of them CRA question. The only people who make $150,000 a year. I am not worried have been found to be substantially have raised those questions are bank about their rights.’’ noncompliant. But even though three consultants. Let me tell you why that is relevant. bad actors have been found, $1.3 billion The next bank is Copiah Bank from One of the reasons this is so hard to in compliance costs has been imposed Crystal Springs, MS: discuss is that everybody has the idea on these little banks that have only be- Our compliance officer, Gerry Broome, and that these bankers are rich. So we are tween 6 and 10 employees. It is a very his assistant have spent many research not worried about their rights. heavy regulatory burden. hours and reams of paper in their efforts to When do our rights end based on how Let me read just a couple of letters comply with mandated requirement’s paper much money we have? I can understand from the banks that are affected. Our work. We have even had to outsource some of and I accept that you ought not have colleague from Illinois was here. I am its checkpoints to a compliance consultant from time to time. more rights because you have more sorry he left. We probably have more money, but you ought not have less. letters from Illinois than any other * * * * * The idea that we would let someone State. But he won’t get to hear it. But As an $83 million community bank, we feel or some group impose hundreds of mil- an obligation to help you in your efforts to- I am going read three of his letters, ward easing our paper work burden. lions of dollars of costs on other citi- and then the others. zens, many of whom are stockholders— This is a letter from Franklin Bank Lakeside State Bank, New Town, ND: my teacher retirement fund, I am sure, in Franklin, IL. I don’t know how big As a former bank examiner for the Federal is invested in some financial institu- the bank is, but it is small. Their Deposit Insurance Corporation, which in- building looks like a house. Here is cluded consumer compliance experience, and tion, or in a thrift. I don’t know, be- as a banker for over 15 years I believe I have cause I don’t keep up with what they what he says: a good understanding of the intent and the are invested in. But every teacher in Were it not for the time-consuming paper- workings of the CRA. work involved, we in small banks in rural America is invested in stocks of some * * * * * of these companies. America would find CRA laughable. Our community is our business. We wrote this Over the 47 years of our existence we have How is it right to let somebody lit- provided financing to virtually every main erally deprive them of millions of dol- book long before the government did. Offer- ing us exemption from the requirements of street business in our town, our customer lars without providing any evidence? the Community Reinvestment Act would not base includes approximately 80 percent of So that is the substance of the first change the way we do business, but it would the area farmers and for the last several committee provision. I don’t know why relieve us of the mounting paperwork from years over 50 percent of our loans have been it requires so much discussion, but it this examination for one day every other to American Indians. does. I don’t mind discussing it, year. The law [he means the CRA law] is a heavy burden because of the expansiveness of the though, because it is something that I In other words, relief by exempting regulations and the paper requirements of feel strongly about. them—they don’t change their busi- compliance. We spend hours documenting This is about abuse. This is about a ness. They are just not going to have what we have already done, rather than wrong that is going on in America the examination to do and the paper- spending that time more efficiently by doing today, right now. The fact that there work and cost of about $80,000 involved more for our community. are many success stories in CRA, the in it. The Farmers and Merchant Bank of fact that there are probably wonderful This is from Security Bank of Ham- Arnett, OK: people in almost every circumstance, ilton, IL: I am the CEO as well as the chief loan offi- does not justify looking the other way Our experience is that regulators struggle cer, compliance officer and CRA officer. I at the kind of abuses that are occur- to fill out their questionnaires when we are have to wear so many hats because we are ring. We are not trying to fix them being examined as most sections do not small and have a staff of only 7 including here. apply. Then we really have to stretch to myself. CRA compliance, done correctly, We are going to have a lot of hear- imagine our community of 3,000 having the takes a lot of time, which takes me away same problem as Chicago or Los Angeles as ings this summer. We are going to from my primary responsibility of loaning none of the demographic stratifications fit. money to my community. It has almost got- bring a lot of people in and put them This is the First National Bank of ten to the point that lending is a secondary under oath. We are going to have a Nokomis, IL. It doesn’t say how big function. It seems like we have the choice of major GAO study. We are going to look they are: lending to our community or writing up CRA at this thing in great detail. plans showing how we would loan to the We are just trying to deal with two I truly believe we could free up one-half to community if we had time to make loans. one employee in our banking operation to little commonsense things that ought put in positive service thereby expanding our * * * * * to be done in the bill. I talked about service to the community we serve. Large banks can hire full time CRA offi- the first. What is the second? That is what they believe they could cers and other compliance personnel to ad- The second committee provision ex- minister CRA programs but, small banks do if we could reduce the regulatory cannot.... empts little banks in rural areas from burden on them. CRA. Why? Because the regulatory They don’t say in their letter, but my Redlands Centennial Bank: burden on these very small banks in guess is they don’t have even 10 em- We spent approximately $80 thousand of very rural areas is oppressive. ployees. So when they are talking our shareholders’ money last year sup- First of all, these are banks that are about freeing up one half of one em- porting this ill-defined regulation. Even the regulators who examined us were hard not in standard metropolitan areas. ployee, they are talking about a tre- They are by and large serving areas pressed to give us specific definition on how mendous reduction in their cost and we might better implement this regulation. that do not have a city, much less an their regulatory burden. inner city to serve. So making them Let me read a couple of other letters. * * * * * I am urging you to get rid of the nonsen- comply with these laws that are really This is from the Cattle National Bank aimed at inner-city lending makes ab- sical CRA yoke. Keep up the fight because in Seward, NE: there are a lot of us out here who are too solutely no sense. Since the origination of public disclosure busy balancing, making a living with govern- Why is this provision important? Be- of CRA examinations, we have not had one ment regulation in this crazy business. cause these banks—as documented in person from our community ever request the Chemical Bank North is a bank of $74 information. the letters they have written to us—are million in Grayling, MI: spending $60,000 to $80,000 a year com- I remind Members that CRA went plying with CRA. As it is, we must devote disproportionate into effect in 1977 and public disclosure resources to creating and maintaining the I have used the figure before, but it went into effect about a decade after ‘‘paper trail’’ that the current CRA regula- fits here, and I want to use it again. that. tions require. Our board members must at- Since 1990, there have been 16,380 CRA So for about 12 years nobody in this tend time consuming CRA Committee meet- examinations of these little banks in little community has ever raised a ings and our officers and staff members

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00035 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8429 spend significant valuable time preparing re- bad things it does? It is the largest ex- pay the protester cash in return for not ports and keeping records that serve no pur- pansion in the regulatory burden of filing a protest. pose other than to keep us in compliance CRA in American history; it would ex- A lot of rhetoric has been used on with a regulation that attempts to enforce pand CRA to noninsured institutions, this, and I am being redundant because from a regulatory standpoint what we do ev- eryday in the normal course of our busi- violating the very logic of CRA, which when other people say something ness.... I would estimate that we devote is, banks get deposit insurance that is wrong, you have to say it right twice the equivalent of a full time employee to all partly subsidized by the Government, to get people to get it straight. Our aspects of CRA compliance. so it is reasonable for the Government amendment does not prevent people The First National Bank of Wamego, to force them to do things that have a from protesting. They can protest. Our KS—I mispronounced Wamego yester- community benefit. amendment does not prevent people day; the Presiding Officer was from The proposed substitute would ex- from filing complaints. They can file Kansas and I appreciate him correcting pand CRA to institutions that are not complaints whether they have any me. This is a $65 million bank, which insured. It would expand CRA approval facts or whether not. Our amendment means this bank probably has five or as being necessary to sell insurance does not prevent the regulator from six employees. and securities in a bank, something holding a hearing. Under current law, Our bank was listed two years in a row as that is not required today and it is oc- the regulator has to hold a hearing if the ‘‘best’’ bank in Kansas to obtain loans curring every day today without CRA somebody complains. We do not change for small businesses.... [This bank also approval. that. Our amendment does not prevent was rated outstanding on CRA.] The proposed amendment would im- the regulator from forcing an entirely * * * * * pose a potential fine of $1-million-a- new CRA evaluation. [O]ur outstanding grade did not make us a day on bank officers and bank board All our amendment says is: If you better bank. The CRA did not make us make members without any evidence whatso- have a bank that has been in compli- loans we wouldn’t have made. The CRA did ever that abuses occur. In fact, as I ance with CRA over a 3-year period, take a lot of employees’ time to document pointed out over and over again, with and if they are currently in compli- that we were an outstanding bank. small banks in rural areas having 16,380 ance, a protester can still file a pro- This is from Nebraska National in examinations at a cost of about $80,000 test, but in order to stop the bank’s ap- Kearney, NE. This is a very small in annual compliance, where the banks plication from going forward, the pro- bank. In fact, I think this might be one had to pay $1.3 billion to comply with tester has to provide substantial evi- of the smallest banks in America that all this regulation, all this paper- dence. was not a recent start. This bank has work—all of these evaluations, 16,380 of Then I went through and read from $34 million in assets, so we are talking them, found only three banks that Supreme Court cases, how you define about probably four or five employees were substantially out of compliance. ‘‘substantial evidence’’—more than a working in this bank: So, the regulatory overkill already ex- scintilla; enough that a reasonable per- We do not make foreign loans, we don’t ists. Why you would want to come in son might believe that what you are speculate in derivatives, and we don’t siphon and subject small banks and large saying is true. Those are not high deposits from this area to fund loans else- banks, and their officers and board standards. where. Instead, like virtually all the banks members, to a million-dollar-a-day for Why anybody would want to let pro- under $250 million in assets we provide home if their institution fell out of compli- testers potentially impose hundreds of loans, business loans, farm loans, and con- ance with CRA, I cannot understand. In thousands of dollars or millions of dol- struction loans. We don’t do this because of lars in losses on a bank and their the Community Reinvestment Act but be- fact, I have never heard an explanation cause it makes good business sense.... I for this draconian change in law. stockholders, many of whom are mem- bitterly resent every minute of my time and I read earlier, and I will not read bers of teacher retirement programs that of my staff spent to comply with this again, letters from the American Bank- and other broad investment groups, regulation because it takes time away from ers Association and the Independent without providing any evidence what- productive duties. Bankers Association saying how the soever to back up their claim, I don’t I feel the regulation is now being used by pending amendment will make it vir- know. But that is the debate we are consumer activist groups to ‘‘shakedown’’ tually impossible for them to get qual- having. banks seeking regulatory approval for expan- So, that is what the amendment does sion or merger. ity people who will serve on bank boards. They also talk about the cost and does not do. It is not a safe harbor. Finally, from American State Bank, of liability insurance, which will ex- It is not a safe harbor. It is not a safe an independent bank, from Portland, plode if you are going to impose these harbor. The Secretary of the Treasury OR: new potential penalties on banks, their came up with the use of that term and As one of the oldest and most strongly cap- officers and directors, all in the name now all critics use it, even though it is italized African American-owned banks west of abuses that apparently exist at the verifiably false. This is a rebuttable of the Mississippi River, Portland-based presumption. Stated another way, if a American State Bank supports your position extreme level in .03 percent of all CRA on CRA exemption for non-metropolitan examinations. bank has a good record of compliance banks. Those are all the bad things the sub- and it is deemed by the regulator to be We also urge you to explore exempting stitute does. What are the good things in compliance, it is innocent until from CRA requirements minority-owned that it undoes? Is that a word, proven guilty. You have to present commercial banks.... Today, minority- ‘‘undoes’’? I guess so. To try to curb some facts to substantiate your claim owned banks still maintain their focus on some of the abuses—and the abuses are if you are going to stop it from going serving our nation’s minority communities very similar to the strike lawsuit that forward. You don’t have to have any and their citizens. It is redundant, at best, to impose CRA requirements on banks whose we dealt with 2 years ago, and again facts to state your opinion. You don’t sole purpose is to serve minority citizens. At last year. have to have any facts to declare that worst, it compels minority banks to sustain The abuse basically occurs during the there ought to be a hearing. You don’t burdensome expenses and administrative critical moment when a bank is trying have to have any facts to protest. But costs and subjects banks to a bureaucracy to merge with another bank or sell or before the regulator can stop it, you largely unaware of the realities of the inner- engage in some new activity: it’s at have to present some facts. city marketplace. that moment the bank has a lot at The final provision that would be un- I have covered a lot of territory. Let stake and is most vulnerable. Under done here is the eminently reasonable me sum up with the following points. current law, any protester can come in exemption of very, very small, very, The Bryan amendment before us has and threaten to hold the whole thing very rural banks that on average have two parts. It does a whole bunch of bad up. This creates immense pressure on a regulatory burden of about $80,000 a things, and it undoes two little good the bank to settle with that protester year in complying with CRA, even things. What are the whole bunch of and either commit some bank action or though in the last 9 years, with 16,380

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00036 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8430 CONGRESSIONAL RECORD—SENATE May 5, 1999 examinations of these small, rural tail and restrict the Community Rein- note that there is virtually no signifi- banks, only three have been deemed to vestment Act, which the vast majority cant opposition from industry groups. I be substantially out of compliance of evidence has suggested works well, find it to be somewhat ironic that in with CRA. has served the American people well in the past, members of my own party If you were from a small town like I the past, and I believe is critical to have been accused of favoring legisla- am, or you represented a State that equal opportunity for all Americans as tion that would unduly hamstring busi- had a lot of little bitty towns and a few we advance to a new century and a new ness for ideological reasons. Today, the little bitty banks left and you went to millennium. shoe seems to be on the other foot. those banks, you would discover why We are increasingly relying upon the Let me be very clear what this dis- only .03 percent have been found out of use of market forces to create oppor- pute that has brought us to this im- compliance in 9 years. If you are from tunity. We are asking the American passe is not about. It is not about the a small town and you have a bank with people to be self-sufficient, to save, to organization under which future bank- four or five employees, your bank ends work hard, to be personally respon- ing, insurance and security services up lending to everybody in town be- sible, and I support those trends. At will be offered. This is not really a dis- cause they have nobody else to lend to. the same time, we need to ensure that pute about operating subsidiaries That is basically what the debate is the market system works for all Amer- versus the affiliates and holding com- about. icans and that every American, regard- panies, although there is a very serious I wish every person could, in some less of whether that person happens to dispute between the Secretary of the simple form, get all these facts. But it come from the right side of the tracks Treasury and the Chairman of the Fed- takes time to debate them, and I am or the wrong side of the tracks, be he eral Reserve on this issue. I am con- grateful to have the opportunity. I am or she Hispanic, African American, Na- vinced that this can be resolved if we sure we will get some more oppor- tive American or any other race, creed are given a chance. tunity today. But I thank my col- or religion in this society, that they Our dispute in this impasse is really leagues for their patience, and I yield have access to those tools in the mar- not about the unitary thrift and wheth- the floor. ketplace that will allow them to be er commercial entities should be al- The PRESIDING OFFICER (Mr. self-sufficient, to build a better way of lowed to get involved in the financial CRAPO). The Senator from Indiana. life for themselves and their families. services sector. That is a legitimate Mr. BAYH. Mr. President, I rise in It is important that we pass this law, issue and a concern that I am con- strong support of the Bryan amend- as I mentioned. It is one of the areas in vinced that, too, can be resolved if we ment, which contains, in my opinion, a which we are internationally competi- can only deal with the issue currently balanced approach to the Community tive. It is important that we pass legis- before us. No, Mr. President, the dis- Reinvestment Act as well as a bipar- lation that will allow our financial pute that has brought us to this point tisan spirit enjoyed in the last session services industry to provide com- involves the Community Reinvestment of Congress. prehensive services to their customers Act. I also want to say, to my colleague and to compete with our foreign com- I say to my colleagues and those lis- from the State of Texas, how much I petitors. tening and watching us at home that respect his expertise in this area as It is important that consumers be al- the Community Reinvestment Act has well as his dedication to this cause. lowed to have access to these services been good for America and good for But I must also respectfully disagree on a coordinated basis, on a one-stop Americans. It is working. Between 1993 and say to all those who are concerned shopping basis. It is better for con- and 1997—4 years—loans in low- and about this issue that if there are prob- sumers as well. It means jobs for your middle-income areas across our coun- lems with this amendment, in terms of State and my State and the rest of the try for mortgages and building homes the fines that can be imposed or other 48 States across the United States of increased 45 percent, 45 percent in just details, let’s correct them. If, in the America, not just in insurance, which 4 years; up 72 percent for African past, overly zealous advocates have is important to the State of Indiana, or Americans; up 45 percent for Hispanic used CRA as an excuse for extortion, investment banking or in securities or Americans; up 30 percent for Native then let’s prosecute them. If there are on the part of insurance company em- Americans. other problems, let’s correct them. ployees, agents, and brokers across this In the same period of time, actually Let’s throw out the bathwater, not country. It means jobs for small busi- just last year alone, there were 525,000 the baby. At the dawn of the 21st cen- nesses and industries in the State of loans to small business men and tury, let us not turn back the clock Indiana and elsewhere that need access women in low- and moderate-income and deny to thousands of Americans, to low-cost credit, so that they can in- areas, with total capital investments of because of the color of their skin, be- vest, be more competitive, more pro- $34 billion. cause of their race, because of their in- ductive and create good-paying jobs The Community Reinvestment Act come, the right to access one of the across our country. This is an issue not has proven to be a boom for the Amer- basic tools for empowerment and just for Wall Street, but for Main ican dream: families wishing to invest progress, and that is credit and the Street and for all of our streets across in home ownership, entrepreneurs ability to start a business or build a this country. wishing to start small businesses, home. We cannot return to those days. Unfortunately, there has been in- Americans of every race, creed and re- I should also say I am somewhat dis- creasing partisanship. I think that is ligion wanting to participate in the appointed that we have arrived at this very, very important. Just last year American dream of a better way of life impasse, because this is important leg- this measure passed out of the Senate for themselves and for their loved ones. islation. It is my great hope we will ul- Banking Committee on a 16-to-2 vote. The Community Reinvestment Act timately get it enacted, because it is This year, unfortunately, it broke has worked in my own home State of important to the financial services in- down exactly along party lines, 11 to 9. Indiana. I won’t go through all the dustry, insurance, banking, as well as Earlier this year, this provision, very cases here. From Gary, East Chicago, other industries that need access to similar to the amendment I am sup- Indianapolis, South Bend, Lafayette, credit and to consumers across our porting today, passed out of the House Bloomington, from the north to the country. This should not be a partisan of Representatives Banking Committee south, from the east to the west, in debate. In fact, in the very recent past, 52 to 8, with the vast majority of Re- communities large and small across my it has been nonpartisan or even bipar- publicans and Democrats supporting a State, more Hoosiers have opportuni- tisan. Unfortunately, it has become an continuation of a vital CRA and equal ties to make investments, make a de- issue that has broken down more and financial opportunity for all Ameri- cent income through a good job, buy a more along party lines. cans. home, or start a small business. It has I especially regret this has happened The administration strongly supports been good for our country. It has been in large part because of efforts to cur- this point of view. It is important to good for my State.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00037 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8431 Mr. President, I have a letter with trification was in the 1930s. Access to Mr. EDWARDS. That is exactly the me today that I think my colleagues credit today is as important to the fu- response I have had. I thank the Sen- will find to be of some interest. It was ture well-being of all of our citizens as ator. sent to me 2 days ago. It happens to be universal service to telephones was in Mr. President, I seek recognition at from the mayor of the city of Fort the fifties and the sixties. this time. Wayne. The reason this may be of in- That is why I believe very strongly, The PRESIDING OFFICER. The Sen- terest is that Fort Wayne is the second as we ask Americans to be more re- ator from North Carolina is recognized. largest city in the State of Indiana. sponsible, to take charge of their own Mr. DODD. Will the Senator from More than that, Paul Helmke, the lives, as we encourage them to start North Carolina yield? homes and build businesses and to Mr. EDWARDS. Absolutely. mayor of Fort Wayne, happened to be Mr. DODD. I want to say to my col- build for the future, we must give them my opponent in the race for the Senate league from Indiana, before he leaves last year. the tools within the market economy the floor, that was an excellent set of Paul Helmke is a card-carrying mem- to get the job done. That means equal remarks. I think it points out the im- ber of the Republican Party. He also access to credit as we approach the new portance of this issue. I was particu- believes in opportunities for the citi- millennium, not just to the few, not larly taken by the comments of your zens of Fort Wayne, business invest- just to the powerful, but to Americans mayor of—which city was that, I ask? ment expansion, and home ownership. of every race, ethnicity, and those of Mr. BAYH. Fort Wayne. The mayor of Fort Wayne, my oppo- even modest means. That, Mr. Presi- Mr. DODD. Fort Wayne. This was nent in the election last year, has writ- dent, is why I rise in support of the your former opponent, I think, that my ten me asking me to support a vigorous Bryan amendment and urge my col- colleague pointed out. And I just say to and vital Community Reinvestment leagues to vote in the affirmative for my colleague, again, I have had a simi- Act. it. lar reaction from my mayors across my I read from his correspondence: Thank you. I yield the floor. State. I know others have. . . . In Fort Wayne, banks have fulfilled Mr. EDWARDS. Would the Senator We have a tendency to think of these their CRA requirements in creative and from Indiana yield for a question? issues in terms of just what the bank- meaningful ways that have allowed us to le- Mr. BAYH. I would be glad to yield to ing community wants. And that is an verage their resources with public and other my colleague from North Carolina. important consideration for us, as we private influences to help in our urban revi- Mr. EDWARDS. Thank you. certainly deal with financial institu- talization efforts. . . . Perhaps the banking community I am wondering, Senator BAYH, if you tions. But I think—and I would ask my would continue to see their investment in have had the same experience I have colleague from Indiana whether or not urban renewal as beneficial without the CRA had. That is, I come from a State with he would agree with this—that, in addi- requirements. But I do not think that it is many banks, including some of the tion to the banking community, we wise to tempt fate. largest banks in America, Bank of bear a special responsibility, as Mem- Mr. President, neither do I. Involved America being one. And having had bers of the Senate, to also consider mayors, like Mayor Helmke, who was many conversations with representa- what occurs to the customers’ financial the head of the mayors association last tives of banks that are headquartered services. year, and I believe concerned Senators in my State, what I hear from them is, I think sometimes that constituency should rise to vote in favor of a vital in fact, they enjoy participating in the is given a back seat when it comes to and continually vigorous Community Community Reinvestment Act. They considering the implications of deci- Reinvestment Act. On April 22 of this take great pride in the work they do in sions we make. It is the farmer in Wyo- year, the Los Angeles Times wrote: the communities where they are lo- ming; it is the small businessperson in Before Congress voted to establish the CRA cated. They have absolutely no opposi- Connecticut; it is the consumer in Indi- in 1977, many banks wrote off entire areas, tion to the Community Reinvestment ana; it is the minority business in refusing to lend to anyone who lived behind Act and, in fact, do not oppose the North Carolina—all of us have con- the red line. Community Reinvestment Act provi- sumers out here who use these finan- The unfortunate truth is that while sions of the Democratic substitute of- cial institutions. the vast majority of bankers across our fered by Senator SARBANES. I commend my colleague from Indi- country are involved and caring and I am just curious whether the banks ana for a very thoughtful set of re- doing a good job, both before and after- in your State of Indiana have had the marks, pointing out that side of the wards, too often there were bankers same kind of reaction. equation, the consumer side, the user who were willing to accept deposits Mr. BAYH. I say to the Senator, I ap- side, the business side of our financial from some parts of our communities preciate your question. As a matter of services, and I commend him again for and not make loans to those very same fact, one of the things that has been his remarks. parts of our communities. That is what most impressive about this issue has Mrs. BOXER. Before the Senator CRA has established. It is a very strong been the uniformity of opinion among yields, I wonder if I could pose a ques- track record of change. our banks in my State, large and tion for 20 seconds. Mr. EDWARDS. Of course. Unfortunately, the bill, as small. They find that CRA has not been Mrs. BOXER. Thank you. I also want unamended, before us poses a serious a significant impediment to their doing to thank my colleague for his remarks. threat to the continuation of this business, and really the industry I wonder if he was aware of the com- progress we have seen across this coun- groups are not in opposition at all. As ments made —and this gets to the Sen- try and in my State. My understanding a matter of fact, they support the in- ator from North Carolina—by the is it would make 97 percent of all banks tent behind this very, very important President of Bank of America about presumptively exempt from the re- provision. this program. If not, I would like to quirements of CRA, 38 percent entirely So we have a situation here where put them in the RECORD. If he answered exempt from the provisions of CRA, many of our community groups, in- that question—— and would exclude the whole new areas cluding our mayors—as a matter of Mr. ENZI addressed the Chair. banks hope to get into, entirely ex- fact, I should mention for the RECORD I The PRESIDING OFFICER. The Sen- empt, new users entirely exempt from spoke to the mayor or Gary last night, ator from Wyoming. the provisions of CRA. Mr. President, as well, who believes very strongly Mr. ENZI. Mr. President, I believe now is not the time to turn back the that a city like Gary, which has been the Senator from North Carolina has clock. struggling to get back on its feet, the floor. The question was being di- I will summarize before yielding the needs this provision. rected to the Senator from Indiana. floor. Access to credit today is as im- The banks are not opposed and, in The PRESIDING OFFICER. The Sen- portant an opportunity for Americans fact, find it to be a very positive ele- ator from North Carolina does have the of every walk of life as rural elec- ment. floor and may only yield for a question.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00038 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8432 CONGRESSIONAL RECORD—SENATE May 5, 1999 Mrs. BOXER. I would be happy to di- Mrs. BOXER. Absolutely. I think it is also important for them rect this to the Senator from North Mr. EDWARDS. I want to address to understand what exactly Senator Carolina. that in just a moment. I want to say, GRAMM’s bill does to the existence of Mr. EDWARDS. Yes, absolutely. I am first, in relation to the remarks of my the Community Reinvestment Act. I aware, I say to Senator BOXER, of the friend, the Senator from Indiana, who have heard the bill described by him comment by Hugh McColl, who is head has become a very close friend and col- and others as being ‘‘Community Rein- of Bank of America. I think I can quote league of mine during our tenure—we vestment Act neutral,’’ as to the over- him exactly. came to the Senate together—that I all purposes of this legislation. Mrs. BOXER. I would like you to do am proud of what he had to say. I com- I might add parenthetically that I that right now in the RECORD, because pletely agree with everything he had to strongly support the idea that banks it is a very telling comment. say, and his remarks particularly ought to be able to expand services and Mr. EDWARDS. I think it is, too. He about turning back the clock on this affiliate with other financial institu- says, ‘‘My company supports the Com- very, very important piece of legisla- tions. They ought to be able to sell in- munity Reinvestment Act both in spir- tion ring true with me and I think ring surance. They ought to be able to sell it and in fact. We have gone way be- true with most Americans. securities. It is good for banks. We yond its requirements. We have had fun Mr. President, if I may, there is a have a lot of banks in my State that doing it. And we have made a business really critical thing I want Americans, need to do this and want to do it and, out of it.’’ who are listening to this debate, to un- I think, ought to be able to do it. It is Now, here is the head of the largest, derstand. This is not some obscure also good for consumers because it cre- or one of the largest, banks in the piece of banking legislation that has ates competition, and it is a good thing country, headquartered in my home nothing to do with their lives. for consumers to have access to these State. I happen to know that Mr. It is really important for Americans services when they go to their banks. I McColl has, in fact, strongly supported to understand that this bill—I refer strongly support those opportunities. the Community Reinvestment Act. His now to Senator GRAMM’s bill—that this Here is the problem. Under existing bank has gone above and beyond the bill will have, or has the potential to law, when a bank seeks to expand, ei- call of duty in that respect. have, a dramatic effect on the lives of ther by merger or by opening a branch, Mrs. BOXER. One more question be- every American, not just the poor, not then its CRA rating is one of the things fore I yield to my friend. just minorities, not just the elderly, that is taken into consideration. Under I find it very interesting that Sen- the provision that is proposed by Sen- ators would get up and attack this pro- not just those who run a small business or want to get into the family farming ator GRAMM, when a bank seeks to ex- gram as if it were some kind of a give- pand services by affiliating with a com- away program. These bank presidents business, and not just those people who are directly impacted by the Commu- pany that sells insurance, by affiliating have told us that these loans are very with a company that sells securities, profitable. As a matter of fact, I won- nity Reinvestment Act. This bill has the potential to affect CRA, or the Community Reinvestment der if the Senator is aware, at least in Act, plays no role whatsoever. California—and now we do have a tie in every single one of us, every single American. And here is why. Because it Let me say this in the simplest because, as you know, Mr. McColl, al- terms. A bank with a completely un- weakens the Community Reinvestment though headquartered in your fair satisfactory Community Reinvestment Act. Because of CRA, we provide low- State, does a lot of business in my fair Act rating that has been determined by income housing, we provide single-fam- State—they have told us that they are regulators to not be complying with ily housing, we give families a place to doing very well with their CRA ratings. the law, to not be doing what it should live, we give small businessmen and As a matter of fact, they are telling be doing with respect to investing in women, minority and otherwise, a us—and I want to know if the Senator its community, I am talking about a chance to engage in entrepreneurship, was aware of this—that their portfolio totally noncompliant bank, that factor to open their own business. We give the of CRA loans—these are loans that cannot even be taken into consider- people the opportunity, in my home never used to be made in the old days— ation in determining whether that are just as profitable, that portfolio, as State of North Carolina, to start a bank should be allowed to sell insur- their other loans. Is my friend aware of small farm, and expand that farm. ance and whether it should be allowed Every time we provide these kinds of that? to sell securities. economic opportunities to people, Mr. EDWARDS. Yes, I say to Senator This bill, Senator GRAMM’s bill, is every time we give families, core fami- BOXER, I am aware of that, and that is not CRA neutral for one simple reason. what I have been told consistently by lies, a chance to live together, to stay We are, by virtue of this law, expand- the banks located in North Carolina. together, and not be spread out, we do ing what banks can do, allowing them Mrs. BOXER. I thank my friend, and a number of things: No. 1, we reduce to sell insurance, allowing them to sell also my friend from Indiana, because I crime; No. 2, we create pride, an ex- securities. If we don’t take CRA, which think the notion that somehow, if you traordinary amount of self-esteem that presently applies to applications for are for CRA, you are for doing some- may not have existed before; and we branching and mergers, and apply it as thing with social value and yet inter- give people an opportunity to do some- a precondition for these new services fering with business is simply not true. thing they otherwise might not be able they are going to engage in, then we These loans are profitable loans. They to do—own their own home or open have withdrawn from CRA. We will are good for the community. It goes their own business. have cut the underpinnings from CRA. back to the old adage: ‘‘If you do good, I speak to every American when I It is something we shouldn’t do—it is you do good things, you will do well.’’ say, crime, core family values, the fact fundamental—we shouldn’t do. CRA I hope we will stand together in favor that the folks who benefit directly compliance ought to be a consideration of this program that does good things from the Community Reinvestment when banks seek to engage in the ex- for people and does well for the banks. Act are folks that we may otherwise, panded services permitted under this I yield back to my friend. as a Government, have to support, bill in exactly the same way, in exactly Mr. EDWARDS. Thank you, I say to these are things that affect every the same fashion that it presently ap- Senator BOXER. American. This bill is not some obscure plies to their attempts to merge with I will add to what she just said: When banking bill that has nothing to do other banks or to their attempts to you do good things and have the im- with people’s lives. The Community open other branches. pact that the Community Reinvest- Reivestment Act has a dramatic effect Now, I want to show a couple of ex- ment Act has had, it does not just and has had a dramatic effect on every amples with the indulgence of my col- inure to the benefit of the people who single American. I think it is critically leagues. are directly affected, it inures to the important for people to understand I want to show a couple examples of benefit of all of us. that. what the Community Reinvestment

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Act has done in North Carolina. I show GRAMM over the course of the last 45 a result of the Community Reinvest- now a photograph of a neighborhood, minutes to an hour—that the Commu- ment Act; $18.6 billion in community an economically disadvantaged neigh- nity Reinvestment Act places an enor- development, the kind of community borhood, a minority neighborhood in mous regulatory burden on banks, un- development that we saw photographs Durham, NC. This is a house that ex- fairly so. of just a few moments ago; and criti- isted in that neighborhood. Well, I think, unfortunately, with all cally important to my State of North As a result of the Community Rein- due respect to Senator GRAMM, the Carolina—and I suspect Senator BAYH’s vestment Act, and as a result of a bank facts do not bear that argument out. State of Indiana—$11 billion in small partnering with local community What we find is that among CRA-cov- farm loans. That is $11 billion going to groups, this house that we have just ered institutions, when they make an small farmers as a result of the Com- taken a look at was turned into this application, for example, when a bank munity Reinvestment Act. house. decides they are going to merge with Here is what we have. We have a bill If I could hold up the first photo just another bank, when a bank decides that makes a great deal of sense on the a minute, this was a crime-ridden, they are going to expand and open a whole. We want to expand the services drug-infested community. As a result branch, and therefore they file a CRA of banks. We believe—at least I be- of the Community Reinvestment Act, application, 99 percent of those appli- lieve—that banks ought to be able to we went from this to this—a place that cations are never even challenged by engage in those services. But it is criti- the people who occupy this home are community groups. So we start with a cally important that we maintain the proud of; a low-income family was able base of 99 percent where there is no viability and the vitality of the Com- to reside there. They take pride in challenge whatsoever. I would love the munity Reinvestment Act. It is impor- their community. And as Reverend comments of Senator SARBANES on this tant that we maintain it for a lot of Brooks, who was part of this effort, in a moment, if he will. It is my under- reasons: because we need to support said: standing that the banks are not re- minorities; we need to support the el- Before, there were drug dealers sitting on quired to keep additional information derly; we need to support low-income this corner. Now, we have homeowners hop- as a result of this expansion of serv- families; we need to support people who ing to be in these houses. ices. In fact, I think they use exactly need or want to start their own small The Community Reinvestment Act. the same base data that they kept pre- business or their own family farm. It It changes communities. It changes viously. Is that correct, Senator SAR- makes good business economic sense families. It changes people’s lives. It BANES? for the country. also changes the financial obligations Mr. SARBANES. I say to the Sen- But what I want the American people that the rest of us, as Americans, have ator, that is correct. Senator BRYAN to hear from me today, if they hear to support opportunities for people who spoke to that earlier, about the effort nothing else, is that this is not some want to support themselves. They just that was made in the mid-1990s to ease obscure piece of banking legislation need a chance. What the Community the regulatory burden on the banks. that is technical or difficult to under- Reinvestment Act does is, it gives Mr. EDWARDS. That is my under- stand. This legislation can affect their those folks a chance. standing. lives and, in fact, will affect the lives I want to show one last photo. We So we start with this basic idea that of every American every day because have seen one house. This is a neigh- 99 percent of all the CRA-covered appli- to the extent that we keep poor fami- borhood. This is located in Durham, cations are not challenged at all. Then lies together, to the extent that we re- NC. This is a neighborhood that, again, of the ones that are challenged, in only duce crime in this country, to the ex- has gone from a high-crime, drug-deal- 1 percent of those cases are the applica- tent that we give people an oppor- ers-on-the-street-corner neighborhood tions denied. So 1 percent are chal- tunity to seek out good employment, to a model community. Can you imag- lenged versus 99 percent that are not, to get jobs to support their own fami- ine the difference between the way a and of that 1 percent, only 1 percent of lies—all those things that we as Ameri- family feels when they live in a com- those are denied. cans believe in—when we do those munity where right outside their door- I think the facts prove that CRA has things in conjunction, we as a country step people are selling drugs and all the not been an enormous regulatory bur- benefit. And to the extent that we look houses are in terrible shape versus how den and that banks, as has been the ex- at it selfishly, we as individuals benefit they feel when they find themselves in perience of Senator BAYH, as has been because those people will not be sup- a community that looks like this? Now the experience of Senator DODD in Con- ported by the Government. They won’t they take pride in their community. necticut, and as has been my experi- be supported by taxpayers. They will The children growing up in this com- ence in talking to my bankers in North support themselves. And the reality is munity take pride in where they live. Carolina, the reality is they do not op- that is exactly what they want. They It gives them a sense of self-esteem. It pose the Community Reinvestment want the opportunity to support them- allows them an opportunity to have Act. They simply do not. selves and to know the pride of home- pride in themselves and their family As the quote from Hugh McColl indi- ownership. That is what community re- that they otherwise might not have. cated earlier, banks take great pride in investment is all about. That is the Now, there are some simple facts their opportunities to invest in their reason Senators SARBANES, KERRY, that I will speak to briefly that have community. Our banks are good cor- BAYH, DODD, and myself believe in it so emerged from the progress of the Com- porate citizens who do what they do be- deeply. munity Reinvestment Act during the cause they take pride in it. They be- Mr. SARBANES. Will the Senator time it has been in place. If I could lieve in the Community Reinvestment yield for a question? have the appropriate chart, please. Act. They support it. They are not op- Mr. EDWARDS. Yes. First of all, just since 1993, the pri- posed to it. Mr. SARBANES. Let me compliment vate sector lending in low- and mod- Finally, this chart depicts what CRA the Senator from Indiana and the Sen- erate-income areas, which is what we has done in loans to low- and mod- ator from North Carolina for their very have been concerned with, has risen. erate-income communities. This is as strong presentations and their tremen- From 1993, I guess this is the number of of 1997, $34 billion in small business dous contributions to the Banking loans, 185,014 to 268,463 in 1997. Over a loans. I think it is really important Committee. They both came on the period of 4 years, there is an increase of that we understand we are not just committee this year, and we are barely 45 percent, almost a 50-percent increase talking about housing. We are talking a few months into their first session in just 4 years, as a result of the Com- about small businesses, entrepreneurs and they have both made extraordinary munity Reinvestment Act. who want to get started and just need contributions to the work of the com- The argument is made that—and we a leg up, giving them a chance to de- mittee and to the work of the Senate. have heard a lot of it from Senator velop their own business, $34 billion as I simply want to say, as one Senator

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00040 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8434 CONGRESSIONAL RECORD—SENATE May 5, 1999 who has been here for a while, we are I think the fact that the mayors are The PRESIDING OFFICER (Mr. very honored to have them as part of behind it, the fact that the community ABRAHAM). The Senator from Wyoming the Senate and thankful and grateful groups are behind it, the fact that the is recognized. to them for the contributions they banks themselves, the financial insti- Mr. KERRY. Will my colleague yield make. tutions, are behind it, I think all these for a question? I wanted to ask the Senator this: In things in combination go to prove a The PRESIDING OFFICER. The Sen- a letter we received from the U.S. Con- very simple point: The Community Re- ator from Wyoming has the floor. ference of Mayors, which in effect fits investment Act has been good for Mr. KERRY. I would like to ask a in with the point that both Senators America. It is good for the specific question. were making about the importance of groups it directly benefits, and it is Mr. ENZI. The Senator doesn’t even the Community Reinvestment Act—it good for all of us as Americans because know what my statement would be. It is signed by close to 170 mayors from it allows these folks to support them- would be difficult to yield for a ques- all over the country, besides the ones selves, which is what they want to do. tion based on what I haven’t said yet. that are trustees and on the advisory Mr. BAYH. Will the Senator yield for There is a little bit of smoke that board of the U.S. Conference of May- a question? needs to be cleared out of the Chamber ors—it says: Mr. EDWARDS. Yes. before we proceed. . . .As mayors, we recognize that CRA has Mr. BAYH. Mr. President, I echo the Mr. SARBANES. Mr. President, I been an essential tool in revitalizing cities words of the Senator from Maryland in think the Senator was just asking you around this nation. In fact, there is now in- complimenting my friend from North to yield in order to determine the pro- creasing recognition that the strength and Carolina for his eloquence and his in- cedure. economic health of whole regions require Mr. KERRY. I was just going to ask strong and vibrant cities. Creating new eco- sightful presentation on a continued, strong CRA. I observe and I can tell the Senator how long he was going to nomic activity—new businesses, new jobs, speak. new homeowners—is key to the revival of that he has taken his advocacy skills Mr. ENZI. I apologize. I have been lis- urban areas and their surrounding regions, from the courtroom to the floor of the tening to a lot of statements made, and CRA has been a key component to creating Senate, and the American people are I probably reacted in a way that I this new economic activity. better for it. They go on later to say: should not have. I compliment the Senator on his Mr. GRAMM. Will the Senator yield? Prior to the enactment of CRA, banks and statement, which is built upon what Mr. ENZI. I will yield for a question, thrifts routinely redlined low and moderate- the ranking member said in the state- income neighborhoods in our nation’s cities. yes. ment he read from the Conference of Mr. GRAMM. Mr. President, I will The modest requirement in CRA that finan- Mayors. The Senator from North Caro- cial institutions meet the credit needs of make the following point. We go back their communities has led to the successful lina has become a dear friend and and forth to try to keep some balance channeling of billions of dollars into local- someone I have admiration and great in the debate. ities. respect for. I have heard the Senator I think when people have a real ques- Then they note that the bill brought mention on many occasions his dedica- tion that it is a logical thing to do. But out by the committee would severely tion to ensuring that not just big cities when questions used really disrupt the weaken CRA. They say: or large institutions have opportuni- flow of the debate so that you have ties, but that the farmers and small Unless the onerous CRA provisions are ad- long periods of time on one side of the dressed and CRA is preserved and strength- rural areas across North Carolina are aisle, I don’t think it is quite fair. Ob- ened, we would urge strong opposition to the afforded the same opportunities as viously under the rules we can do it, Senate bill. those in the large cities and in the but it can be done on both sides. I raise that with the Senator because large financial institutions. I would like to just suggest—we are it seems to me that it goes to this very My question is this: Very often, this going to vote on this at about 7 point, including the pictures he was financial modernization bill is por- o’clock. We have plenty of time. Every- showing. We are talking about the trayed as something that just Wall body can be heard. I would just like to elected officials who are right on the Street and big institutions are inter- suggest that we go back and forth. Ev- front line, so to speak, trying to deal ested in. The Senator touched on this erybody will get a chance to speak. with the problems of their commu- briefly, and there is one thing I was I urge our colleagues, if you have a nities, trying to bring them back and hoping he can expand on. I wonder if real question on something you don’t achieve revitalization and renewal. his experience in North Carolina is the know—other than, ‘‘Do you realize that They, obviously, have come in feeling same as ours in Indiana, which is that our proposal is a great proposal and very strongly. CRA can be an engine for making sure their proposal is a rotten proposal?’’— Mr. President, does the Senator feel that farmers and small businesses in yes, I realize that—if you have a real that this is another perspective on the rural areas are afforded the same kinds question, I think it makes sense. But very point he was trying to make of of opportunities as the mayors indi- in fairness to what we try to do in the importance of CRA—not just for cated the cities enjoy. going back and forth, I urge people to the people who directly benefit from it Mr. EDWARDS. I thank the Senator wait for their time to speak so we have but for the broader community, for all for his kind comments. He and I share debate on both sides of the aisle. That of us, it seems to me, here is, in a the same feelings about each other. We is my point. sense, an endorsement of the very posi- share a lot of the same beliefs and val- Several Senators addressed the tion the Senator has been enunciating. ues. There is no question that in the Chair. Mr. EDWARDS. I think that is a State of North Carolina we have had The PRESIDING OFFICER. The Sen- wonderful indication, as the Senator the same experience they have had in ator from Wyoming has the floor. put it, of the people on the ground, on Indiana, which is that the Community Mr. ENZI. The answer to the question the spot, seeing what is happening on a Reinvestment Act, in fact, reaches out of the Senator from Massachusetts is, I day-to-day basis, recognizing how criti- into rural, underserved communities, think about 10 minutes. cally important CRA is to this coun- to small farmers, small businesses and Mr. KERRY. I thank the Senator. try. They see what is happening. I communities that are chronically and Mr. SARBANES. I ask unanimous think it goes hand in hand with the economically disadvantaged and so consent that when the Senator from fact that the banks—and I might add, I desperately need its help. I think it is Wyoming concludes that the Senator take great pride in the fact that every another example of how well the CRA from Massachusetts be recognized. bank in North Carolina has a satisfac- has worked. The PRESIDING OFFICER. Is there tory CRA rating, every single one of Several Senators addressed the objection? Without objection, it is so them—are helping make a difference. Chair. ordered.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00041 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8435 The Senator from Wyoming. If these things are really invalid ac- These banks are community banks— Mr. ENZI. Mr. President, I thank you tions by those banks, they ought to be rural banks. In Wyoming, the bank for the recognition. I appreciate this taken to the highest level and the may be 100 miles from another bank. opportunity to speak. highest opportunity to punish. But Who do you think they serve? People There is a certain amount of tension that destroys the value of the com- from other States in the Nation don’t that builds up as you listen to some of pany. So they enter into agreements mail their money there. It is the people the comments. The comments have like this and send letters that say that who live in that community, and they been very good about CRA, the Com- the CRA is OK. expect and they get service, or the munity Reinvestment Act, in general, This bill does not gut CRA. It keeps bank goes out of business. and in general nothing is going to hap- the same program in place. If a bank, We have heard some statistics about pen to that CRA. The Community Re- which is audited regularly, has met the how business has increased because of investment Act will still be in place. criteria for 3 years, and meets it at the the CRA. We have heard statistics There will still be community reinvest- moment, then actual objections have about how loans have increased be- ment. to be lodged. It seems like common cause of the CRA. Take a look at the There are two changes in this bill sense to me. It doesn’t sound like doing timeframe. It wasn’t the CRA that that have been suggested. They make away with the program. It is just com- drove up the number of people buying some changes. They make some impor- mon sense. houses or drove up the opportunity for tant changes that may make CRA Small banks were mentioned. There more people to go into business. It was more viable, more valuable, more pro- is a change for small banks in here, the interest rate. The interest rate ductive, and more useful. too, if they have under $100 million in plummeted. More people could make There has been a tremendous esca- assets. I think if any of you look into house payments. More people bought lation in the number of dollars being banks, you will find that it is a very houses. It wasn’t that the banks were given in CRA commitments. We note small bank that has five or six employ- being forced into this; the banks are al- that in 1995 the annual dollars were 26 ees. You will probably find that one of ready precluded from having to do bad million, almost $27 million. In 1998, the those employees is dedicated to just loans. They are not loaning to just annual dollars were 694 million. doing CRA—doing CRA so they can anybody who comes in the door. They What do you suppose caused the in- prove that they don’t have a problem. are just doing a lot of paperwork to crease? Are banks just discovering It is only rural banks. show that the loans they are granting this? I don’t think so. We have had these letters from Fort are valid loans and the ones they are A while ago you had the opportunity Wayne and some other cities. Those not are not valid loans. to listen to some of the contents of an aren’t rural banks. I don’t care what The economy makes the difference in agreement that was necessary in order their asset base is. They don’t get this whether new businesses start and to move on in a banking arrangement. advantage. whether people buy more houses. The There are a lot of clauses in that which We are talking about the very small exemption for small banks will solve are pretty disturbing to me. communities. I have those in Wyoming. some problems for small banks, and it It has been said that you are not Those very small communities, even if probably ought to be a higher amount hearing from the banks. If that letter they only have one or two employees, than that. Again, if you are looking at auditing has been used by many groups—you have to have somebody dedicated to statistics, you could double or triple can see by the numbers that it is rap- doing the CRA. It is a paperwork expe- that number without affecting the idly escalating—how many groups are rience. They are having to fill out pa- numbers that are out of compliance; being brought into this? There is a perwork to prove that they are not in hardly at all. clause in that which says they cannot violation in a community where there I want to reiterate again that that complain about CRA. That is freedom may not even be minorities. So they amount of extortion to the big banks of speech? You cannot complain about cannot rest as well, because they don’t has gone from $27 billion up to $694 bil- somebody extorting money from you? have a classification they can meet in lion. That is going to be something on When banks are merging, there are a their customer base in their commu- an ever-increasing basis. As more peo- lot of stockholders who are nervous. nity. ple get into the business of taking on There are customers who are nervous. Three-fourths of the banks are rural CRA, taking a base and a commission They do not know whether they want banks. It was said that we had an off of that, none of this goes to the sec- to stay with the bank or not just be- amendment that put that at $2 million. tor of the community we are talking cause of the media turmoil that is I also want to point out a comment about. caused by the merger. that was made about these small CRA is important. CRA is included in Then you have a group coming in to banks. There were over 16,000 of them the bill. CRA only makes two changes. take advantage of that crisis moment, audited for CRA. There were three out It does not gut the bill. There are two that interest moment. They raise an of compliance. According to my record, changes: One for small, rural banks so issue. The bank isn’t found to be out of there were three out of compliance. we don’t have to spend so much annu- compliance; the bank is in compliance. There are some that get lower ratings, ally complying with CRA and they in- Under this bill, they have to have been and I have explained why they are stead can put it into their community, in compliance for 3 years. For 3 years lower ratings. But even if they were which is where they put their money; they have been following this. considerably more out of compliance, the other one is for the big banks so We had some discussion earlier that it is not good auditing to do it under they don’t have to write these required there are audits done on this. They are that basis. letters we heard to their Congressman checked on. It has always been shown I am an accountant. I am the only saying they don’t have any problem that the ones that are most likely to accountant in the Senate. When you with CRA. be involved in this, the bigger banks, have criteria for auditing businesses, This is not an attempt to gut CRA. are also the best respondents. But you come up with higher statistics This is an attempt to make it more there is a clause they have that says, than that kind of a base, or even a valuable, more useful and more appli- first of all, they are not going to com- higher base than that. You have to. cable in the banks. plain about CRA; second, they are Otherwise, you are wasting resources. I yield the floor. going to write this Congress and say What I am saying is that some of The PRESIDING OFFICER. The Sen- what a good deal CRA is. these benefits that are talked about ator from Massachusetts is recognized. Does that sound like a normal busi- may not have been worth it even on Mr. KERRY. Mr. President, I thank ness transaction? Does that sound like the basis of the auditing costs. We are particularly the Senator from Mary- something that businesses ought to be talking about the basis of the business land, the ranking member, for his lead- involved in? cost as well complying with this law. ership on this issue. I regret that the

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00042 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8436 CONGRESSIONAL RECORD—SENATE May 5, 1999 Senate is in the position it is in on this I don’t think Congress can stand here ommendation, have stated that if the particular bill. with a straight face and take entire CRA measure stays as it is, this meas- I have previously supported financial credit for the virtues of the economy ure will be vetoed. Very simple: It is modernization. We have voted on it in that we are living in today. I do think going to be vetoed. several incarnations. Last year I was we take partial credit because I think We have a choice. We can either take among those who happily sent this bill, it was a courageous effort in 1993 to a look at the CRA and make a judg- what was then H.R. 10, to the Senate face up to the realities of the deficit ment about what it accomplishes or we with a very significant vote of support and to come up with a solid deficit re- can go through another Senate exer- in the Banking Committee, because we duction act. In addition to the congres- cise, send the bill out for veto and ac- believed overwhelmingly that we had sional efforts, Alan Greenspan, the cept failure in the end for our capacity the right balance between the interests chairman of the Fed, deserves enor- to be able to recognize the importance of the financial services community, mous credit for his courage during the of the vast changes that I referred to a whom we are all concerned about and banking crisis of the last years of the moment ago. we all understand need the needs of 1980s and the beginning of the 1990s Let me say a few words about the that community; at the same time we when he took bold action to help refi- CRA, if I may. The CRA is now more had what most people thought was a nance the banks, as well as his remark- than 20 years old. It is very straight- very fair and sensible recognition of able stewardship of monetary policy forward in concept. It is imminently the virtues of the CRA. itself. reasonable. It says simply that banks In the waning hours of the last Con- Finally, it seems to me a very signifi- have to provide credit to all the com- gress, all Members remember there was cant amount of the credit goes to the munities in which they take deposits. a single, very adamant voice of opposi- companies themselves and the CEOs In other words, if a bank accepts depos- tion, the now chairman of the com- who saw a change coming down the its from a neighbor, that bank has mittee, who in fairness has deep-rooted road, who responded to the demands of some kind of responsibility to make beliefs about it, but who frankly stood the 1980s when people were writing loans available to creditworthy bor- in a very, very small number last year books about Japan, Inc. and writing off rowers in those neighborhoods. That is who ultimately, because of the timing American enterprise and suggesting we common sense and it is fundamentally of the bill, was able to prevent an en- needed a wholesale adoption of another fair. This statement of reciprocity, of tire bill from passing the Senate. model. Indeed, our model has proven mutual responsibility, says an awful Now we are back here once again re- perhaps at times to be excessive and at lot about the kind of country we want visiting the important imperatives of times even to be insensitive, but never- to be and the kind of country we are as financial modernization. This year theless to be way ahead of any other a consequence of that kind of effort. many of us who want to vote for that capacity or structure in the world in Let me speak for a moment to what financial modernization are put in the the marketplace. the CRA has accomplished. It has very difficult position of having to Increasingly, one of the reasons for helped to make more than $1 trillion in take a position of fundamental prin- that success has been the blurring of good, profitable loans to low-income ciple that because we believe so deeply the lines between banking, insurance, areas, loans that bankers in my State that the CRA provision is so disturbed and securities. We need to do our part. and in States all across the country by this bill that a strong relationship We are way behind the curve, years be- have said would not have been made that has existed and worked with a hind the curve. Were it not for the without the law. It has given low-in- profound, positive impact for people in thoughtful and judicious steps taken come communities of working families this country, is being sufficiently un- by the regulators themselves without access to capital that is absolutely cru- done, even attacked, and requires that congressional impetus we perhaps cial to start a small business or to buy we oppose the bill in its current form. wouldn’t have been able to accomplish a home. And it has created new busi- I am used to going through Pyrrhic some of what we have. ness opportunities for the banks them- exercises in the Senate, regrettably Now is the time to respond by break- selves. with increased frequency. It is a sad ing down the artificial legal barriers of I would say that CRA is a fundamen- commentary on the nature of the legis- an outdated era, the barriers that pre- tally conservative, procapitalist law lative process today that sometimes vented banks, security firms and insur- because it is not a handout; it is not measures move through here in a very ance companies from affiliating. It is something for nothing. It requires re- partisan way and then we ultimately time we take the step to ratify the lib- sponsibility. It broadens the tax base. wind up in the conference committee eration of financial service companies It broadens the capitalization capacity with the administration negotiating so they can provide a broader array of of a community. It brings people into and things are changed. services to consumers and corporate the economic mainstream. It is a law That may or may not happen here. It customers. I don’t think we should that provides that all Americans, low- certainly didn’t have to be this way. hesitate to do it. This is several years and moderate-income Americans, very We could have arrived at some kind of overdue. often African Americans or Hispanic fairminded compromise that reflected It is regrettable that we find our- Americans, with the opportunity to the views of the vast majority of Sen- selves in this position, after the Senate buy a home or build a business if they ators. Instead, we find ourselves with a Banking Committee overwhelmingly are creditworthy. bill that is not just about financial by a 16–2 vote passed legislation. That The law is very clear on the last modernization. It is also about a sig- is a fairly profound statement of the point, about creditworthiness. Loans nificant reduction in the capacity of Senate Banking committee’s willing- have to be made with all of the normal the Community Reinvestment Act to ness to move forward. concerns for safety and for soundness. work. Many Members believe very, Here we are again, notwithstanding The act itself could not have been more very deeply we can do better than that. the challenge of financial moderniza- clear on that. It says that it has to I think we obviously need to recog- tion, with too many Members having help meet the credit needs of the local nize that U.S. financial institutions as to say no to moving forward because of communities from which it is char- a whole are the most efficient pro- the extreme measures being applied to tered, ‘‘consistent with the safe and viders of financial services in the world the CRA itself. sound operation of such institutions.’’ today. There have been remarkable That judgment is not ours alone. The So, when the chairman of the com- changes in the marketplace in the last Treasury Secretary, whose expertise mittee says it is just an extortion pro- years. All Members ought to pay prop- and judgment over the last years, I gram, I think there is such a level of er tribute to the virtues of the entre- think, has been without parallel, and extreme exaggeration and rhetoric in preneurs who have themselves under- the President of the United States, that, measured against what happens taken to put those changes in place. clearly on Secretary Rubin’s rec- —and I will speak for a moment later

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00043 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8437 to the question of extortion—because If ever there was a reason to make all, with communities in which there any bank has the ability to prove that judgments about whether or not people are sets of relationships which every- any particular request was not able to are in compliance, it is when they are body understands. meet the requirement of safe and sound going to go out and engage in new ac- Most of the people within that com- operation of that institution. It is clear tivities that involve a whole series of munity—the political leaders, the there are plenty of ways of doing that. new, larger roles within the economic elected political leaders, the opinion And the balance of the weight is on the community. leaders, the bankers, the business- bank; it is really against the person re- It seems to me it is inconceivable people, the news people—understand questing the credit, based upon the that, when they are going to take on the difference between legitimacy and normal standards by which banks do those new kinds of responsibilities, you extortion. They understand the dif- business. are suddenly going to say: We are not ference between a community that is If you talk to most bankers, they going to apply it; we are going to hold getting its fair share of community in- will tell you the CRA loans perform as it where it is based on the theory of vestment from a bank and a commu- well as the rest of their portfolios. We what CRA is supposed to be. nity that has been starved. are not looking at some enormous drag There is a reason that there is this The fact is, if somebody is walking on banking institutions. In fact, some kind of semi-subtle approach—I would in, in some sort of bald-faced ‘‘extor- banks have begun to sell CRA loans on not call it that subtle in the end. It is tion effort,’’ the bank can tell them no Wall Street in order to acquire more sort of a sledgehammer, but it is hid- way and probably stand there with im- capital to make more CRA loans. den enough in a way that people who punity and justification in doing so. If some banker is complaining about Those are market forces that are being are not completely familiar with it or some illegitimate group coming in and harnessed to expand opportunity and with the process might say there are holding them up, then that banker, to grow our economy. some redeeming factors here. But the frankly, ought to be fired for not hav- Here in the Senate, lately, we have fact is, the reason it is done in this sort ing the courage and the guts to say: heard a lot of talk about the ‘‘oppor- of backdoor approach is that they Look, we are meeting our standards. tunity society.’’ The fact is, the Com- learned they cannot do a frontal as- We have covered all the people who munity Reinvestment Act exemplifies sault. They are not going to strike it have made legitimate requests. Your that notion. Credit is the economic altogether. It does not give people request is not legitimate. It will not lifeblood of every community, whether enough cover. So then you are left sort withstand the scrutiny in the light of it is rich or poor. In our society, I of analyzing: What is it that it is really day, and I am not going to be think it is fair to say that historically going to do? What is going to happen blackmailed, period. we know that credit denied is also op- here, in terms of this effort? Moreover, there are laws in this portunity denied. When you deny hard- I believe the Bryan amendment will country already on the books, Federal working Americans the chance to buy preserve the appropriate relationships laws, State laws and local—within their own homes or start their own by simply requiring that banks have counties—which district attorneys can businesses, you are denying them the and maintain a satisfactory CRA rat- prosecute with respect to those kinds opportunity to share in the American ing as a condition of exercising the new of extortion efforts. promise. affiliations allowed in this bill. The To suggest we are going to hold up This is a country where we have de- Bryan amendment also strikes the safe the financial modernization efforts of manded a lot of our citizens. We expect harbor language and the exemption the United States of America in a glob- them to make the most of their own from CRA regulations for banks with al marketplace over these anecdotal lives, to take responsibility for them- less than $100 million of assets. stories and not be able to find a com- selves and for their families—largely I listened to the chairman in the mon ground where we could fix or ad- because of the kinds of public policy committee and I addressed this di- dress the question of legitimacy—there decisions we have had the privilege of rectly—raised this issue of extortion. I are any number of language changes supporting here in the Senate with re- acknowledged at the time, and I will you could make in the standards or in spect to this kind of economic sharing, acknowledge on the floor, that I know the review process or in the process, all if you will. We say to Americans: If you of instances where people have come of which would be adequate to deal take the effort to live by the rules, to into a bank at the last minute, or at with the questions that the Senator show your creditworthiness, to stand the moment of a merger, feeling the from Texas has raised. But none of up within the economic structure, then iron is hot, and of course when the those is on the table, none of them. we have the ability to help provide bank wants the merger to move—care- What is on the table is an entire ex- some of the tools to build that decent fully and without ruffled feathers. emption for a whole set of banks for life for yourself. CRA was built on When the banks don’t want the regu- whom this has worked very effectively. that. lators suddenly getting their dander up Moreover, what is on the table is an ex- But what we are considering today— at this critical moment of merger. So emption of any consideration at all for and I heard the Senator from Wyoming people take advantage of this oppor- these remarkable new powers that are and I have heard other Senators try to tunity. going to be given to the banks which suggest this is really just a fixing of Let me say, I know of some instances demand that you make some kind of the CRA, that it doesn’t really take it where there have been some marginally judgment about what their commit- apart, it is going to leave it in place; meritorious requests. But the record of ment really is in their community. we are just going to take, whatever, the numbers of challenges—and I will You can talk to most of the bankers about 38 percent of the banks out from address that in a moment—is very in the country right now. under it—those are the banks under clear. It is so de minimis that no one The Wall Street Journal summed it the $100 million mark—and then we are can come to the floor with anything up this way: going to make it a lot more difficult to except pure anecdote, sort of a story Few Republicans share (the Chairman’s) passion for the (CRA) issue. Bankers don’t apply any real measurement because here or there, that suggests that some- love the CRA but have largely made their we are going to change the standard by how there is some massive problem. peace with it. . . . ‘‘CRA is part of the way which we measure a violation; and, we What bank does not deal with commu- we do business—we don’t have any problems are also going to change—according to nity groups, all the time—this is not with it,’’ says Pamela Flaherty, a vice presi- the chairman—we are going to exempt some sort of a last minute thing where dent at Citigroup, Inc. banks from protest based on a 3-year there are a bunch of unknown people It is not industry leaders or commu- satisfactory CRA record no matter sitting at a table who can walk into nity leaders who are driving this effort what. And of course for the new activi- the bank and the newspapers and the to undermine the CRA; it is the tend- ties we are empowering in this bill, it local television are all going to take ency in this Chamber and in our poli- doesn’t apply at all. them seriously. We are dealing, after tics for ideology sometimes to work

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00044 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8438 CONGRESSIONAL RECORD—SENATE May 5, 1999 against the needs of communities and denying private mortgage credit and the assembly line every single day. the interests of good public policy. business lending was literally dev- Thanks to CRA she has now made them When you measure what we are doing astating to the social and economic one of the top selling gourmet snack against the broad-based effort of the growth of Roxbury and other low-in- foods in all of Boston, and she has House of Representatives and the come neighborhoods in the inner city major airlines interested in serving her House Banking Committee to develop a and in rural areas. Over time, property chips to first-class customers. Without more broad-based effort, you have a values and small business activity the CRA, Mr. President, the commu- real confrontation with that approach. plummeted, and then crime and pov- nity of Jamaica Plain would not have If you look at some of the language erty escalated. received those kinds of benefits from we have heard about the CRA—com- We can recreate that cycle if we want economic development that has been paring it to slavery—that is the kind of to go backward in time, Mr. President. generated. In addition, it is also giving statement that just ignores the reality Activities like that are exactly what low-income communities a shot at of what the CRA has accomplished. brought the Congress to pass the Com- home ownership. The CRA, accepted by most bankers munity Reinvestment Act in 1977, to Julie Orlando is a single working in this country, supported by people encourage bank and thrift regulatory mother of three. She wanted to buy a like Alan Greenspan, supported by agencies to help meet the credit needs home for her family in Leominster, major bankers in the country, has in all areas of the communities that MA, which is Northwest of Boston. In brought billions of dollars of credit they serve. the days before CRA, she would not into African communities, Hispanic I don’t think we can afford as a na- have possibly been considered a likely communities, and Asian-American tion to roll ourselves back to those candidate to own a home, but because communities where thousands of banks days when it was more power to the the Fidelity Cooperative Bank was in- have become active partners in cre- powerful, more money to those who al- volved in the CRA coalition, she was ating opportunities for working fami- ready had the money, and less concern able to obtain a $72,000 mortgage with lies so they can become new home- and less effort to try to be the country no points. The city of Leominster pro- owners and by providing the capital to that all the speeches are about and all vided additional assistance to Julie and budding entrepreneurs. our days of celebration are about. her family. Because the Fidelity Coop- Slavery? That is an extraordinary CRA has worked in Massachusetts erative Bank participated in the CRA comment. Too many of our colleagues where there has been more than $1.6 coalition, she and her children can live are willing to forget the redlining and billion in commitments made by finan- with their first home, which is, after the racism that plagued lending in too cial assistance institutions to assist all, Mr. President, not just the Amer- many low-income communities in pre- low-income neighborhoods. These funds ican dream, but it is good for the com- vious years. Before 1977, when the Com- have been invested in home ownership, munity. munity Reinvestment Act became law, affordable housing development, mi- How many times have we heard of many financial institutions believed nority small business development, the problem of crime that comes from they had absolutely no responsibility new banking facilities and services, transient members of the community, to the communities they served. Some and it has made a difference in our people who do not have a stake in the financial institutions accepted racial inner-city neighborhoods from Roxbury community. That is exactly the type of and economic discrimination as part of to Jamaica Plain to the South End. assistance that CRA was designed to their mortgage credit and business Let me give a direct example. provide. lending policy. It is because we found Stacy Andrus, from Jamaica Plain, It is my hope we are not going to that too many banking institutions Massachusetts, was a restaurateur take measures here that deny a whole saw an ease to the profit line by mov- struggling to make ends meet and re- generation of CRA success stories in ing into certain areas and an unwill- tain her clientele in a competitive en- the future. The CRA and the Home ingness to do business and reach out to vironment. She knew she had to be cre- Mortgage Disclosure Act data continue Main Street with access to credit that ative just to keep pace. She began to show that blacks and Hispanics face we put the CRA in place. toasting chips out of pita bread to significantly higher mortgage rejection Studies from that time period show serve as finger food before meals. As rates. that some financial institutions rou- one might expect, those chips soon be- The Boston Federal Reserve showed tinely invested more than 90 percent of came the most popular item on the conclusively that African Americans their deposits that they received from menu. get turned down for a mortgage 1.6 low-income and minority neighbor- Like so many businessowners who times more often than whites, even hoods into other areas. Ninety percent know they have latched on to a great after you control for many of the eco- of the deposits that came from certain idea, she wanted to expand the oper- nomic income and creditworthiness dif- low-income communities went out to ation. She tried to bring the concept to ferences. other areas. We have a fundamental re- scale, but capital and credit were not A New York Newsday study, looking sponsibility not to start segmenting available to her; they were not avail- at 100,000 mortgage applications on and dividing up the financial market- able in Jamaica Plain. Even though Long Island, showed that blacks’ appli- place in a way that is going to allow their deposits went into the bank, they cations were rejected three times as people to turn away from that respon- did not come back into the community. often as whites’, even when they had sibility of inclusion that has benefited She could not find the help she need- the same income. everybody in this country and has ed until finally she started working In a study right here in the Wash- made this country a better place. with the Jamaica Plain Neighborhood ington, DC, area, completed last year, In Roxbury, MA, a low-income mi- Development Corporation. This cor- we found that significant lending dis- nority neighborhood within the city of poration works within a network of crimination exists against blacks and Boston, only 20 percent of home sales small business providers that use CRA Hispanics. were financed by financial institutions programs at local banks to secure fund- Mr. President, the need for the CRA between 1975 and 1976. But in the pros- ing for small businesses. With their remains very much alive in the United perous suburbs of Boston, 83 percent of help, Stacy obtained a $60,000 loan from States. Let’s put the rhetoric aside. home sales were financed by financial BankBoston. As a result, her business Let’s put the ideology aside. Let’s find institutions in the same time period. expanded rapidly: She has leased a pro- the common ground within the Senate The residents of Roxbury who were duction plant in Jamaica Plain; she whereby we can guarantee that we can able to obtain financing were forced to has residents of the low-income com- build a coalition that will support the use private mortgage companies, often munity working for her; she has put best of financial modernization and the at substantially greater expense than former welfare recipients on the pay- best of our effort to broaden the eco- at financial institutions. The cost of roll; she has 900 bags of chips rolling off nomic base of this country.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00045 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8439 I might add, some have suggested Several Senators addressed the So that is all interesting but largely ir- there is sort of a legalized concept to Chair. relevant. what has been called the ‘‘legalized ex- The PRESIDING OFFICER (Mr. SES- One of our colleagues said that I said, tortion.’’ In fact, some people have sug- SIONS). The Senator from Texas. or someone had said, that CRA is just gested that the regulators have as- Mr. GRAMM. Mr. President, you will an extortion program. No one ever sisted that process. hardly know where to begin when you made that statement. What I have said Let me say, Mr. President, I find it have listened to these speeches for a is that CRA has become a vehicle very hard to believe that people would couple hours, and most of them have where a tremendous number of actions suggest that Alan Greenspan, the nothing whatsoever to do with what we occur that certainly look like extor- Chairman of the Federal Reserve, for are talking about on the floor. tion. When you look at contracts that whom we have—all of us—such respect It reminds me of the old Lincoln are being signed, these individuals and for, is complicitous in that process. adage, where Lincoln was engaged in a groups are given large sums of money, This is what he said about the CRA: debate, and the guy debating Lincoln and then they sign a commitment that . . . the CRA process is something that we got up and gave a wonderful speech they will withdraw their objection. clearly have been supportive of and think is that had nothing to do with the subject That is a classic quid pro quo, that is crucial and necessary to the development of being debated; and Lincoln got up and the essence of extortion or bribery or communities. We think that it’s in the inter- said that his colleague had given a kickbacks. There are a lot of names est of the banks. We think that it’s in the in- wonderful speech that would be appro- terest of communities. you can use. But no one has suggested priate for another day and another oc- any of them in this debate. Many, Mr. President, the data from the reg- casion. most, almost all of the people involved ulators—let me just close on this—the I want to go through, roughly, 10 in CRA are conscientious and honest. data from the regulators is clear. The points that have been raised in all We are talking about people here who chairman of the Banking Committee these speeches, and then go back to are abusing the system. And even wants the Senate to fundamentally what we are debating. spokesmen for CRA, even spokesmen weaken CRA. He will stand up and No. 1, we have had a lot of speeches for community groups, say there are argue, this is not taking it away. He is for CRA. And one would get the idea in abuses, that the abuses undercut the going to try to point to the exemption listening to these speeches that some- system. As everybody who is on the for the small banks. And he will come one is proposing to repeal CRA. In fact, Banking Committee knows, when the back to the notion that it somehow is as far as I am aware, no one has ever CRA advocates testified before the still in effect, even though it does not offered an amendment or bill since 1977 Banking Committee, a clear point was apply to the new services that will be proposing repeal of CRA. made that abuses do occur. They called provided, and even though the 3-year Whether the record for CRA is as the abuses ‘‘greenmail.’’ I think the safe harbor provision is included. wonderful as our colleagues have standard term is ‘‘blackmail,’’ but no- But the fact is, that fewer than 1 per- claimed, have we built more houses be- body disputes that they occur. What we cent of bank applications have been re- cause the economy is better or because are trying to do is to deal with them. ceiving an adverse CRA comment. of CRA? Who wants to get into that de- In terms of half the banks being out Fewer than 1 percent of the 660 applica- bate? Because it is not relevant to of compliance, half the banks being af- tions that received the adverse com- what we are talking about, nobody is fected, there isn’t any proposal that ment were denied on CRA grounds—1 talking about repealing CRA. percent of the 1 percent. Not a single No. 2, nobody is talking about ‘‘turn- would let half the banks out of CRA. application receiving adverse com- ing back the clock.’’ What we are talk- Basically, the proposal in the under- ments has been denied since 1994. ing about is dealing with abuses that lying bill is that banks with less than So here we are with the entire regu- exist in the current system, and that $100 million in assets and which are latory structure of our modernization can and should be fixed. One of those also in nonmetropolitan areas, in rural effort of the financial services of our abuses basically has to do with ex- areas, that these banks be exempt from country held hostage to a few people’s traordinary power that protesters and CRA. Now, why? perceptions, based on ideology, of 1 per- protest groups have at critical mo- First of all, since 1990, over a 9-year cent of 1 percent, notwithstanding that ments when banks are trying to make period, there have been 16,380 examina- all of the banks in the country have decisions. The second has to do with tions of these small rural banks; 16,380 learned that this is, in fact, good eco- the relevancy of CRA, and which banks times Federal regulators have gone to nomic policy, good banking policy, and under what circumstances have rel- these rural banks. They have sat down they have accepted the CRA. evant requirements, and what are the for days and weeks, looking through It is my hope that our colleagues will regulatory burdens and costs involved. their records. They have done reports recognize that, even as this country In terms of a point that was made to determine whether these rural has grown strong and the economy and way back so many speeches ago—I for- banks are lending in their community the marketplace has grown, even as the get which one it was—that in 99 per- and meeting their community reinvest- stock market is reaching the extraor- cent of the cases where banks apply to ment requirements. dinary 11,000 level, the fact is that do something that requires CRA eval- After 16,380 examinations, only 3 there are more Americans who are uation, nobody challenges that action, banks have been found to be substan- poor, there are more Americans who that is a very misleading number, real- tially out of compliance. The cost of are living on 1989 wages, there are more ly, for a number of reasons. complying with CRA for these exami- children in poverty today than there First, most of these applications con- nations to the small banks has been were 3 years ago or 4 years ago in this cern the opening or closing branches. roughly $80,000 a year, according to the country, by a figure of about 400,000, They are not very relevant. It is basi- 488 letters we have received from small and the fact that too many families are cally the mergers and acquisitions that banks on this subject. working too hard at the bottom level are relevant to CRS protests. That is $1.3 billion of cost imposed on just to make ends meet. Second, as I have pointed out on small banks. I have read at great For us to backtrack on a funda- many occasions, most of the CRA ac- length letters about how small banks mental commitment about the rela- tion takes place not in the formal com- can’t serve their customers because tionship of financial institutions with- plaint, but basically when the pro- they have to do all this paperwork and in the communities in which they do tester goes to the bank threatening how it is interfering with community business, would be to turn our backs on that unless the bank takes certain ac- lending. I have read some passionate what has made America stronger and tion, often giving that person money, letters on this subject on the floor of better. And I hope my colleagues will that they are going to file a complaint. the Senate in this debate. I am not not do that. I yield the floor. So it never shows up in the statistics. going to reread them now.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00046 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8440 CONGRESSIONAL RECORD—SENATE May 5, 1999 The point is, $1.3 billion later, 16,380 payments that were made under CRA— fund, execution and delivery, $100,000 6 examinations later, crushing paper- something never contemplated; nobody months from now. That is the quid. work, cost burden on very small banks, on the Banking Committee in 1977, I Here is the quo: The group commits to many of them between 6 and 10 employ- don’t believe, thought CRA would ulti- withdraw all pending protests of regu- ees, $1.3 billion of costs banks have mately produce cash payments being latory applications and related mat- paid, and only 3 small rural banks have made to individuals and to groups; ters, but not to sponsor, either directly been found to be substantially out of they thought, as we have heard argu- or indirectly, to protest or supply in- compliance. ments all day, that CRA is about lend- formation in connection with any pro- What does our bill do? It exempts ing—we don’t know where all this test relating to the pending or future from CRA very small, very rural banks. money goes. We don’t know what per- blank applications with bank regu- In total, in terms of the number of centage of rake-offs, for example, these lators. banks, that is about 38 percent of the groups get on loans banks make, be- In other words, it doesn’t matter banks in America. In terms of avail- cause we don’t have the records. These what abuses the bank might do in the able capital, as you can see from this CRA agreements are confidential; they future. They are never going to protest chart, that is 2.7 percent of all the as- are not made public. That is something again because of this. At the request to sets in all the banks and S&Ls in later that we hope to change. send letters to the customers of the America. But let me just say, I have three bank—well, let me go on. Not only do Now, the logical question is this: 44 pieces of CRA agreements. These are they agree never to protest again on percent of our auditing effort is going all private agreements where the par- any issue, but they agree to purge the into banks that have only 2.7 percent ties have agreed not to make them files and data bases of all information of the assets, and they have been found public. We have redacted the names to relating to the bank’s customers. to be substantially out of compliance protect the people who committed not Now, it goes on: to immediately only 3/100 of 1 percent of the time. Is to make them public. cease all activities directed against the this not massive regulatory overkill? The point I am trying to make here bank; to maintain the confidentiality What does this have to do with meeting is how far away from lending, as we of this agreement—they have confiden- community needs for loans? If there conventionally know it, this is. tiality again here—and then: to cooper- has ever been an overreach in regu- This is from Bank A: Provide blank— ate with the community group, to help latory terms, imposing $1.3 billion of this is the CRA group—with a grant of them use this agreement to leverage cost on little banks and little commu- up to $20,000. Provide blank with a other financial institutions to get nities to turn up three banks in 9 years grant of up to $50,000. Provide blank money from them. In other words, not that have been substantially out of with a grant of up to $25,000. And on only are they paying this money, they compliance, this is regulatory overkill. this one they say why: to pay reason- are going to help them get other banks We are trying to fix it. able and necessary soft costs incurred. to pay it. In terms of exemption based on a 3- Provide blank with a grant of a reason- It is funny how little things grab year record, one of my frustrations in able amount. you. Maybe it is just me, but this one debating on the Senate floor—and I And then after they agree to pay that hits me the hardest. I was wondering guess all of us can be accused of doing money, look at this provision: Blank why we were getting these letters from it; I try to, at least within my own agrees to withdraw on the date hereof banks in favor of CRA when the bank mind, be careful about things I say. I the comment letter, dated blank 28, 19 officers were telling me—and in some try to put my argument in the best blank, and any related materials filed cases saying publicly—that CRA was light I can. Everybody else does. I try by blank with the Office of the Comp- blackmail. Yet, I was getting letters not to say things I don’t believe to be troller of the Currency, the Federal Re- from these banks saying CRA is great. true. But we continue to hear these serve Bank, and the board—and it goes Well, here is the reason: things like, if a bank has been in com- on. Blank will work with the blank to es- pliance three times, they are exempt The point is, on one page they give tablish a clear, written declaratory from CRA. That is not what our bill all these grants to groups, and then on statement indicating support for the does. the second page the groups agree to Community Reinvestment Act and the Here is what our bill does. Let me ex- withdraw the complaints they filed Home Mortgage Disclosure Act, and plain the problem. In fact, let me have against the action the banks want to the party’s opposition to any attempts that quote from the law professor at make. to weaken the law. Blank will send the Cornell. This quote is from Cornell law Here is the point: Did the groups file final copy of this statement to the professor Jonathan Macey. Jonathan the complaints to get the money? What blank. Macey is one of our Nation’s premier about the legitimacy of the complaint? In other words, they will let them go experts in banking law and is very Did it go away when they got the over and rewrite the letter they are knowledgeable in this whole area of ap- money? going to send. And they are going to plication of CRA. In evaluating what is It goes on. We are getting more and send the letter to the American Bank- happening, this is basically what he more of these every day. Then, in every ers Association, Federal Reserve says: one of these agreements we have seen, Board, Office of the Comptroller of the You see really weird things when you look there is an agreement by the commu- Currency, the whole congressional del- at the code of Federal regulations . . . like nity group or the individual and the egation of their State, and to all mem- Federal regulators are encouraged to leave bank not to disseminate or otherwise bers of the House and Senate Banking the room and allowing community groups to make available to the public copies of Committees. negotiate ex parte with bankers in a commu- this agreement. So, Senator BENNETT, when you got a nity reinvestment context. . . . Giving jobs Here is a second bank agreement, letter from this bank telling you that to the top five officials of these communities or shake-down groups is generally high up on Bank B: Blank will receive a fee of 2 CRA is the greatest thing that has ever the list (of demands). So, what we really and three quarters percent of the face been, you probably did not know that have is a bit of old world Sicily brought into amount of each program loan made by was the result of a CRA agreement so the U.S., but legitimized and given the pat- blank. that a bank could do business in Amer- ina of government support. Now, I wonder if people in that com- ica. And we are not talking about Hon- Let me see those CRA agreements, if munity realize that this undisclosed in- duras; we are not talking about Thai- you will stack all those back up there dividual, or group, is getting a rake-off land. We are talking about the United one more time. I am going to zip of 2.75 percent of the face value of States of America, and we have through them real quickly. every loan that is being made by this banks—some of the richest and most One of our problems in evaluating bank. Blank will receive a $200,000 fee powerful institutions in America—that what happened to the $9 billion of cash as reimbursement, $100,000 payable are having dictated to them at this

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00047 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8441 very moment that they have to write rency, there has to be a hearing for any Why in the world would we stand by us letters telling us things they do not complaint that is lodged. and allow a bank that has complied believe. How is that happening? How But what our amendment adds is the with the law of the land and been eval- can that be happening in America? I requirement that if this bank has a uated three times in a row as being in ask you, how can it happen? long history of being in compliance, be- compliance to be prevented from exer- Not only is it happening, it is being fore the regulator can stop the action cising a right they have earned unless condoned because, as the law professor that they have earned the right to un- somebody presents credible evidence, from Cornell said, we have given the dertake, the protester must present substantial evidence, to the contrary? I patina of Government support to some- some substantial evidence. In other don’t understand. Why would anybody thing that if it happened to an Amer- words, if you are a good actor and you be against this change? ican bank in Thailand, we would file an have been evaluated 3 years in a row I continue to be stunned that our col- unfair trade practice against them. and were found to be in compliance, leagues talk about CRA and how won- So when you are getting all these let- you are innocent until proven guilty. derful it is. That is not what we are ters telling you how wonderful CRA is Somebody can’t just walk in and say a talking about. from banks, remember this agreement. banker is a racist and a loan shark. Should you have to present some evi- In fact, I received such a letter from a Some protesters have done exactly dence if you are going to try to deny particular bank. Fortunately, to show that. There is a CRA protester who people the rights they earned under the you this is a very good and honorable calls himself an ‘‘urban terrorist,’’ who law? How can that be unfair? How can bank, they say in their letter they used those charges against a bank, har- that be reaching? How can that be bur- have been forced to send this letter as assed them for 4 years, went to a densome? Who could be against that? a result of a CRA agreement. speech of the president of the bank at The second provision of the bill pro- I discovered this letter because there Harvard University, disrupted the vides relief to small banks in rural was an editorial written attacking the speech, made this man’s life miserable areas. I have gone through the figures: bill quoting this bank, or this letter, for 4 long years, until the bank gave $1.3 billion later, in this decade of au- interestingly enough. There was an edi- him $1.4 million and a $200,000 grant dits and costs imposed on the banks, torial written quoting a letter from and set up an organization that now three small rural banks—three one- First Union Corporation, a wonderful, lends $3.5 billion, totally unregulated hundredths of 1 percent—are bad ac- great bank. They were quoted in the by the Federal Government. He gets a tors. Is that not regulatory overkill? editorial as saying how great CRA was 2.75-percent rake-off of each one of We have forced little banks, many and why we should not be making any those loans, and nobody knows what he with just 6 to 10 employees, to pay $1.3 changes to the bill. Well, I said I want does with the money. He is not ac- billion in compliance costs, and in to see this letter. So we got the letter. countable to anybody. 16,380 examinations, only 3 of them Let me read the first paragraph: Now, all we want to do is say if a have been deemed to be substantially As part of a CRA pledge we made during bank has consistently been in compli- out of compliance. Does that make our merger with CoreStates, First Union Na- ance and you want to stop them from sense? Is that crazy? Did I miss some- tional Bank committed to send a written merging with another bank, or opening thing? statement to certain individuals or organiza- a branch, you have to present some evi- I could read to you letter after letter. tions clearly expressing our position on CRA dence. Now, what is the standard we We have had 488 letters from banks and HMDA regulations. We, as an organiza- have used? The Presiding Officer, as a urging the committee to take this ac- tion, are very committed to serving all of distinguished attorney and former tion. I have read them before; I will not our communities, including underserved prosecutor, knows that substantial evi- do so again. areas. We are happy to provide this state- Finally, let me remind my colleagues ment. dence is the most defined term in American law. It is referred to over 900 that the amendment that is pending Then they go on to say that nothing times in the United States Code. doesn’t just strike these two provi- in the letter is meant to be an endorse- There have been 400 court decisions sions—the ‘‘integrity and relevance’’ ment or opposition to any particular that have defined ‘‘substantial evi- provisions—it does far more than that. bill. I know we have one of the most dence.’’ It would create a situation where indi- distinguished former prosecutors in So what standard do we require a vidual officers and directors of a bank America sitting in the Chair. I have to protester to meet if he tries to impose could potentially be fined up to $1 mil- say—not to speak for him, because in potentially hundreds of millions of dol- lion a day for noncompliance. his role as Presiding Officer, he can’t lars in costs on a bank, and to stop a Remember, in these little banks you speak until he comes down here—what bank from doing what it appears to be have 16,380 examinations over the dec- is the difference between this and the qualified to do? They have to present ade, and just 3 banks have been found old protection racket that existed evidence. to be substantially out of compliance. when I was a child? I am proud to say Here are four standards set by the What is the justification for this $1- that my uncles, as sheriffs and police Supreme Court as to what ‘‘substantial million-a-day fine? officers, broke up some of those protec- evidence’’ means: I have letters from the American tion rackets. But the only difference is They have to present evidence that is Bankers Association, and from the that this is Government; this is the understood to mean ‘‘more than a mere Independent Bankers Association, Federal Government that is basically scintilla.’’ pointing out the obvious. allowing this to happen. That is a standard we are setting. This provision that has been offered Now, we are not talking about re- You can’t come in and stop a bank by our colleague from Nevada, and was pealing CRA. We are not talking about with a consistent record of CRA com- offered in committee by Senator SAR- ending a program that obviously has pliance. You can’t automatically stop, BANES, will make it virtually impos- had many successes. We are talking shut down, and delay the process un- sible for small banks to get quality di- about trying to deal with abuse. So less you present evidence that is ‘‘more rectors, because who can afford that what are the two things we do? No. 1, than a mere scintilla.’’ potential liability? It will make it vir- we say that if a bank has a history of Unless you present such relevant evi- tually impossible for small banks, who being in compliance with the law, if dence as a ‘‘reasonable mind might’’— can’t buy the insurance to protect peo- they have been evaluated 3 years in a notice it didn’t say ‘‘would,’’ but ple from liability, to hire quality bank row and been found to be in compliance ‘‘might’’— ‘‘accept as adequate to sup- officials. with CRA, and if they are presently in port a claim.’’ The bill goes on and on and on in the compliance with CRA, then any indi- You have to present evidence that is most massive overkill of expanding vidual or group can protest, file a com- real, material, not ‘‘seeming or imagi- CRA to nonbanking activities. Cur- plaint; and under the existing regula- nary,’’ and considerable in amount, rently, a bank can sell insurance with- tions of the Comptroller of the Cur- value, and worth. out CRA approval. This substitute that

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00048 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8442 CONGRESSIONAL RECORD—SENATE May 5, 1999 is now pending would require CRA ap- will we allow any change whatsoever, Mr. SARBANES. I don’t know any proval for that. Banks can sell securi- no matter how bad the abuse is in CRA. study that validates that figure as the ties without CRA approval. This takes I don’t understand it. I think it is an right figure. CRA out of banking and into other extreme view. I hope that even yet, by Even assuming for the purpose of this areas. the time we get through conference, by Alice-in-Wonderland discussion that What is the justification for that? the time we have had a chance to dis- both the number of exams and the The justification for requiring CRA cuss this over many more times, per- costs which we were then told came to was that banks have a federal subsidy haps there can be a compromise. a $1.3 trillion burden, the fact is, it is through deposit insurance. So that is I yield the floor. $1.3 billion. That is still a lot of money. public insurance, and making banks do Mr. DODD addressed the Chair. I don’t pretend to the contrary, but it things in the public interest could be The PRESIDING OFFICER. The Sen- is a lot different from $1.3 trillion. It justified. But how does expanding that ator from Connecticut. was escalated 1,000 times. requirement outside banking make any PRIVILEGE OF THE FLOOR Let me give one other example. We sense? Are we simply going to keep Mr. DODD. Mr. President, I ask unan- were told the CRA is allocating more writing laws telling people what to do imous consent that Karen Brown of my money each year than the gross domes- with this money? office, a fellow, be granted floor privi- tic product of Canada. The CRA com- Basically we have a choice. The leges during the consideration of S. 900. mitments are over a 10-year period. choice is the following: The PRESIDING OFFICER. Without Those commitments, factored out over Both of these provisions concern objection, it is so ordered. a 10-year period, do not begin to ap- CRA. The bill that was adopted by the Mr. SARBANES. Mr. President, will proach the gross domestic product of Banking Committee has two reforms— the Senator yield to me for 2 minutes Canada. one an integrity provision, and one a without losing his right to the floor? These are only a few examples. We relevancy provision. The amendment Mr. DODD. Fine. could give a lot more. I want to under- that has been offered strikes both of The PRESIDING OFFICER. The Sen- score these figures that come floating those reforms and imposes all of these ator from Maryland. in out of the air, and we hear this long new regulations. Mr. SARBANES. Mr. President, I disquisition. When we start probing So I think it is as clear a choice as have refrained from taking a lot of de- these figures, we discover it is not you can make. bate time this afternoon, because a lot there; it is Alice in Wonderland. Just a couple of other points, and I of our colleagues want to speak. I rec- I thank the distinguished Senator. will stop, because I know that others ognize that. Of course, the temptation Mr. DODD. Mr. President, I rise in want to speak. One of our colleagues is very great to sort of rise every time support of the Bryan amendment. My quoted the Wall Street Journal. The the chairman of the committee speaks. fervent hope is that we can adopt this Wall Street Journal has editorialized He has done that at some length here amendment and move on with passage not once but twice in favor of the posi- this afternoon. So I am not going to do of this bill. There are other out- tion the committee has taken here. it now, because I have colleagues here. standing issues that need to be re- I urge my colleagues again to look at I hope before we get to 7 o’clock I will solved. No issue is as galvanizing or as the debate—not get carried away or be get a chance to have a few minutes to important as this issue of the Commu- confused by people who say the com- make a statement. nity Reinvestment Act and how it is to mittee has gutted CRA, is killing CRA, But I want to say that there is kind be handled. or is repealing CRA. We are not doing of an Alice-in-Wonderland quality to My friend from Texas, the chairman any of those things. But we are dealing this debate. The chairman pulls these of the committee, and I have worked with abuses of CRA. They need to be figures out of the air. I don’t really very closely together over many years. dealt with. They scream out to be dealt know where they come from. I asked We have been each other’s chairman with. him where they come from. He says and ranking minority member, depend- If I could make a plea to the other there have been 16,000 something ex- ing on who was in control of this Au- side, it would be a simple and short aminations of banks under $100 million gust body. We have dealt with securi- plea: If we don’t fix the abuses of CRA, in nonmetropolitan areas. ties matters, we have written legisla- by the time we are through letting peo- I don’t know where he gets that fig- tion together, passed it together here ple know what is happening in terms of ure. The figure from the Federal De- on the floor, carried it through con- these $9 billion of cash payments, and posit Insurance Corporation is 11,445. ference, overrode the President’s veto— by the time we finally do run down and He says only 3 have been found in sub- the only time a veto by this President know where all of this money is going, stantial noncompliance; the figure is has been overridden. and we find that much of it—or some of 18, and another 320 have been found a It is not easy for me to disagree with it—is not being used to benefit people need to improve. This chart is from the a man with whom I have agreed on who are supposed to be benefiting from FDIC. many occasions in dealing with finan- community loans, I think it is going to The Chairman says only three—it is cial issues. However, on this we have a undercut CRA. not only three. I want to make that fundamental disagreement. I listened If I were a strong proponent of CRA, point. for a good part of the chairman’s pres- I would be for these reforms, because Mr. GRAMM. Will the Senator yield? entation, especially the last part of the they clean up a program that clearly Mr. SARBANES. I yield. presentation dealing with the alleged has had an impact. But our col- Mr. GRAMM. These are figures from abuses that have occurred. I know of leagues—as they did on welfare—it was the interagency CRA rating. nothing in the bill violating existing abused and abused and abused and Mr. SARBANES. The Senator said federal laws on extortion. We may do abused and abused. But they would earlier today that the cost this is im- some things in this bill Members do never ever, ever, ever say that it posing on small banks is $1.3 trillion. not want, but to the best of my knowl- should be fixed. Finally, the American I am thinking to myself, $1.3 trillion edge the criminal code is left intact. people rose up and elected a new Con- from these examinations? So I asked Nowhere in this bill do we touch on the gress. We are probably in the majority him, How did you get that figure? He issue of whether or not people are because of their intransigence. So God took the number of examinations— going to be excused from engaging in does provide His services from time to about which we have just disagreed— extortion, blackmail, green mail—call time. And then it was fixed. They prob- and he multiplied it by 80,000. I am not it what you will. ably could have had it closer to what sure where he got the 80,000 figure. The suggestion that there are serious they wanted had they been willing to Someone must have written in and violations of law—State and Federal fix it. said: That is what it costs our bank. that I know of—ought to be brought to But the position we have heard today Mr. GRAMM. That is right, a small the proper authorities. If someone be- over and over is, never ever, ever, ever bank said that. lieves they have been extorted, then we

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00049 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8443 have Federal prosecutors and State ior. Only a small percentage of Ameri- would like to know more about it. A prosecutors to bring those matters to cans violate the law. But that is not an great deal of information was redacted. the light of day and those accused can excuse for not writing laws, because, We do not have the whole agreement. be brought to the bar of justice. unfortunately, some do in fact break But I tell my friend from Texas, I am Second, I have never known the the law. concerned about it, too, and we ought banking community to be terribly shy So when it comes to the Community to take a good look at this. Let us re- about things that they want. They are Reinvestment Act, we seek here not to member, however, that we ought to usually pretty vociferous. They are lay a burden on the overwhelming ma- take a look at the 360 agreements, and never reluctant to tell us how they jority of banks who do a good job. We many of those probably are proper and want us to vote on matters that affect must recognize that there are institu- worthwhile agreements. In fact, many their institutions. They lobby quite ef- tions which have discriminated against lenders also require counseling for cer- fectively. They do a good job. The idea various groups in this country based on tain loan practices because they im- that the banking constituency, the race, religion, ethnicity. So several prove the quality of loans. To meet thousands of banks all across this years ago, we decided to enact the commitments, banks sometimes pro- country, are somehow afraid of some Community Reinvestment Act to re- vide payments to community groups community-based groups, and would quire that lending institutions, deposi- for services provided. It is not some not bring to light their concerns be- tory institutions, pay attention to our outrageous behavior. It goes on all the cause of fear of some retribution, just nation’s underserved, pay attention to time. But, nonetheless, if problems doesn’t hold up when it comes to how our small farmers, and pay attention exist, let’s look at them. the banking community generally to our small businesses. If you are But with all due respect to my good makes its concerns known. going to do business in Alabama or friend from Texas, it appears as though The fact of the matter is, here on business in Connecticut as a depository we were sort of squirrel hunting with a this issue there really is not a con- institution, we do not want you to ne- machine gun here. That is not what his stituency for the provisions in this bill glect the people in your communities, amendment or the language of the bill dealing with CRA. Usually we have a in your States, on any basis. does. All we are saying here is we want litany of organizations that are in So we passed CRA and it has worked to preserve the Community Reinvest- favor of or against a provision, organi- well. My colleague from Texas has said ment Act in a new financial frame- zations and groups which have felt out- that there are extortionate practices work. This modernization bill allows raged or discriminated against in some ongoing. Let me quote him, from a for the consolidation of financial serv- way and will stand up and defend in a statement made last October. The ices. If we are going to do that—and I very loud and clear voice their rights chairman of the committee said: think we should, I am a strong sup- or how their rights are being infringed It has now become common practice in porter of it—then it seems to me we upon. CRA for professional protest groups to pro- should be preserving the Community In the last almost 6 hours of debate, test a bank’s community service record and Reinvestment Act to ensure that we do in turn to use the leverage of those protests I defy anyone to show me a list of orga- to extract bribes, kickbacks, set-asides in not have discrimination in lending. We nizations here across the country that purchases, quotas, hiring and promotion, must ensure that Hispanics, African feel as though the Community Rein- none of which has anything to do with CRA Americans, Asian Americans, and Na- vestment Act is somehow a great in- and the lending practices of banks in the tive Americans, as well as small busi- fringement on their ability to conduct communities that they serve.’’ nesses and small farmers, are not going their business. It is nonexistent. In It is a pretty broad statement. Now, to get short shrift. We are going to fact, the only time we have ever actu- let me give you the facts. Mr. Presi- have a lot of large institutions, a lot of ally voted on these matters prior to dent, four-tenths of 1 percent—let me large banks. We want to make sure the today is when the House Banking Com- repeat that, four-tenths of 1 percent of average citizen is not going to find mittee recently voted—51–8, Democrats applications have resulted in agree- himself or herself denied fair access to and Republicans, voted for provisions ments with community groups; four- credit. That is what the Community we are seeking here contained within tenths of 1 percent have resulted in Reinvestment Act has been able to do the Bryan amendment. The Banking these agreements. We have had them for millions of Americans. Committee last year voted 16–2, Demo- up here on placards and the easel here I listened to my colleague from Mas- crats and Republicans, in favor of the today. A great amount of time has sachusetts and others here today go provisions that we are trying to re- been spent talking about these out- over the statistics of how vastly the insert into this legislation. There is rageous provisions in these agree- availability of credit has increased to overwhelming evidence from the Fed- ments. If one sort of casually tuned groups who in the past were denied eral Reserve Board, the banking regu- into the debate the assumption would those opportunities. We in this country lators, banks all across the country, be, as the Senator from Texas has said: cherish the notion of equal oppor- that the Community Reinvestment Act It is common practice. Common prac- tunity. We have never achieved the is working, and working well. tice? Four-tenths of 1 percent of all the perfection that our Constitution and Let me quickly add I have never met applications? Under any estimation our Founding Fathers sought in cre- any institution which was overly en- that is not a common practice, less ating equal opportunity for every cit- thusiastic about any regulation— than 1 percent of all the applications. izen in this country, regardless of State, local or Federal. They usually During the past 21 years, there have where they come from or the color of do not welcome these and I understand been approximately 360 agreements their skin. We all know, painfully, the why. There is a cost associated with it. reached. How many applications do you discrimination that existed for a long I appreciate that they try to keep their think there have been in the past 21 time in all parts of our country. costs down. years? Mr. President, 86,000; 86,000 ap- Let me reiterate—all parts of our Most banks, certainly in my State, plications and 360 agreements. When country. I could take you to the North- have been active in our community and you stand up here for an hour and a east. You do not have to go to the do a great deal of good. However, as the half or so and list these agreements home of my friends from the South in Presiding Officer who has been identi- that have been reached, you leave our this country to find discrimination in fied as a distinguished scholar of the colleagues and others with the impres- lending. In Connecticut, a year or two legal codes of our country knows, we sion that this has, to quote my friend ago, you could see the redlining that do not write laws for the overwhelming from Texas, ‘‘become common practice went on. People talked about this majority of Americans who obey the in CRA.’’ That is an exaggeration. That being a southern issue. That is untrue. law, who try to do the right thing. is an extreme exaggeration. I could take you to places all across Laws are written for those who try to I do not like what I heard in these this land where redlining occurred, abuse what we believe is proper behav- agreements. It bothers me a bit. I where neighborhoods and communities

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00050 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8444 CONGRESSIONAL RECORD—SENATE May 5, 1999 were denied equal opportunity. If they would like to start a new business, buy percent of all the banks and thrifts in are creditworthy people, they ought to a new home, get a chance to share in the United States. get the credit and financing to buy a the American dream. And the Commu- Again, I can understand if you just home, start a business, and get on their nity Reinvestment Act has been the hate CRA, you just think it is a bad feet. Because of these discriminatory engine for many achieving those de- idea and we ought to get rid of it. Then practices, we passed the Community sired results. I accept that—I disagree with it, but I Reinvestment Act. It has made quite a Again, in the past, we have seen accept your position. But if you believe difference in our country. It is not a votes of support on CRA by our col- CRA makes a difference and it actually perfect condition yet, but we have leagues, Democrats and Republicans. It helps rural people have greater access reached into the communities of people would be a great pity, indeed, for this to fair credit, then you must acknowl- who never had a chance before and bill to fail over this issue. edge that this bill exempts 76 percent they have a chance today. It would be a great pity, indeed. This of rural banks in this country. Vir- Now we are going to allow these in- issue ought not to be the one that tually one out of every three banks in stitutions to affiliate, and engage in causes this bill either to be defeated or the country will be exempt from CRA. new financial activities. With this leg- to be vetoed by a President and sent That seems to me to go too far. islation, are we now going to deny back after all the years we tried to get CRA loans in rural areas assist small them the very benefit that the Commu- this done. farmers in obtaining credit. Small nity Reinvestment Act has afforded We are 240 days away from the next bankers have historically received during the past 22 years? I do not think millennium, the year 2000. The world lower CRA ratings, quite candidly, we ought to deprive them of that. and its financial markets are getting than larger banks and have invested That is what the Bryan amendment more complicated. The United States less in their communities. On average, attempts to address in part. It says we of America has always been a leader in 50 percent of large banks have a loan- ought not to exclude certain credit- financial services. I do not want to see to-deposit ratio below 70 percent. 25 worthy consumers in the process of al- us lag behind because we couldn’t come percent of small banks have a loan-to- lowing banks to expand in these new fi- to terms with what is essentially a fun- deposit ratio of less than 58 percent. nancial areas. To suggest that the ex- damental civil rights issue. I do not The supporters of the small bank ex- tortion of banks by community groups want to see us lose our leadership role emption contend the CRA creates an is somehow a common practice—again, in the global marketplace because we onerous regulatory burden. However, four-tenths of 1 percent, 360 applica- decided we were not going to expand the federal banking regulators specifi- tions out of 86,000, is not legitimate. the equal opportunities that are so cally reduced the regulatory burden on Under anyone’s estimation, that is not much a part of this country’s heritage. banks when the new CRA enforcement justification for weakening the Com- I am concerned that we are willing to rules went into effect 3 years ago. munity Reinvestment Act in the 21st give up all the other things we are try- These efforts streamlined CRA, facili- century. ing to achieve in financial moderniza- tated easier compliance by lenders, and Again, there is no constituency here. tion over CRA provisions that are not reduced paperwork requirements. Most people, I think most of my col- supported by the banks they purport to Addressing the specific point the leagues from all across this country, help. Senator from Texas made that some- believe the Community Reinvestment In fact, Mr. President, I will include times these banks have a few employ- Act is doing a good job. Nobody here in the RECORD, and others have al- ees—and, again, I do not want to over- wants to be on the side of an equation ready, countless statements from many load that small bank—in 1996 we that says: Having made these gains others— the Federal Reserve Chair- streamlined that process considerably now we are going to turn back the man, the Treasury, and major banks in for them. clock. We should not do that. I do not all parts of this country who have said If there are some other ideas that believe the people who have commu- the Community Reinvestment Act is will help achieve that, I think we nicated with us, who write us—bank- working. Sometimes conflicts occur; it ought to listen to them. Again, think ers, consumers—said that. is difficult. Sometimes we have two not only about the 8 or 10 employees of One of the things we need to keep in groups we admire and support, that are that small bank, but think about those mind as we talk about banking legisla- fighting hard for their points of view, small farmers who do not have any tion and financial institutions in gen- and we are asked to make a choice be- other choice but to do business at that eral, is that one of our major respon- tween them. That can be a hard deci- bank. Small communities do not give sibilities is to ensure that our nation’s sion. you much of a choice. Your local farm- financial institutions are going to This is not a hard decision. There is ers in Alabama or Connecticut have work well. So we pay a lot of attention no one on the other side of this equa- one bank to go to. It is not like living to their needs, as we should. But we tion. Yet we are dangerously close to in New York City or Washington, DC, also need to pay attention to the peo- killing an otherwise great bill that where you can walk down the street ple who do business with our financial does a lot of good things. and compare which bank will give you institutions. They are an important As I said a moment ago, we have an the better deal. part of the equation here as well. Let obligation to make sure our financial Under this bill, if you have only one us not forget the people who show up at institutions are strong. We have an ob- bank window to go to, and you are liv- that bank window, who go in nervous ligation as well to see to it that the ing in rural America, you will be told about whether or not they can get a users of these financial institutions are that your bank is exempt from having home loan. Let us not forget the person not going to be adversely affected by to see to it that you are going to be with a good idea to start a business legislation we pass. dealt with fairly. There is something who needs to know if that local banker Let me focus for a second on the seriously wrong here. will take a chance on him, back him, small, rural bank exemption that is in- Streamlining the process for rural give him a chance to get on his feet. cluded in this bill. The bill exempts small banks is something I applaud; it Those are our constituents, too. They rural banks with less than $100 million is something we ought to move ahead are a fundamental part of this equa- in assets from the requirement of CRA. on to make it easier. I do not want peo- tion. This exemption addresses that there is ple to be denied options, denied It is not just the person behind the some undue burden imposed on small choices, and to be discriminated grate; it is the person in front of the banks complying with CRA, and there against when it comes to getting the grate, too, who we have an obligation may be some merit in that. But the credit they need. to watch out for when we pass financial provision in this bill which the Bryan According to Christopher Williston, services modernization legislation. It amendment would take out exempts 76 the president of the Independent Bank- is those people out there tonight who percent of rural banks from CRA, 38 ers Association of Texas:

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00051 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8445 Most small banks are really very accus- I hope at 7 o’clock, when the vote be- CRA matter and examine it at great tomed to complying with CRA. . .. Now they gins and as Members come to the detail. I think that is a salutary thing know exactly what the regulators are look- Chamber to cast their ballots, they will to do. ing for, many of my members would say CRA keep in mind the importance of this But we have an opportunity here in is here and I can live with it. bill. And to a far greater extent, keep this bill to take some steps which I Mr. President, again, if there are spe- in mind those who depend upon us to consider to be relatively modest and cific problems with the implementa- see to it that they are going to have relatively straightforward. The one I tion of CRA, if there are certain activi- equal opportunity in America, a chance want to focus on is the exemption of ties that should be considered that are to participate in the American dream CRA, the CRA requirement for institu- not considered, then the appropriate in the 21st century, and will not be de- tions that have $100 million or less in way to address those specific concerns nied because of an action we take to- aggregate assets. is to work with the regulators or come night by denying the preservation of I want to share with the Senate the up with a specific legislative approach. CRA in a new financial services frame- reaction of banks from my home State The Senator from Texas, our distin- work. that have been contacted about this. guished chairman, should remember The PRESIDING OFFICER (Mr. And this is their information. This is our conversations to address this and SMITH of Oregon). The Senator from not some professor at some university. have some hearings to look into the Utah. This is the everyday banker doing busi- issues he raised. Mr. BENNETT. Mr. President, I have ness in the everyday community. And I Again, don’t exaggerate and turn listened to this debate with some inter- will go beyond simply quoting the let- four-tenths of 1 percent of the applica- est. I have enormous respect for mem- ters because I want to put it in context tions into a common practice, and then bers of the Banking Committee on so you can understand the market. miss the opportunity to include reason- which I have served since I came to the I have said around here before—and able CRA provisions in this consolida- Senate. I know there is good intention undoubtedly in the spirit of the Senate tion of financial services. on both sides of the issue, on both sides where there is no such thing as repeti- I hope there will be enough votes on of the aisle. tion—I will say, again, that if I could the other side to support the Bryan I echo the comments of the chairman control what we engrave in the marble amendment. I am fearful if we do not of the committee in that much of the around here to remind us of our duty— do so, this bill is doomed. I mentioned debate that I have heard has been fo- not to denigrate the marvelous phrases at the outset of my remarks the other cused on the wrong issue; that is, you that are here—I would have engraved day that my colleague from Maryland would think that this was an attempt in stone, at least in our committee and I have been at this together for the on the part of the majority in the com- rooms, the phrase: ‘‘You cannot repeal full 18 years I have served in the Sen- mittee to repeal CRA. I do not condone the law of supply and demand.’’ ate. He has been at it longer than that, redlining. I recognize that the decision We try to do that continually in Con- having served a bit longer than I have which was made by the Congress in 1977 gress. We try to think that markets do in the Senate. Nothing—nothing— to create CRA was motivated by a gen- not matter, that governments are would make me happier than to pass uine abuse that required a genuine smarter than markets, that govern- this bill and expand and consolidate fi- Federal fix. ments can make decisions that inter- nancial services to serve consumers’ At the same time, I recognize also fere with the law of supply and demand needs and keep America in a leadership that under Secretary Rubin’s leader- and produce beneficial results with no position on these issues. ship, attempts have been made to al- side effects. People have been trying to However, I cannot support a bill that leviate the regulatory burden of CRA, do that in government not only for turns its back on my constituents at that there has been a recognition on centuries but for millennia. And they home. I want to help my financial in- the part of this administration—I always fail. stitutions in Connecticut. I want to think belatedly, but nonetheless I will Here are the market realities with help banks across the country. But I accept it whenever I can get it—a rec- respect to CRA. cannot, in doing so, turn the clock ognition that CRA has gotten out of I first quote from a letter of the back on the gains, on the strength- hand and has become, in some in- Cache Valley Bank. No one in this ening of America that we have made stances, a paperwork burden that is Chamber knows where Cache Valley is; with the Community Reinvestment nonproductive and anticompetitive and but I know where Cache Valley is. I Act. puts an undue burden on places where have spent a lot of time there. My fam- Whatever shortcomings it has—and I it should not be. ily has done business there. We have am certain they are there, CRA is not The question is not, Should we abol- owned a business there. The president perfect—let’s fix the shortcomings. ish CRA? The answer to that is clearly of the Cache Valley Bank says in his Let’s deal with those, but do not de- no. The question is not, Should we turn letter: prive people in this country of the in- our backs on those people who have Our community is a middle class farming creased opportunities. We have a CRA been benefited by CRA? The answer to community with a university. Most all of bill on the books that has worked well, that is no. our customers are of modest income, small even by those who must bear the bur- The question is, Can we streamline businesses and small farms. The rich profes- den of implementing these regulations. CRA, as we are going through the proc- sionals have gravitated to the local credit We must no place in jeopardy an other- ess of modernizing our financial insti- unions where they know they can get some- wise fine bill that, in my opinion, de- tutions, in a way that recognizes the thing for nothing. serves broad-based support in this reality of the marketplace? And there That last sentence indicates how he Chamber and the other body. the answer is yes. feels about the competitive impact of I hope that we will stand at 7 p.m. to- One of the criticisms which has been credit unions in Cache Valley. night when the votes are cast, in what made, and I think with some justifica- He says: may be the only civil rights vote of tion, is that a good part of the debate We are chartered to serve our community. this Congress, and the Bryan amend- has been anecdotal; that is, one situa- We have no business going outside our com- ment will be adopted. Maybe other tion has been described, and we ex- munity. We live off the ability to say we are civil rights votes will come along, but trapolate from that, and then another a hometown institution. as of right now, this will be the only has been described, and we extrapolate Let me underscore that last sentence test as to where people stand when it from that. again. ‘‘We live off the ability to say comes to seeing that equal opportunity I agree with those members of the we are a hometown institution.’’ in America is going to be at least pre- committee who have suggested at some In Cache Valley, there are branches served in this Congress and not set point it would be well for the com- of large banks, large banks that are lo- back. mittee to have hearings on the whole cated someplace else. There are, as an

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00052 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8446 CONGRESSIONAL RECORD—SENATE May 5, 1999 earlier somewhat sarcastic comment of this small institution. How does he its purpose to produce a meaningful indicated, credit unions. They happen survive under these competitive condi- impact for those in need in commu- to be very large credit unions. We have tions? He survives by serving the com- nities where they were not getting some of the largest credit unions in the munity. This is what he has to say: served. United States in Utah because of Exempting our institution from CRA re- I am hoping that the reforms estab- Utah’s law. There is competition in quirements would allow bank personnel to lished by Secretary Rubin have begun Cache Valley for the banking cus- spend more time with our customers in de- to lift that burden and change that sit- tomer. veloping new products rather than gathering uation, but I am satisfied now that we How does he deal with that competi- information to satisfy CRA documentation have enough evidence that indicates tion? He says: requirements. Competition is the greatest that the vast majority of small banks enforcer of CRA. The delivery of financial My bank is . . . a $90 million institution services is a highly competitive business. If with capitalization under $100 million operating from one office . . . my institution is not offering free checking are spending their time on CRA, filling One office—so he does not have or mortgage loans, then my competitor down out documents and meeting with regu- branches around the city. The credit the road will be taking advantage of my fi- lators, spending their time performing union does. He does not have the reach nancial institution’s shortcomings. the bureaucratic chores necessary to of advertising that the large banks I think he is absolutely right. In to- file a report, where they could be which are there as his competition do. day’s competitive world, you do not op- spending their time better serving He has one office. And he makes his erate in a vacuum. If he wasn’t doing their communities. living advertising himself as a home- his job, even though he is in a small, Therefore, I will vote to see to it that town institution. rural community, with Internet bank- the language that was adopted in the This, in marketing, is what is known ing and advertising over television, the committee report remains there. I will as a marketing niche. He recognizes large institutions would come in. oppose the Bryan amendment. that he cannot compete with the big It is interesting, again, referring to Mr. LEVIN. Mr. President, I rise to banks throughout the entire city. He Utah’s somewhat unique situation, in speak about the Community Reinvest- recognizes that he has a particular many communities where the local ment Act. The CRA was enacted in 1977 niche in the market that he can fill, bank was perceived as having some- to encourage banks to serve the credit and he goes after it and he fills it. thing of a monopoly or a free ride in needs of the entire community includ- He says: the community because of the physical ing low and middle income areas. The We do what the CRA regulation intended isolation, it was not another bank that obligations that banks owe to the en- us to do because it makes good sense. The came in to offer competition; it was a tire community stem from their char- documentation and time spent telling the credit union, operating under Utah’s ters and the public benefits they re- regulators that that is what we do is just credit union laws. The competition ceive through the Federal Reserve. The wasted by both us and the regulators. I have CRA is a way to encourage banks to never had a customer come in and ask to see produced the kinds of challenges that our CRA file. competition always produces. Once live up to their public obligation. again, you cannot repeal the law of Nationwide the CRA has been recog- Then, with the optimism that comes nized as an effective way to increase from every small businessman, he says: supply and demand. If there was de- mand in that community that was not credit availability in underserved As I will probably [pass] the $100 million being met by the local institution, areas. In his testimony before the proposed limit some day, I can see that not House Banking Committee in Feb- having to comply would give smaller institu- competition came in and met it. tions a slight advantage from costs they Now, a little further down the high- ruary, Federal Reserve Chairman would save. The real issue is if the whole way, I want to refer to the Frontier Greenspan remarked, that the CRA has rule for community oriented institutions Bank of Park City. Here the president ‘‘very significantly increased the makes any sense. It doesn’t and no one has of the bank says: amount of credit in communities’’ and provided any evidence that it does. As president of a nonmetropolitan commu- the changes have been ‘‘quite pro- He is not operating in a vacuum. He nity bank, I am of the opinion that existing found.’’ In 1997 alone, almost 2,000 is not operating in a situation where CRA regulations are largely superfluous for banks and thrifts reported $64 billion in there is no credit available to anybody both my institution and its direct competi- CRA loans, including 525,000 small busi- else if he does not serve his niche. He is tors. The fact remains that we have and will ness loans worth $34 billion; 213,000 operating in a highly competitive situ- continue to lend to all segments of our com- small farm loans totaling $11 billion; ation, and yet he is examined as if he munity because it is good business, not be- and 25,000 community development cause it has been defined by regulation. Ad- is the only institution, and he is looked ditionally, the time spent documenting our loans totaling $19 billion. Those loans at in terms of his lending to his market community lending efforts for regulatory went to affordable housing projects, niche. purposes is in itself counterproductive as we economic development through financ- All right. Let me go down the high- could instead redirect our energies towards ing small businesses or farms, and ac- way a little from Cache Valley to the additional lending and community develop- tivities that revitalize or stabilize low First National Bank of Morgan. This is ment activities. or moderate income areas. CRA has a smaller bank. This is a smaller com- An interesting quote, Mr. President. also encouraged a dramatic increase in munity. The president of this bank He feels that CRA gets in the way of home ownership by low and moderate says that they have $37 million in cur- community developing activities that income individuals. Between 1993 and rent assets. They serve a county, the he would otherwise engage in. 1997, private sector conventional home population of which is approximately When I first went on the Banking mortgage lending in low and moderate 7,000. In Utah, given our family size, a Committee, some 6 years ago, I had income census tracts increased by 45%. total population of 7,000 means that never heard of the CRA. I heard at that And the CRA has done so without there are probably about 2,000 families time institutions coming in and com- forcing a large paperwork burden onto there. I do not know how many of those plaining that the CRA documentation banks and without forcing banks to are borrowers. This is a relatively burden was overwhelming and that make bad loans. During the same small base for him to serve. CRA had become more of a documenta- House hearing, Chairman Greenspan al- Once again, while it is an isolated tion issue than it had been a lending luded to the mutual benefit of the CRA farming community, in today’s modern issue, that if they could fill out the to consumers and banks when he said, world there is competition there. The documents in such a way as to satisfy ‘‘CRA has helped financial institutions big banks can go after his customers on the regulators, it didn’t matter what to discover new markets that may have the Internet if they want. They can their lending practices were. been underserved before.’’ open ATM stations or put branches We had some testimony—I can’t go While there are countless examples there, if they want. There is a big bank back and put my hand on it now—that of the Act’s effectiveness in encour- just down the highway, within 20 miles made it clear that CRA was failing in aging lending in underserved areas all

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00053 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8447 over the country. Here’s some exam- that oversees the nation’s banking sys- backward. I urge my colleagues to sup- ples from Michigan. Lake Osceola tem says its not onerous and has been port the Bryan amendment and ensure State Bank in Baldwin just completed very successful. Therefore, I will not that CRA will remain strong and viable their CRA exam under the reformed support a bill that weakens a program for all American communities, whether 1996 regulations. They said it was not a that has been so important to commu- urban or rural, in the new financial era burden, and they received a rating of nity development efforts in Michigan that we hope to create. outstanding. Under the terms of S. 900, and nationally. Mr. HARKIN. Mr. President, I rise the bill before us today, Lake Osceola Mr. KOHL. Mr. President, I rise in today in strong support for preserving State Bank would qualify for an ex- strong support of the Bryan amend- current law with regard to the Commu- emption from the CRA because of their ment. While my comments today will nity Reinvestment Act (CRA) and size and location, but the bank has told be brief, my conviction on the issue of striking the provisions of S. 900 which my office that they are not seeking a the Community Reinvestment Act will harm this important and worth- CRA exemption. To the contrary, they (CRA) is strong. while program. CRA was enacted in are justifiably proud of the contribu- CRA came into being in 1977 thanks 1977 to help prevent ‘‘redlining’’ of poor tions they are making to community to my Wisconsin colleague, Senator neighborhoods by banks, which denied development in the Baldwin area. Bill Proxmire. While there’s been talk loans to residents and businesses in We Care, Inc. is a small non-profit of CRA as merely an urban concern, in those areas. that rehabilitates a few houses a year fact, it has enriched and addressed in- For more than twenty years, CRA in Detroit’s Van Dyke and 7 Mile area. equities in both urban and rural areas has been a key means of increasing They say the CRA and National City in Wisconsin and across the country. capital and credit to underdeveloped Bank have been their life-line for cred- We are all familiar with the numbers— areas through market based loans. it. more than $1 trillion in community de- CRA has created jobs and contributed Northwest Detroit Neighborhood De- velopment, small business and home to the economic revitalization of many velopment, Inc. is yet another non- mortgage loans—to communities that depressed urban and rural areas. It has profit organization that has contacted were once deemed unworthy. been a force for the capital needed to me in support of the CRA. They praised CRA has been, and remains, vital to increase home ownership and business the National Bank of Detroit and our common efforts of ensuring that development. CRA has contributed Comerica for extending credit to them credit is extended to all Americans greatly toward the revitalization of and supporting their mission of home- without prejudice. But CRA lending many areas, helping to generate an es- building in the Brightmore area of De- has also proven that the ability and timated one trillion dollars in lending troit. willpower of a borrower is often just as over 22 years. Put simply, CRA is good The Local Initiatives Support Cor- important, if not more important, than public policy. poration (LISC), a nationally promi- a loan determination based solely on Mr. President, community groups, nent community development group income or economic history. In other housing groups, farm groups, minority that operates in five Michigan cities, words, new and innovative lending in- groups, civil rights groups, mayors and considers the CRA critical to their ef- spired by CRA has promoted fairness, rural organizations all support a vi- forts. In an effort to boost their CRA but also made good business sense and brant CRA and are opposed to S. 900’s scores, lenders have sought out groups delivered profits to lending institu- CRA provisions. like LISC and the Neighborhood Rein- tions. And, fortunately, we’ve made In my State of Iowa, many rural resi- vestment Corporation to develop substantial progress at making CRA dents remain in desperate need of af- ‘‘shared risk’’ loan pools that offer fi- compliance less burdensome. fordable capital, especially during the nancing to first time home buyers. While impressive, this progress has farm crisis gripping the mid-West. Over the past 5 years, more than 400 not reduced the need for an effective Under S. 900, as it is now written, 276 of mortgages were written in six Michi- CRA. In 1977, Senator Proxmire’s legis- the 325 banks and thrifts in rural Iowa gan cities. This has generated over $16 lation was timely and appropriate, but counties would be exempt from CRA re- million in direct public and private in- in 1999, it has proven timeless and vi- quirements. That’s 85 percent of all the vestment in central city neighbor- sionary. We are contemplating an era rural banks in Iowa. If the provision hoods. According to LISC, without the of more diversified, and potentially exempting banks under 100 million dol- CRA ‘‘these types of programs would bigger, actors in the financial market- lars in assets remains, the benefits of not have been established.’’ Other place—one in which vigilance to ensure CRA would not be available to a large Michigan community development fair lending is all the more important. share of the rural communities in groups like U-SNAP-BAC, SWAN and Overall, with adequate safety and Iowa. New Hope also rely on loans encour- soundness protections and an effective I have here a letter from the Iowa Co- aged by the CRA. CRA, this new financial marketplace alition for Housing and the Homeless, Many Michigan mayors have ex- will yield benefits for consumers—more which describes the importance CRA pressed their support for the CRA. financial products delivered more con- has for our communities. It reads, in They praise the CRA for encouraging veniently and rapidly and at a better part, ‘‘Through increasing the access private business investment and cre- price. to capital and credit, CRA provides a ating new jobs and businesses in their I strongly support financial mod- market-based solution for economic re- communities. In addition, money from ernization and want to help send a vitalization and even job creation. A federal grants is leveraged to obtain signable, bipartisan and well-balanced strong and vibrant CRA has meant that millions of dollars in private invest- piece of legislation to the President’s hundreds of billions worth of new home ment. There are twelve mayors from desk. Last year, we secured a com- mortgage loans and small business all over Michigan on this letter from promise bill that passed out of Com- loans have been made in low and mod- the U.S. Conference of Mayors sup- mittee by a vote of 16 to 2 that would erate income, urban and rural commu- porting the CRA. I oppose the provi- have had my support. It is regrettable nities throughout the country in the sions weakening the CRA included in that this year we find this legislation past several years.’’ S. 900, a bill intended to modernize the and the financial industry held hostage I ask unanimous consent that the financial sector of our economy. Both to a counterproductive agenda to scale text of this letter be printed in the small and large banks in Michigan back CRA. RECORD. have received outstanding CRA rat- Financial modernization is about The PRESIDING OFFICER. Without ings. The community groups and non- moving forward, paving the way for objection, so ordered. profits make great use of the resources marketplace innovation and consumer (See Exhibit 1.) which are made available through the benefits. But Senator GRAMM’s bill and Mr. HARKIN. Mr. President, I would CRA. The federal independent agency his proposed CRA restrictions move us just like to mention briefly the CRA

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00054 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8448 CONGRESSIONAL RECORD—SENATE May 5, 1999 reforms already in place to protect problem: the ability of financial conglom- try could have a profound effect in democra- small and rural banks. In 1995, new reg- erates to offer loans through their holding tizing access to credit and capital accumula- ulations dramatically simplified the company affiliates, without having to con- tion tools in our society. Clearly, that would CRA exam process for small banks form to CRA requirements. Stated simply, be good for America. holding companies will be able to shift assets Sincerely, under 250 million dollars in assets. from CRA-covered banks to mortgage and in- SANDI MURPHY, Under the new rules, small banks are surance companies, securities firms, and Policy Director. not subject to the lending, investment other institutions exempt from CRA-like re- The organizations listed below support the and service tests applied to large insti- quirements. Banks, therefore, will be left position of the Iowa Coalition for Housing tutions. Additionally, for small banks, with fewer resources with which to make af- and the Homeless and strongly encourage examiners look at only five factors: fordable housing economic development, and you to oppose the current financial mod- loan to deposit ratio; percentage of small business loans. If any financial mod- ernization legislation and demand a strong, loans inside bank’s CRA assessment ernization bill fails to extend CRA to the and protected, CRA. area; record of lending to borrowers of lending and bank services activities of mort- John Boyne, United Action for Youth, gage companies and other non-depository af- Street Outreach, Iowa City. different income levels and businesses filiates, CRA will cover an ever-shrinking Crissy Canganelli, Emergency Housing of different sizes; geographic distribu- amount of traditional banking products and Project of Iowa City. tion of loans; and a bank’s record of services. Jan Capaccioli, Domestic Violence Inter- taking action in response to written In addition to the expansion of CRA, finan- vention Program. complaints about its CRA performance. cial modernization could further serve low- Amy Covreia, Iowa City, Iowa. Finally, small banks are not subject to income consumers if it improved upon data Mike Coverdale, Iowa Community Action any data collection requirements for disclosure requirements. Such data disclo- Network. CRA. So, we have already addressed sure requirements help communities identify Bill Holvoet, Southeast Iowa Community these issues. This Senator would cer- missed market opportunities and eliminate Action. discriminatory practices. These require- Greg Jaudon, Iowa Homeless Youth Cen- tainly welcome hearings on the current ments help leverage reinvestment by making ters. state of those reforms and their effec- financial institutions publicly accountable Gene Jones, Des Moines Coalition for the tiveness. In fact, I would ask the Bank- to serve all borrowers in a fair and equitable Homeless. ing Chairman to consider holding such manner. Insurance companies and others Mike Kratz, Veteran Affairs Medical Cen- hearings on CRA before we make affiliating with banks should be required to ter. changes to an important and effective report data on policies and services issued by Lora J. Morgan, Goodwill Industries of program. income and race and small business data S.E. Iowa. Mr. President, CRA has provided should include the race and gender of the Mark Patton, Muscatine Center for Stra- jobs, helped our economy to grow, and borrower as well as the neighborhood in tegic Action. Linda Severson, Johnson County LHCB. ensured all of our citizens are consid- which the business is located. We would also urge you to fight attempts Lisa Wageman, Operation Threshold, Wa- ered for loans based on their financial to directly attack or weaken CRA; specifi- terloo. history, not their address. I urge all cally, proposals such as safe harbors, small my colleagues to support removal of bank exemptions, and ‘‘anti-greenmail’’ bills Mr. REED. Mr. President, I rise in these provisions. or amendments. Mergers and acquisitions strong support of the Bryan CRA EXHIBIT 1 can disrupt the lives of thousands of citizens amendment. This amendment would in a community through job losses, closing IOWA COALITION FOR HOUSING strike the small bank exemption and of offices, decreases in lending, and higher AND THE HOMELESS, the CRA safe harbor provisions in- Des Moines, IA, May 3, 1999. fees. CRA reviews are critical to ensure that lenders involved in mergers can preserve cluded in S. 900 and require banks to Rep. TOM LATHAM, their CRA performance after such enormous have a ‘‘satisfactory’’ CRA rating as a Cannon House Office Building, condition for engaging in the expanded Washington, D.C. institutional changes. Moreover, affected DEAR CONGRESSMAN LATHAM: As organiza- citizens ought to have the right to speak up powers allowed under this bill. tions that work with and on behalf of low-in- and have their concerns addressed before a The language of this amendment is come and homeless individuals, we join merger application is approved, regardless of similar to language that was included today to share our concerns regarding the the pre-merger CRA ratings. in the financial modernization bill proposed financial modernization legislation Small bank exemptions would also be ex- which passed the House and Senate tremely harmful to communities because currently being considered in Congress. By Banking Committee by a vote of 16 to combating discrimination and promoting they eliminate community reinvestment re- bank-community partnerships, the Commu- quirements for most of the banks in the 2 last year and which enjoyed broad in- nity Reinvestment Act (CRA) extends the country. Small towns and rural areas that dustry support. Similar language has American dream of home and small business depend on these banks for home and small also been incorporated in the H.R. 10 ownership to millions of Americans. Without business lending would only suffer a new bill that recently passed the House this sustained access to capital and credit, round of credit and capital flight. as pro- Banking Committee and is pending in our neighborhoods die. We ask that you sup- posed, the current legislation would exempt the House Commerce Committee. port a strong CRA and the benefits it has small rural banks under $100 million in as- In short, the Community Reinvest- sets from CRA altogether. Almost 40% of all brought our communities. ment Act requires financial institu- Through increasing the access to capital lenders in the country will then have no obli- and credit, CRA provides a market-based so- gation to serve minority and working-class tions to meet the credit needs of the lution for economic revitalization and even neighborhoods. Seventy-two percent of all local communities in which they are job creation. A strong and vibrant CRA has rural banks would be exempt from CRA. In chartered, including low- and mod- meant that hundreds of billions worth of new Iowa, this exemption would include 85% of erate-income communities, consistent home mortgage loans and small business the lenders in non-metropolitan areas, many with safe and sound practices. Let me loans have been made in the low- and mod- of whom enjoy a near monopoly in their reiterate, CRA requires banks to make erate-income urban and rural communities service areas. credit-worthy loans. It does not require It would be detrimental to the wealth- throughout the country in the past several banks to make bad loans. years. Any bill that threatens to eviscerate building efforts in this country to pass a fi- the effectiveness and application of CRA will nancial modernization bill that would halt Despite this fact, some have argued only destroy this promotion of wealth cre- community reinvestment progress by failing that CRA is tantamount to govern- ation and entrepreneurial development in to keep CRA on pace with the evolution in ment-mandated credit allocation. minority and working-class neighborhoods. the financial industry. Congress has required Nothing could be further from the While the various versions of financial mod- that banks serve ‘‘the convenience and truth. Neither the Act nor its regula- ernization that have been introduced and needs’’ of the communities in which they are tions specify the number of loans, the contemplated may not directly attack CRA, chartered because of the vital role they play type of loans, or the parties to CRA in our lives. We believe that this same stand- they will eventually undermine the law by loans. To the contrary, CRA relies on preventing its evolution with the rapid ard should be applied to the entire financial changes in the financial industry. industry. A financial modernization bill that market forces and private sector inge- The current versions of financial mod- carefully modernizes the Community Rein- nuity to promote community lending. ernization only demonstrate its fundamental vestment Act to the entire financial indus- This is evidenced by the tremendous

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00055 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8449 flexibility that financial institutions which is more than twice as fast as the CRA, it is likely that many rural com- have in satisfying CRA. For example, rate of growth in all home mortgage munities could become credit-starved. loans to low-income individuals; loans loans. In view of these statistics, it is The bill also includes a provision to nonprofits serving primarily low- clear that CRA has played a tremen- that would provide a safe harbor for and moderate-income housing needs; dous role in the home ownership boom. banks with a ‘‘satisfactory’’ or better loans to financial intermediaries such In addition to increases in home CRA rating. Specifically, institutions as Community Development Financial mortgage lending, CRA has also been receiving a satisfactory CRA rating at Institutions; and loans to local, state, responsible for an increase in commu- their most recent examination would and tribal governments may qualify for nity development lending. In the past be presumptively in compliance with CRA coverage. Moreover, loans to fi- four years, banks have invested four CRA, unless ‘‘substantial verifiable in- nance environmental clean-up or rede- times as much in community develop- formation’’ to the contrary was pre- velop industrial sites in low- and mod- ment projects, as they did in the pre- sented. I am concerned about this pro- erate-income areas also qualify as CRA vious thirty years. vision because it establishes a very dif- loans. This increased investment in commu- ficult-to-satisfy burden of proof for in- In addition to lending, CRA is satis- nity development by banks has also dividuals or groups wishing to protest fied through investments by financial furthered the evolution of a secondary a bank merger on CRA grounds. Indeed, institutions in organizations engaged market for community development I fear this provision will greatly inhibit in affordable housing rehabilitation, loans, which ultimately provides addi- the ability of groups to get the nec- and facilities that promote community tional capital for community develop- essary information from banks to pro- development such as child care centers, ment. For many years, the develop- test a merger. Also, when considering homeless centers, and soup kitchens. ment of a secondary market for com- the fact that 97 percent of institutions Even Federal Reserve Chairman Alan munity development loans had been receive a satisfactory or better CRA Greenspan has weighed in on this issue, limited. This development was limited rating, it is clear that this provision arguing, ‘‘The essential purpose of the for a number of reasons including the will effectively eliminate CRA com- CRA is to try to encourage institutions lack of conformity in the underlying ment on a bank merger. who are not involved in areas where loans, as well as the fact that commu- If these provisions of S. 900 are not their own self-interest is involved, in nity development securities typically eliminated, I fear a return to the days doing so. If you are indicating to an in- do not receive a rating from a nation- prior to CRA’s enactment when access stitution that there is a foregone busi- ally-recognized rating agency. Also, to credit was limited for many minori- ness opportunity in an area X or loan the underlying loans lacked long-term ties and those living in low-income product Y, that is not credit alloca- performance data, making them dif- neighborhoods. In fact, testimony be- tion. That, indeed, is enhancing the ficult to rate. fore the Senate Banking Committee market.’’ However, because of CRA, a sec- during the consideration of CRA in 1977 As illustrated by these examples and ondary market for community develop- revealed how bad things were. Wit- Chairman Greenspan’s comments, it is ment securities is beginning to emerge. nesses recounted stories of financial in- clear that CRA is a far cry from gov- This is happening for two specific rea- stitutions that had previously been ac- ernment-mandated credit allocation. sons: (1) The federal banking regulators tive in urban lending, that disinvested To be sure, CRA is predicated on two have interpreted CRA to allow banks in those same urban neighborhoods as simple assumptions that were well-ar- to get CRA credit for purchasing com- minorities increasingly moved in. Tes- ticulated by the legislative architect of munity development securities, even if timony before the Senate Banking CRA, former Senate Banking Com- they lack ratings or performance data, Committee also brought to light a 1974 mittee Chairman Proxmire, who stat- if the purchases are consistent with study of six Chicago banks. In the ed, ‘‘(1) Government through tax reve- safe and sound banking practices, (2) study, it was found that these banks, nues and public debt cannot and should Also, as banks have increased their which held $144 million in deposits not provide more than a limited part of community development lending, they from low-income and minority commu- the capital required for local housing have been able to draw on this experi- nities, returned one-half cent on the and economic development needs. Fi- ence to improve underwriting stand- dollar in home loans. Such was the de- nancial institutions in our free eco- ards and create greater conformity in plorable state of lending in low-income nomic system must play the leading underwriting, which is important for and minority communities before CRA. role, and (2) A public charter for a bank investors in the secondary market. While certainly we have come a long or savings institution conveys numer- Also, this experience has provided way since CRA’s passage in 1977, lend- ous benefits and it is fair for the public banks with greater empirical data on ing discrimination, unfortunately, per- to ask something in return.’’ loan performance, which is another im- sists. In a study published earlier this In the words of former Comptroller of portant consideration for secondary year by the Fair Housing Council of the Currency Eugene Ludwig, ‘‘CRA is market investors. These are trends Greater Washington, it was revealed in many respects a model statute. It that we should clearly be excited about that Washington area lenders discrimi- requires no public subsidy, no private and should seek to further. nate against two out of five African subsidy, and no massive Washington Instead, S. 900 would undermine this American and Hispanic mortgage ap- bureaucracy.’’ progress. Specifically, one provision of plicants. In one incident cited in the It is this simple concept that has re- S. 900 would exempt rural banks with study, a Rockville lender advised a sulted in more than $1 trillion in loan assets under $100 million from CRA. Al- black tester that the lender did not commitments for low- and moderate- though this exemption is limited to the make loans to first-time home buyers. income borrowers since CRA’s enact- smallest institutions, over 76 percent The same lender later met with a white ment in 1977. Indeed, the record home of rural banks would be covered. This tester, also posing as a first-time home ownership rate that the U.S. is now en- is of great concern since small banks buyer, giving the tester an appoint- joying—66.3 percent of Americans own have historically received the lowest ment and encouraging him to apply for their homes—is in large measure due to CRA ratings. In fact, institutions with a mortgage loan. Lending studies by CRA lending to minorities and low-in- less than $100 million in assets ac- other organizations reveal similar find- come individuals. Minorities have ac- counted for 92 percent of institutions ings. These studies have shown that counted for a disproportionately large receiving ‘‘non-compliance’’ CRA rat- minority borrowers receive fewer bank share of home ownership growth since ings in 1997–1998. loans even when their financial status 1994—roughly 42 percent. I am also concerned about this ex- is the same as or better than white bor- Also, since 1993, home mortgage emption because smaller banks are rowers. loans to low- and moderate-income typically the primary sources of credit By encouraging lenders to extend census tracts have risen by 22 percent, in rural communities. Hence, absent credit to all communities, CRA has

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00056 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 8450 CONGRESSIONAL RECORD—SENATE May 5, 1999 been an important weapon in fighting things, a combination of new and inno- lows. First, as I understand it, there lending discrimination. The Bryan vative products and services, as well as are no enforcement mechanisms or amendment will ensure the potency of technological advances. penalties for failing to maintain a CRA in fighting lending discrimination Regulators must keep pace with ‘‘satisfactory’’ CRA rating. By con- and providing fair access to credit to these innovations, and we, as legisla- trast, the bill passed last year by the low-income and minority communities. tors must set the appropriate param- Senate Banking Committee required In closing, Mr. President, let me reit- eters for this changed financial serv- all banks in a holding company struc- erate how important it is to include ices marketplace. We cannot leave it ture to have a satisfactory CRA rating CRA in any modernization legislation up to piecemeal regulation and legisla- as a condition of affiliation, and main- that passes. It is very likely that if S. tion as, all to often, has been the case. tain a satisfactory CRA rating in order 900 is enacted, we will see increased Our goal should be to create a regu- to continue to engage in new financial consolidation in the financial services latory framework which provides meas- activities. industry. As we know from recent ex- urable benefits to consumers and busi- Second, this bill provides for a CRA perience, this consolidation will likely nesses, enhances competitiveness of ‘‘safe harbor.’’ Under this provision, all lead to layoffs and bank branch clos- the financial services sector on a glob- institutions which received at least a ings. Absent the CRA language in- al basis, and ensures the continued satisfactory CRA rating on their most cluded in the Bryan amendment, I fear safety and soundness of our financial recent examination, and received a sat- that this consolidation could have a institutions. While the bill before us isfactory rating in each of the past 3 significant and adverse impact on ac- goes a long way toward achieving that years, would be deemed to be in com- cess to banking services and credit in goal, unfortunately I believe, it falls pliance with CRA. Such a safe harbor, low-income and minority communities. short. I believe, would often effectively elimi- By adopting the Bryan amendment, we It falls short, principally in my opin- nate the opportunity for public com- will at least ensure that industry con- ion, because it fails to ensure the con- ment. Banks and thrifts are usually ex- solidation will not decrease access to tinued strength of the Community Re- amined every two to three years. CRA credit in these communities. investment Act. CRA has been invalu- performance can change in the interim. In fact, I feel so strongly about these able in helping to assure low and mod- Third, S. 900 exempts those banks provisions that I plan on opposing the erate income consumers, communities with less assets of less than $100 mil- bill if this amendment is not adopted. I and small businesses have sufficient lion, and those that are not located in would hope my colleagues can support access to credit. metropolitan areas, from CRA. While I this amendment. The Community Reinvestment Act think we can all agree that institu- Mrs. BOXER. I have been a long- has been important to both urban and tions with assets of less than $100 mil- standing supporter of financial services rural communities. Every CRA dollar lion are small, the amendment would modernization and affirmed such sup- is a loan—it is the leveraging of cap- exempt more than 75 percent of rural port in a letter to Secretary Rubin ital. Over the past seven years or so, institutions from CRA requirements— about two years ago, and last year, as approximately $400 billion of commu- that is almost 40 percent of all U.S. a member of the Banking Committee, I nity development has been leveraged. banks and thrifts. Ironically, I would voted in support of H.R. 10—the Finan- It has proven to be an effective tool in note, it has traditionally been these cial Services Modernization bill re- my home state of California and in smaller institutions that have had the ported out of the Banking Committee states throughout the country. worst CRA records. Moreover, the new with strong bi-partisan support. CRA encourages federally insured fi- CRA rules, which went into effect in I believe it is important that our fi- nancial institutions to help meet the January 1996, provide a streamlined ex- nancial services sector adapt to con- credit needs of the communities in amination for banks and thrifts with temporary market conditions, market- which they do business. As Senator assets less than $250 million. In fact, place innovations and to growing fi- Proxmire said in 1974, ‘‘CRA is in- pursuant to the changes which took ef- nancial competition from abroad. tended to establish a system of regu- fect in 1996, small banks do not have Moreover, I understand and appreciate latory incentives to encourage banks any data collection or reporting re- the desire of our financial services in- and savings institutions to more effec- quirements. dustries—banks, securities firms, and tively meet the credit needs of the lo- I do not believe the CRA changes en- insurance firms—to further expand calities they are chartered to serve, visioned in S. 900 are appropriate, or their traditional lines of business. consistent with sound lending prac- needed at this time. If there are abuses I joined the Banking Committee in tices.’’ or specific problems, let’s deal with 1993 when I was first elected to the CRA does not, despite many implica- them—let regulators, and, if appro- Senate, and I proudly served on that tions to the contrary, impose any re- priate, law enforcement deal with Committee until this year. So I realize quirement upon banks to make un- them. Such abuses are hurtful to CRA the process of financial services reform sound or unsafe loans. CRA does not re- and to those who can potentially ben- has been long, tedious, and often quite quire banks to engage in risky lending efit from CRA. These abuses, I would contentious. I also realize that many or investments. It does not require suggest however, are extraordinarily financial services firms are looking for- banks to make loans outside of the rare. On the whole, bankers have found ward to the Senate putting an end to lending criteria they have established. CRA to be an extremely minimal intru- that long process by passing a financial I would suggest, in fact, that given how sion at most. services modernization bill. And I well banks are doing these days, one CRA has not been a problem to most would like to see us pass a good bill— would be hard pressed to make a rea- bankers in my home state of Cali- a fair and balanced bill. sonable case that CRA has been detri- fornia. BankAmerica, Wells Fargo and Nonetheless, it is important to re- mental to the bottom line of banks or others have made important CRA com- member that the U.S. already has the to their safety and soundness. mitments in my state. best banking system in the world. It is I think it is wonderful banks are Between 1992 and 1997, BankAmerica the best capitalized, the most trans- doing so well, I appreciate the con- made $3 billion in conventional small parent, has the highest accounting tributions they are making to our business loans and lines of credit for standards, is very innovative and its economy. I remember all too well when less than $50,000. In 1997, it made more safety and soundness is unsurpassed. banks were not doing so well. Thus, I than $1 billion in loans and lines of Therefore, it is appropriate to ask, would not support CRA, or any other credit for $100,000 or less. And ‘‘why is financial services moderniza- requirement, which encouraged banks BankAmerica has often noted their tion necessary?’’ It is necessary be- to engage in unsafe lending practices. CRA loans have performed as well as cause the financial marketplace has My specific concerns as relate to the other more traditional loans made by changed, brought on by, among other CRA provisions in this bill are as fol- the bank. These loans have also been

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00057 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.001 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8451 profitable for the bank. In fact, Hugh access to the Federal Reserve’s dis- throw away our best chance to pass fi- McColl, the Chairman and CEO of count window and payments system. nancial modernization solely to end a BankAmerica Corp. has said, ‘‘My com- And in return, they would have an law that we know is working? pany supports the Community Rein- obligation to ‘‘serve the convenience The President has stated very clearly vestment Act both in spirit and in fact. and needs’’ of their communities. that with these CRA provisions, this We have had fun doing it. We’ve made Over 20 years later, banks still CRA bill will end in veto. His veto letter a business out of it.’’ as an obligation—but as an obligation states: Moreover, in Los Angeles, as a result that a minimum they can live with— We cannot support the ‘‘Financial Services of CRA, loans to African American and in many cases, that they endorse. Modernization Act of 1999’’ * * *. In its cur- owned businesses increased a whopping Does CRA work? rent form, the bill would undermine the ef- 171 percent between 1992 and 1997. How- The answer has been a resounding fectiveness of the Community Reinvestment Act (CRA), a law that has helped to build ever, it is important to note that small yes. homes, create jobs, and restore hope in com- business owners of every race have ob- Since its enactment, CRA has re- munities across America. The CRA is work- tained credit as a result of CRA-related sulted in $1 trillion of investments in ing, and we must preserve its vitality as we programs. For example, in San Diego, underserved communities. It’s been a write the financial constitution for the 21st at least 25 percent of the loans made by driving force for community economic Century. local community development organi- development; one of the best ways to Contrary to what many think, this zations were to white business owners. bring people together, to bring poor amendment does not expand CRA. It So Mr. President, although I am a en- people and people of color upward, simply maintains the status quo. thusiastic supporter of financial serv- which we all want to do. First, it requires that banks have at ices modernization, I cannot support S. It’s also driven a 30 percent increase least a ‘‘satisfactory’’ CRA rating as a 900 if the CRA provisions contained in in home ownership among low-income precondition for affiliation with securi- the bill are maintained. Access to cap- families since 1990, making the Amer- ties and insurance firms. Today our in- ital and economic development, I be- ican Dream of home ownership a more sured depository institutions have this lieve, will potentially be some of the commonplace reality for our minority obligation. And 97 percent of them most important tools available to low communities. meet it. They meet it precisely because and moderate income Americans in the And in 1997, large banks and thrifts it is not a tremendous burden. coming century. Without such access made approximately 525,000 small busi- Second, this amendment would re- to capital, far too many Americans, ness loans totaling $34 billion to entre- move the small bank exemption that particularly those in urban and rural preneurs located in low and moderate narrowly passed the Banking Com- areas, will not be able to share in the communities. mittee. Small banks account for 70 per- economic wealth of our remarkably ex- CRA works. cent of the ‘‘needs improvement’’ rat- uberant economy. And we know it works because banks ings handed out to banks by the regu- Mr. SARBANES addressed the Chair. who have never been shy in fighting lators last year. So the idea that we The PRESIDING OFFICER. The Sen- what they view as burdensome or in- should exempt the institutions that are ator from Maryland. trusive Federal regulation are not most likely to be in noncompliance Mr. SARBANES. Mr. President, I pushing to repeal CRA or even to roll it seems ill-advised. Finally, the amendment eliminates have refrained from speaking all day. I back. the safe harbor provisions in the Com- do need to speak for a brief period of In fact, they’re supporting it. Every mittee print. The safe harbor sets up time, but I want to try to accommo- major bank in my State has contacted an unnecessary burden of proof that is date colleagues as well. If I can inquire me in favor of CRA. Some have been honest enough to simply unnecessary. of Senator SCHUMER, how much time In sum, these provisions would re- admit that because of CRA they are would he need to speak, 5 minutes or store CRA to today’s potency. reaching out to communities that they thereabouts? As I said yesterday, I say, it is my Mr. SCHUMER. Yes, that would be would not otherwise have served. hope that we can set aside our par- And they’re serving them profitably. fine. tisanship for the sake of pragmatism. Mr. SARBANES. And Senator SHEL- Hugh McColl, Jr., Chairman and CEO And set aside confrontation for the BY? of BankAmerica Corp., stated earlier sake of compromise. Mr. SHELBY. About 10. this year; ‘‘My company supports the Mr. President, I strongly support this Mr. SARBANES. I would like to pro- Community Reinvestment Act in spirit amendment, and I urge my colleagues pound a request that Senator SCHUMER and in fact. To be candid, we have gone to support it. be allowed to speak and then Senator way beyond its requirements * * *. A vote for this amendment is a vote SHELBY and then after Senator SHELBY We’re quite happy living with the ex- for modernization. that I would be recognized. isting rules.’’ The PRESIDING OFFICER. The Sen- Mr. GRAMM. Could we add to it that, A Federal Reserve study showed that ator from Alabama is recognized. after the Senator from Maryland, I be banks with higher volumes of loans to Mr. SHELBY. Mr. President, I rise in recognized? low-income communities were on aver- opposition to the Bryan CRA amend- The PRESIDING OFFICER. Without age more profitable than those with a ment. This amendment not only objection, it is so ordered. lower volume. strikes the small rural bank exemption The Senator from New York. And we know that banks have had that we have in the Banking Com- Mr. SCHUMER. Mr. President, I some of their most profitable years mittee bill and that we adopted on a bi- thank my friend, the Senator from even as CRA loans have reached record partisan vote, but it also replaces that Maryland, as well as the Senators from heights. language with a significant expansion Alabama and Texas for their courtesy Finally, our regulators, who are com- in CRA—the same language Chairman here this evening. mitted to ensuring the safety and GRAMM and I vehemently opposed on I also thank Senator SARBANES for soundness of our financial institutions, the Senate floor this past year. his indefatigable efforts to defend the have been very vocal in their support Community banks, as the Presiding Community Reinvestment Act. of CRA. Officer knows, by their very nature, And I’d like to thank my Democratic So there’s more evidence that CRA serve the needs of their communities colleagues as well as Secretary Rubin has been effective in communities’ edi- and do not need a burdensome Govern- for their strong commitment to CRA. fication than in any invidious exploi- ment mandate to force them to allo- In 1977 when CRA was enacted, the tation of banks, as some of its critics cate credit or to originate profitable thinking was that banks—though pri- have been charging. loans. And, contrary to the assertions vately owned—receive public benefits The question is, then, with everyone of critics, there is no evidence whatso- in the form of deposit insurance and in support of CRA, why do we want to ever that the small bank exemption

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00058 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 8452 CONGRESSIONAL RECORD—SENATE May 5, 1999 would have ‘‘devastating con- Institution. I know because I have just com- raises the cost of borrowing through sequences’’ for low- and moderate-in- pleted 39 years this month. All this time in higher loan rates and punishes savers come rural communities. There re- small home-owned banks that deliver serv- in the form of lower savings rates. mains no documented evidence to ices that are essential to rural life. Where Critics of the small bank exemption services have been rendered over the years prove such an assertion, just as there is even before we knew anything about CRA. claim that small banks get the worst no tangible evidence that CRA has ever CRA ratings. The truth of the matter is That was from Charles Willmon, helped rural communities in America. that one size does not fit all in any chairman of the First Bank of the What is documented, though—and business. These critics point to lower South in the small town of Rainsville, Chairman GRAMM has worked tirelessly than average loan-to-deposit ratios of AL. small banks as evidence that they are to do so—is the kinds of blackmail I have another letter, from John not serving their communities. That is agreements and extortion practices Mullins, president and CEO of First nonsense. That is like saying the aver- that the Community Reinvestment Act Commercial Bank of Cullman, AL, age male wears a size 42 regular suit enables community groups to engage which says: in. The truth of the matter is that the and that every male in America who Exempting small banks would be a wonder- small bank exemption would exempt ful opportunity for me to spend less time on does not fit in that size suit should be less than 3 percent of bank assets na- unnecessary and nonproductive paperwork reprimanded by the Federal Govern- tionwide. Thus, 97 percent of all bank and more time helping the citizens of my ment. assets would still be subject to the market area improve their financial well- Every community in this great coun- Community Reinvestment Act. being . . . CRA examiners spend many un- try is different. Most of us take pride Just bear with me a minute on this necessary hours examining our loan track in such diversity. That is the founda- chart. We have bank assets of $5.711 record. Banks our size are an integral part of tion on which this country was built. trillion. But banks above $100 million, the local community and we are always sen- However, the Community Reinvest- sitive to the needs of our citizens. They are ment Act punishes banks who do not rural and nonrural, control 97 percent not faceless names, but people whom we of the bank assets in America. The know. We don’t need a law to require us to comport with national averages. In- small banks in America that we are help them with credit, we do it anyway. deed, the loan demand in Prattville, talking about, those under $100 million I have another letter from a small AL, is not the same as in Lafayette, in assets—there are 3,667 of them—con- banker in Clanton, AL. He is Leland LA. Nor is it the same as in Shelby- trol only $165 billion, or 2.9 percent of Howard, Jr., of Peoples Southern Bank. ville, TN. Nonetheless, CRA judges all the banking assets. Can you imag- He says: banks based largely on their loan-to- deposit ratios that the regulators deem ine? BankAmerica, for example, has We in the community banks feel that the $614 billion in assets. And I commend CRA exception for banks with aggregate as- to be appropriate. That, my friends, is them for that. They are a well-run sets of $100 million or less is a very good nothing but a quota. When everything bank. But that is more than all 3,667 start on the road to easing the regulatory is said and done, CRA promotes quotas small rural banks in America put to- burden. and creates a regulatory burden. gether; it is about 4 times more. So I have a letter from John Hughes, As if that is not bad enough, Mr. let’s look at this in a realistic situa- CEO of First National Bank of Hart- President, the Bryan amendment tion, as this chart here depicts. ford, AL, a small town in south Ala- would also expand the reach and the Mr. President, critics will point out bama. He says: scope of the Community Reinvestment that the small rural bank exemption Extra work created by the CRA is tremen- Act. which I and Senator GRAMM have in the dous. Most rural banks know at least 95 per- Specifically his amendment would: bill would exempt 3,700 banks. That is cent of all their customers, their family, and One, increase administrative enforce- true. But to put that into context their situation. The rating system that most ment authority of the regulators to again, and to reiterate, one needs to examiners used is highly subjective and the fine directors and officers up to $1 mil- understand that BankAmerica, as I rural banks have a hard time to achieve a lion a day for CRA noncompliance. grade higher than satisfactory. Again, it have just shown, is four times the size Just think about that. would be a great day in Alabama if you . . . Two, it would make expanded activi- of all small rural banks in America. could get this amendment passed. ties subject to CRA compliance on all Indeed, BankAmerica possesses $614 Those are just a few letters, and they billion in assets, or 10.7 percent of all depository institution affiliates on an come from all over the Nation. ongoing basis. bank assets in this country. If one Mr. President, the Federal Reserve looks at the list of large banks, one And it would give the regulators the Bank of Richmond published its 1994 authority to shut down any affiliate will soon realize that the vast majority annual report on ‘‘Neighborhoods and of bank assets are concentrated in the within the holding company if just one Banking,’’ where it reported its find- subsidiary depository institution falls large, multibillion-dollar banks that ings on the costs of CRA. The report can most easily shoulder the burden of out of CRA compliance. found: The Bryan amendment dramatically CRA. The regulatory burden [of CRA] would fall The assertions of those who oppose expands, Mr. President, CRA enforce- on bank-dependent borrowers in the form of ment authority to allow civil money the small bank exemption that we have higher loan rates and on bank-dependent in the banking legislation also do not savers in the form of lower deposit rates. penalties for bank directors and offi- comport with the comments I have re- And to the extent that lending induced by cers, as I have pointed out. ceived from small banks across the the CRA regulations increases the risk expo- The amendment would require bank country. In fact, I have many letters sure of the deposit insurance funds, tax- holding companies who seek to become from small bankers who complain payers who ultimately back those funds bear financial holding companies to be com- some of the burden as well. about the burden of CRA, as well as the pliant with the Community Reinvest- regulators’ subjective reporting re- The report goes on to say that, basi- ment Act of 1977 just in order to be eli- quirements dealing with CRA. cally, the CRA imposes a tax on banks. gible. If even one subsidiary depository I would like to take a moment to CRA, then, is a tax on community institution ever falls out of compli- read some letters from some small banks and raises the costs of inputs to ance, the holding company, including bankers in Alabama. I believe they banks by increasing their regulatory the nonbank affiliate, would then be have a right to be heard. I will quote burden and compliance costs. Mr. subject to section 8 of the Federal De- from some of these. The first one says: President, in addition, CRA forces posit Insurance Act, which is 12 U.S.C. banks to make loans according to a 1818, which authorizes bank regulators I don’t think, in these small community banks, that we have to be examined by peo- Federal quota, increasing the risks, to invoke cease and desist orders, civil ple who usually don’t understand our pur- and therefore the costs, of borrowing to penalties, and fines. pose, to enforce us to service our community consumers. Make no mistake about it, Regulators would be authorized to * * *. Small community banks are a Service the Community Reinvestment Act fine bank directors and officers up to $1

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00059 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8453 million a day. This, Mr. President, is a CRA, with the bank regulators given The premise of the legislation is simple— dramatic expansion in the enforcement the authority to enforce such law. This to make sure that economic opportunity for authority and reach of bank regu- is the first time CRA has ever been ex- families and communities is available to every American. lators. panded to cover the approval of non-de- Opportunities for home ownership, small Such authority does not exist today. pository activities. business development, and sustaining rural The Clinton Justice Department even I urge my colleagues to vote against communities are critical to the strength of agrees. the Bryan amendment and support this Nation. In late 1994, Comptroller of the Cur- what is in the bill. With CRA our neighborhoods have a rency, Eugene Ludwig, tried to invoke I yield the floor. chance. Without it, they are discriminated the administrative enforcement powers Mr. SARBANES addressed the Chair. against. under Section 8 of FDIA (12 U.S.C. 1818) The PRESIDING OFFICER. The Sen- Just as civil rights legislation enacted a decade ago sought to break down the walls of to enforce CRA. The Justice Depart- ator from Maryland. Mr. SARBANES. Mr. President, discrimination that separated us in schools, ment issued a memorandum stating: restaurants, and places of work by the color [T]o move from an enforcement scheme shortly we will be voting with respect of our skin, the CRA has meant opportunity that relies upon a system of regulatory in- to the Bryan amendment. for everyone, whatever race or color. As a re- centives to a scheme that entails cease-and- I, again, want to underscore the very sult of CRA, millions of minorities across desist orders and potentially substantial strong and powerful statement which I this Nation now have access to the capital monetary penalties is a leap that we do not think Senator BRYAN made shortly that will allow them to build new homes, to believe can be justified on the basis of the after noon at the outset of this debate, create new businesses, and to improve edu- text, purpose, and legislative history of CRA. and I am deeply appreciative to him for cation. We therefore conclude that enforcement the strong leadership he has shown She concluded her introductory re- under 12 U.S.C. 1818 is not authorized by marks at the press conference by say- CRA. with respect to this amendment. We have tried to give all Members a ing: Bank trade associations were very chance to speak. I, in fact, have re- Leaders you see before you represent doz- pleased with the Justice Department frained from doing so in the course of ens of organizations galvanized by an assault decision. The Bankers Roundtable, the the day in order to make sure that our on the Community Reinvestment Act. Those American Bankers Association, the colleagues had a chance to speak. I organizations represent millions of Ameri- cans who have been touched by CRA and mil- Consumer Bankers Association, and would like to take just a few minutes the Savings and Community Bankers lions more who deserve the same oppor- now. tunity. of America, filed joint letters focusing I want to speak in support of the Make no mistake about it, this issue in substantial part on the regulators amendment. But I really do not want is seen by the civil rights community claims of enforcement authority. to repeat a lot of the extensive discus- as a critical civil rights issue. Fair ac- The Bryan amendment also permits sion of the issues which have taken cess to credit is fundamental to hopes regulators to force divestiture since place, both during opening statements for economic progress in our minority banks cannot ‘‘retain shares of any on the bill, and on the alternative company’’ if ever out of CRA compli- communities. amendment, and now on this amend- Another speaker at the press con- ance. This provision also explicitly ment itself, although they may well states that a bank holding company ference was Hugh Price, president of bear repeating. the National Urban League, who said: may not ‘‘engage in any activity’’ un- I want to make sure my colleagues We of the National Urban League strongly less the institution is CRA compliant appreciate the intense feeling and the always and forever. support financial services modernization be- critical importance which civil rights cause we believe it is in tune with the times. Think about it. groups, mayors, rural groups, Hispanic If just one subsidiary depository in- But we staunchly oppose any effort to gut groups, and Native American groups stitution of a financial holding com- the CRA. We at the Urban League work with attach to this issue of CRA. They have the leaders of many financial institutions. pany falls out of compliance with CRA, all sent letters to the committee. Just last week I talked with Kenny Lewis, the substitute authorizes the Federal I ask unanimous consent those let- president of Bank America, who said that his Reserve Board to ‘‘impose such limita- ters be printed in the RECORD at the bank stands strongly behind the renewal of tions on the conduct or activities of conclusion of my remarks. CRA. the company or any affiliate of the The PRESIDING OFFICER. Without I know that belief is echoed by many company as the Board determines to be objection, it is so ordered. leaders in the financial services and appropriate * * * ’’ This, too, is a dra- (See Exhibit 1.) banking community who see it as good matic expansion of enforcement au- Mr. SARBANES. Mr. President, these business for their corporations. thority under CRA. For the first time, letters reflect how CRA has benefited Charles Kamasaki, senior vice presi- regulators will be able to impose re- communities all over this country— dent of the National Council of La strictions on activities throughout the small, urban, and rural. They dem- Raza, stated: entire holding company. This means a onstrate how CRA has expanded eco- The National Council of La Raza is the Na- bank regulator could prohibit a securi- nomic opportunities for people of all tion’s largest Hispanic civil rights organiza- ties affiliate from underwriting securi- races, colors, and ethnic affiliations. tion. We represent more than 200 local com- ties or an insurance affiliate from un- Yesterday morning, the Leadership munity-based organizations who provide a derwriting insurance. range of services, many of them supported by Conference on Civil Rights, our pre- CRA-related funds in over 32 States. Regulators do not have such author- eminent civil rights group, held a press Mr. Kamasaki, the head of the Na- ity today. Currently, CRA only allows conference in support of CRA. I would tional Council of La Raza, introduced regulators to prohibit the merger, ac- like briefly just to quote some of the Richard Farias as president of the quisition or branch expansion of an in- comments made by civil rights leaders Tejano Center for Community Con- stitution that is not compliant with at the press conference, as well as com- cerns in Houston, a member organiza- CRA. ments made by individuals who bene- tion of La Raza. Mr. Farias stated, in Current law does not give bank regu- fited from CRA. lators the authority to prohibit eligible Dr. Dorothy Height, chairman of the speaking of the importance of CRA: activities of a given charter due to Leadership Conference on Civil Rights, Now because of CRA, a number of banks in Houston created a consortium to help us pur- CRA non-compliance. The Bryan president emeritus of the National amendment requires an operating sub- chase a $2.1 million school building. The Council of Negro Women, spoke, and building has 7.5 acres and 80,000 square feet sidiary who wants to engage in agency said: of space, including a gymnasium, a cafeteria, activities to maintain CRA compliance Since its enactment in 1977, the Commu- an auditorium and 25 classrooms. They now on all depository institution affiliates. nity Reinvestment Act has served as one of have a charter school for success that houses Thus, non-banking financial agency the crowning achievements in the civil 400 students and is expected to grow to 650 activities would be held hostage to rights movement. students.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00060 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 8454 CONGRESSIONAL RECORD—SENATE May 5, 1999 He goes on to say that it is very im- alition of 19 family farm and rural In a perfect world, lending practices would portant to understand that CRA is not groups, which states: be fair and the Reinvestment Act would be unnecessary. But without Federal pressure just about community development; it Rural areas continue to suffer from a seri- the country would return to the era of red- is about empowerment of the people; it ous shortage of affordable housing. Farmers lining, when communities cut off from cap- are facing the worst financial conditions in is about being able to give low-income ital withered and died. children and families the right that more than a decade due to declining com- they have to not only good housing but modity prices. Rural Americans continue to need the tools of the CRA to ensure account- [From the Washington Post, May 4, 1999] to good education and to good health ability of their local lending institutions. BANKING ON REFORM services. CRA helps to meet the credit demands of Daphne Kwok, executive director of The Senate today is scheduled to begin millions of family farmers, rural residents considering a bill that would remake the fi- the Organization of Chinese Americans, and local businesses. nancial services industry, allowing banks also took part in the press conference. Mr. President, I ask unanimous con- and insurance companies and investment She stated that the Organization of sent to have printed in the RECORD firms to merge and compete. Similar legisla- Chinese Americans supports the Com- other letters from a number of organi- tion is making its way through the House. munity Reinvestment Act because it zations which have written to us in The thrust of both bills is sound. But while has enabled home ownership among mi- very strong support of the CRA, as well the industries have lobbied hard to shape a law satisfactory to them, the current legisla- nority and low- and moderate-income as editorials. individuals: tion doesn’t adequately protect low-income There being no objection, the mate- communities or consumers’ privacy. Finan- Asian Pacific-Americans, especially Chi- rial ordered to be printed in the cial modernization should apply to them, nese-Americans, Korean-Americans, Viet- RECORD, as follows: too. namese-Americans, Asian Indian-Americans MISCHIEF FROM MR. GRAMM Since the Depression, federal law has are small business owners, and many of them Cities that were in drastic decline 20 years sought to keep the banking, insurance and are seeking to open up businesses in low and securities industries separate. The idea, in moderate income areas. ago are experiencing rebirth, thanks to new homeowners who are transforming neighbor- part, was to make sure that federally insured JoAnn Chase, executive director of hoods of transients into places where fami- bank deposits didn’t wind up somewhere the National Congress of American In- lies have a stake in what happens. The ren- risky and unregulated. But in recent years, dians, then spoke and stated: aissance is due in part to the Federal Com- even without a change in the law, that sepa- ration has eroded. Banks have found ways to Founded in 1944, the National Congress of munity Reinvestment Act, which requires offer mutual funds to their customers; in- American Indians is the oldest, largest and banks to reinvest actively in depressed and vestment firms function like deposit institu- most representative national organization minority areas that were historically writ- tions; etc. It makes sense now to bring legis- devoted to promoting and protecting the ten off. Senator Phil Gramm of Texas now lation—and regulation—in line with reality. rights of American Indian tribal govern- wants to weaken the Reinvestment Act, en- Congress has been trying to do so, and fail- ments and their citizens. One of our key mis- couraging a return to the bad old days, when ing, for more than a decade, and may again. sions has been to continuously advocate for banks took everyone’s deposits but lent But on the major issues, the administration, Indian self determination and self suffi- them only to the affluent. Sensible members the Federal Reserve and Congress have pret- ciency, and toward that end from its very in- of Congress need to keep the measure intact. ty well agreed. They would let the financial ception, our communities, our governments, The act was passed in 1977. Until then, pro- services industries meld while for the most our people have supported the Community spective home or business owners in many part keeping them out of other businesses, a Reinvestment Act, which has proven to be an communities had little chance of landing wise decision. They’ve come up with fire effective means of encouraging federally in- loans even from banks where they kept walls and regulatory schemes that, while sured financial institutions to extend pru- money on deposit. But according to the Na- still not entirely agreed upon, have satisfied dent and profitable loans in traditionally un- tional Community Reinvestment Coalition, most concerns about protecting federally in- derserved areas, particularly in Indian coun- banks have committed more than $1 trillion sured deposits. try. to once-neglected neighborhoods since the Specifically, the CRA has helped focus at- act was passed, the vast majority of it in the But there is no consensus yet on safe- tention to the challenges of extending credit last six years. guarding the interests of underserved com- to reservations and has acted as a catalyst to In New York City’s South Bronx neighbor- munities. Since 1977 federally insured banks reservation-based economic development. hood, the money has turned burned-out areas have been subject to the Community Rein- Since the implementation of the CRA, Na- into havens for affordable homes and a new vestment Act, requiring them to seek busi- tive American governments and citizens and middle class. The banks earn less on commu- ness opportunities in poor areas as well as our own banks have negotiated agreements nity-based loans than on corporate business. middle-class and wealthy neighborhoods. The for lending more than $155 million within the But the most civic-minded banks have ac- law, a response originally to clear evidence Indian country which has substantially ad- cepted this reduced revenue as a cost of of bias in lending, has worked well. It doesn’t vanced efforts toward economic self-suffi- doing business—and as a reasonable sacrifice force banks to make unprofitable loans, but ciency. It is a law that has helped build for keeping the surrounding communities it encourages them to look beyond tradi- homes for our people, has inspired hope and strong. tional customers, and it’s had a beneficial ef- has created jobs in many native commu- Federal bank examiners can block mergers fect on home ownership and small-business nities. or expansions for banks that fail to achieve lending. a satisfactory Community Reinvestment Act Sen. Phil Gramm, chairman of the Bank- The final speaker at the press con- rating. The Senate proposal that Mr. Gramm ing Committee, now wants to scale the law ference was Hillary Shelton, Wash- supports would exempt banks with assets of way back. He argues that community groups ington bureau director of the NAACP, less than $100 million from their obligations use it to extort money from banks; there’s who stated: under the act. That would include 65 percent scant evidence for that. The real danger is * * * on behalf of the NAACP * * * we are of all banks. The Senate bill would also dra- that, with financial modernization, banks honored to strongly support and continue to matically curtail the community’s right to will gradually escape their community obli- endorse the Community Reinvestment Act expose what it consider unfair practices. gations by transferring capital to affiliates and consequently oppose any attempts to Without Federal pressure, however, the that aren’t covered by the law. The law weaken it. amount of money flowing to poorer neigh- should be extended and modernized to keep The CRA has been instrumental in the re- borhoods would drop substantially, under- pace with a changing industry. vitalization of literally tens of thousands of mining the urban recovery. Consumer privacy also could be in danger communities nationwide, and continues to Mr. Gramm argues that community groups as barriers among industries break down. An be an important tool in the NAACP’s ongo- are ‘‘extorting’’ money from banks in return example: Should your life insurance medical ing efforts to help people and communities for approval, and describes the required pa- records be shipped over, without your knowl- achieve the goals of community resurrec- perwork as odious. But community organiza- edge, to the loan officer considering your tion, development, and growth, at no cost to tions that build affordable housing in Mr. mortgage application? Sen. Paul Sarbanes of American taxpayers. Gramm’s home state heartily disagree. Maryland and Rep. Ed Markey of Massachu- Mayor Ron Kirk of Dallas disagrees as well, setts, among others, would give consumers Mr. President, there has been printed and told the Dallas Morning News that he more control over the sale and sharing of in the RECORD a letter from the U.S. welcomed the opportunity to explain to Mr. personal data. As the financial industry Conference of Mayors which was Gramm that ‘‘there is no downside to invest- moves into a new era, privacy laws should quoted from earlier, a letter from a co- ing in all parts of our community.’’ also keep pace.

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JESUIT CONFERENCE, THE SOCIETY DEPARTMENT OF SOCIAL multiple funding streams, bringing together OF JESUS IN THE UNITED STATES. DEVELOPMENT the public and private resources required to Washington, DC, March 3, 1999. AND WORLD PEACE stimulate and produce new housing and eco- Hon. PAUL SARBANES, Washington DC, March 4, 1999. nomic development initiatives at the local Seante Committee on Banking, Housing, and Hon. PAUL SARBANES, level. Each of our members can attest to the Urban Affairs, Washington, DC. Banking, Housing, and Urban Affairs Com- necessity of the Community Reinvestment DEAR SENATOR SARBANES: We are writing mittee, U.S. Senate, Washington, DC. Act in putting together the resources re- you on behalf of the Jesuit Conference Board DEAR SENATOR SARBANES: I write to ask quired to do the job we all expect of them. At of the Society of Jesus in the United States. that you oppose any provisions in the Finan- a time when responsibility for solving seri- With the House and Senate Banking Com- cial Services Act of 1999 that may eliminate ous community problems is being devolved mittees scheduled to mark-up financial mod- consumer protections and/or dilute the fair to local organizations, it is mystifying as to ernization legislation this week and vigorous lending laws. why one of their most critical resource de- discussions already underway we call your The United States Catholic Conference has velopment tools would be pulled out from urgent attention to the status of the Com- vigorously supported the disclosure of lend- underneath them. munity Reinvestment Act (CRA) in this de- ing patterns since 1975 and was one of the Especially serious is the provision in the bate. We urge your vocal and unconditional original supporters of the Home Mortgage Senate bill which allows banks not in com- support for safeguarding and effectively ap- Disclosure Act. We believe people must have pliance with CRA to expand their affiliations plying CRA to any proposed financial mod- access to information about the lending and engage in new powers. This would essen- ernization legislation. By maximizing the practices and patterns of the financial insti- tially render the CRA useless in the new capital available to undeserved urban and tutions in their communities that are seek- world of financial modernization. rural areas, CRA has proven to be an excep- ing their business. In the past banks, mort- We also object to the creation of so-called tional means of promoting vital and sustain- gage companies, insurance brokers and other ‘‘safe harbors’’ for institutions with at least able communities. CRA should be allowed to financial institutions have discriminated a satisfactory CRA rating, which in effect continue its invaluable work. eliminates opportunity for public comment There are approximately 4,000 U.S. Jesuit against minority populations, low-income individuals and the communities in which on the community reinvestment activities of priests and brothers working abroad and in the banks, while maintaining opportunity our domestic projects which include: 28 Jes- they live with virtual impunity. The Com- munity Reinvestment Act (CRA) and the ef- for public comment on all other aspects of uit-affiliated universities and colleges, more the institutions’ functioning. than 50 Jesuit high schools and middle fective enforcement of its regulations have proved significant tools in ensuring that fi- Finally, the small bank exemption would schools, nearly 100 Jesuit parishes, and var- mean that rural communities have no op- ious other apostolic programs throughout nancial institutions meet the credit needs of the local communities in which they are lo- tions for acquiring credit, as small banks are the country. We have an overriding commit- often the only source of credit in many rural ment to empower individuals, families and cated, particularly by increasing the flow of credit to low-income and minority commu- parts of the country. communities who are most at-risk in our so- The Community Reinvestment Act is a ciety. In essential ways, CRA enables these nities. Since 1977, CRA has channeled tens of bil- model of the Federal government at its best, marginalized groups to fully integrate into stimulating investment in poor neighbor- society. lions of dollars profitably back into rural and hoods and creating a true partnership among Propelled by a mission of justice and social urban communities. This success of local progress, Jesuit institutions have CRA-type communities gaining access to private cap- the private, for profit sector; the private, not goals of investing in the communities where ital should not be jeopardized. Communities for profit sector, and the public sector. As we they are located. For example, Fordham Uni- and neighborhoods need the investment of move into an era of a bigger and more com- versity is situated in one of the poorest private capital particularly as government prehensive banking system, building on, not urban counties in the nation. In 1983, Ford- curtails its spending on housing and social tearing down, this core element of commu- ham formalized a long-standing partnership services programs and local communities are nity reinvestment should be an essential with the Northwest Bronx Community and being asked to assume more responsibility principle. We urge that the Senate not take this ac- Clergy Coalition to form the University for their own development. Low and mod- tion, and prevent the dire consequences that Neighborhood Housing Corporation (UNHP). erate income families of all races and would result in its wake of its passage. UNHP believes in working aggressively to ethnicities have benefited from CRA with in- Sincerely, develop and preserve innovative, commu- creased opportunities to purchase homes, SHEILA CROWLEY, nity-controlled, affordable housing. With the open small businesses or operate farms. President. strength and leverage of CRA, UNHP, has As Congress seeks to modernize the bank- built a positive, working relationship with ing and financial industry, fair lending laws Mr. SARBANES. Mr. President, as I Chase Manhattan Bank. From the late 1980s, must not be undermined. Once more, we urge draw to a close, let me again say to the this relationship has resulted in millions of you to oppose any efforts to diminish con- distinguished Senator from Nevada we dollars of capital for affordable housing and sumer protections and to weaken fair lend- very much appreciate his very strong economic development in the northwest ing laws. Bronx. Recently, this successful partnership and powerful statement. Sincerely, yielded $25 million in housing rehabilitation CARDINAL ROSER MAHONY, EXHIBIT 1 funding from Fannie Mae. The force of com- Archbishop of Los An- munity leaders working with university, APRIL 8, 1999 geles, Chairman, Do- banking and Fannie Mae representatives is Hon. PAUL S. SARBANES, not merely a lifeline for the northwest mestic Policy Com- Senate Hart Office Building, Bronx; it has added self-sustaining stability mittee. U.S. Senate, Washington, DC. and growth to an historically distressed, DEAR SENATOR SARBANES: The undersigned densely populated neighborhood. This is one NATIONAL LOW INCOME HOUSING organizations write to express strong opposi- example of an estimated $1 trillion in CRA- COALITION/LIHIS tion to the Financial Services Modernization leveraged financial commitments since 1977. Washington, DC, April 6, 1999. Act of 1999 as reported out of the Senate We ask for your continued support for na- Hon. PAUL S. SARBANES, Banking Committee on March 4th. The Act tional economic development policies which United States Senate, Washington, DC. would restructure the financial services in- equip people with the means to lead respect- DEAR SENATOR SARBANES: On behalf of the dustry in the United States by allowing ful and dignified lives. CRA is in the interest National Low Income Housing Coalition, I broad affiliations among banks, insurance of underserved communities; it is in the in- must express in the strongest terms possible companies, and security firms. Currently, terest of our Jesuit institutions; and it is in our objection to the evisceration of the Com- the law strictly limits ownership among dif- our collective, national interest. munity Reinvestment Act in the Financial ferent financial entities and between finan- Thank you for your consideration and ef- Services Modernization Act of 1999 recently cial companies and commercial corporations. forts. reported out of the Senate Banking Com- The Act seeks to ease these restrictions, Sincerely, mittee. without commensurate expansion of the REV. RICHARD RYSCAVAGE, The National Low Income Housing Coali- Community Reinvestment Act (CRA) to S.J., tion represents thousands of local housing cover insurance companies, securities firms, Secretary, Jesuit Social organizations that are doing the hard work mortgage companies, and other financial en- & International at the local level to rebuild neighborhoods tities allowed to affiliate with banks. The Ministries. that have been depleted by disinvestment, Act would undermine one of the most effec- MS. BRITISH ROBINSON, and to produce safe, decent, and affordable tive revitalization vehicles for underserved National Director, Jes- housing for people at the low end of the eco- low-income and minority communities, in- uit Social & Inter- nomic spectrum. These are organizations cluding Hispanic American communities national Ministries. that are masterful at the management of across the country.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00062 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 8456 CONGRESSIONAL RECORD—SENATE May 5, 1999 We have found, and research confirms, that ment, not weakening, of CRA is critically oppose the Financial Services Modernization all too often the credit and financial needs of needed. We urge you to support the contin- Act of 1999 until the provisions against the these communities are severely underserved. ued strengthening of America’s communities CRA are removed. Historically, many financial institutions by vigorously opposing the Financial Serv- Sincerely, have avoided investing in these communities ices Modernization Act of 1999 as reported LELAND SWENSON, due to their perceived higher level of risk. out of Committee, and supporting amend- President. Unfortunately, ‘‘perceived higher level of ments that would strengthen the Bill’s CRA risk’’ is often code for ‘‘low-income’’ or ‘‘mi- protections. Thank you. SMALL BUSINESS ADMINISTRATION, nority.’’ But the facts show that low-income Sincerely, Washington, DC, May 3, 1999. and minority communities are not inher- Rick Dovalina, National President, Hon. PAUL S. SARBANES, ently riskier than other communities. In League of United Latin American Citi- Ranking Member, Committee on Banking, Hous- fact, most financial institutions find them to zens; Arturo Vargas, Executive Direc- ing and Urban Affairs, U.S. Senate, Wash- be quite profitable, once they begin invest- tor, NALEO Educational Fund; Ruth ington, DC. ing in them. Unfortunately, without the Pagani, Executive Director, National DEAR SENATOR SARBANES: I am writing to CRA, many financial institutions have not Hispanic Housing Council (NHHC); express my concern with provisions of the and would not be encouraged to do so. Juan Figueroa, President and General Financial Services Modernization legislation As the data show, Hispanics are the fast- Counsel, Puerto Rican Legal Defense that would weaken the Community Rein- est-growing population in the United States. and Education Fund (PRLDEF); Anto- vestment Act (CRA). The President has made We are a growing force in the expansion of nia Hernandez, President and General clear that he would veto legislation that homeownership and small business develop- Counsel, MALDEF; Raul Yzaguirre, weakens CRA, and it is my hope that the ment, two leading indicators of the economic President and Chief Executive Officer, U.S. Senate will not move to undermine this well-being of this country. For example, be- National Council of La Raza (NCLR); important statute. tween 1987 and 1992, Hispanic-owned business Manuel Mirabal, President and Chief The CRA is a vital tool in providing access grew by over 76%, compared to 26% for U.S. Executive Officer, National Puerto to capital in communities traditionally un- businesses overall. According to a 1997 Har- Rican Coalition (NPRC). derserved and once perceived as high-risk vard study, ‘‘the number of Hispanic home- lending areas. Financial institutions have found, through CRA, that creditworthy bor- owners has shown the most spectacular rise’’ NATIONAL FARMERS UNION, rowers and sound investments do exist in in recent years compared to that of Whites Washington, DC, March 24, 1999. these areas. The CRA has resulted in viable and of other minority groups. Population DEAR SENATOR: On behalf of the 300,000 small businesses creating jobs and stimu- projections forecast Hispanics to be the larg- farm and ranch families of the National lating local economies. Without CRA, lend- est minority group in the U.S. by the year Farmers Union, I write to express our strong ing institutions might never realize the max- 2005, causing the U.S. economy to be increas- opposition to the Financial Services Mod- imum potential of these marketplaces, and ingly dependent on the continued prosperity ernization Act of 1999, as reported out of the many communities could lose access to bank of the Hispanic American community. With- Senate Banking Committee earlier this credit, which is so important to small busi- out the CRA, this growth may be impeded. month. Specifically, we are concerned that nesses. As reported out of the Senate Banking the bill would undercut the Community Re- The CRA focus for banks strikes at the Committee, the Financial Services Mod- investment Act (CRA)—a law that has sig- heart of fulfilling the U.S. Small Business ernization Act of 1999 would hinder that nificantly expanded access to credit in rural Administration’s (SBA) mission. SBA is in growth by weakening the CRA in the fol- communities across the nation. the business of providing credit to those who lowing three ways. First, ‘‘satisfactory’’ CRA The Community Reinvestment Act pro- cannot obtain it elsewhere, and we do this rating is not required in order for financial hibits redlining, and encourages banks to largely through our partners—local financial institutions to enjoy the new powers af- make affordable mortgage, small farm and institutions. Everyday, SBA and banks forded to them by the legislation, thereby al- small business loans. Under the impetus of across the country help entire communities lowing banks to exercise their privilege, CRA, banks and thrifts made $11 billion in grow through SBA-backed equity invest- even if they are not meeting the credit needs farm loans in 1997. CRA loans assisted small ments and guaranteed loans, many of which of the communities where they do business. farmers in obtaining credit for operating ex- fall under CRA goals. Additionally, studies Second, banks receiving a ‘‘satisfactory’’ penses, livestock and real estate purchases. analyzing CRA data identify and quantify CRA rating would be given a ‘‘safe harbor’’ Low- and moderate-income residents in rural what would have been only hunches just 4 from public comment on CRA performance. communities also benefited from $2.8 billion years ago, and the result is a more accurate Since over 95% of banks receive a ‘‘satisfac- in small business loans in 1997. depiction of the patterns and gaps of small tory’’ rating, this would undermine the effec- In 1999, access to credit is tighter than business lending across the Nation. The CRA tiveness of the law by restricting a commu- usual, making it critical to maintain the is essential in meeting the credit and invest- nity’s right to voice its experience with CRA. There are three provisions in the pend- ment needs of our America’s small busi- banks. While a ‘‘satisfactory’’ rating pro- ing legislation that jeopardize the CRA. nesses. vides a helpful guide to a bank’s overall per- First, the bill exempts banks and thrifts Weakening CRA could reverse the progress formance, it may not provide an accurate that are located in rural areas and have less we have made in small business lending in picture at the neighborhood level. than $100 million in assets, from CRA re- this country. As you seek to modernize the Third, the Act proposes to exempt all quirements. This provision would exempt 76 financial industry, I urge you to oppose any small rural banks (those with less than $100 percent of all banks and thrifts in rural com- provision that actually moves us back in million in assets) from CRA, thereby releas- munities. A Congressional Research Service time. ing 76% of all rural banks from their CRA study of data from 1997 to mid-1998 found Sincerely, obligations. As with the safe harbor provi- that banks with less than $100 million in as- AIDA ALVAREZ sion, this undermines the spirit and the ef- sets receive 70 percent of the ‘‘below satisfac- Administrator. fectiveness of the law by exempting most tory’’ CRA ratings. rural banks. This would have particularly Second, the banking bill fails to require CHAIRMAN GREENSPAN COMMENTS ON CRA adverse consequences in low-income rural that banks have a satisfactory CRA rating in ‘‘Anecdotal information seems to suggest communities where often the only source of order to affiliate with securities and insur- that loans to low- and moderate-income peo- credit is a small bank. Moreover, researchers ance firms. In the absence of this require- ple perform, with respect to repayment, as have found that small banks have dispropor- ment, banks could ignore local credit needs well as loans to others, though some studies tionately poor CRA records compared to in favor of expanding to other areas. have suggested that delinquency rates on larger banks, thereby highlighting the need Third, the bill has the effect of eliminating some types of affordable mortgage loans are for CRA in rural communities and small the public’s opportunity to comment on a higher. . . . there is little or no evidence towns. bank’s performance pending expansion, if that banks’ safety and soundness have been CRA is one of the strongest incentives to that bank has had a satisfactory CRA rating compromised by such lending, and bankers encourage investment in low-income and mi- during the previous 36 months. often report sound business opportunities.’’— nority communities. Over the last twenty- There is no compelling reason to weaken January 12, 1998. two years, neighborhoods across the country the CRA. In fact, CRA regulations were re- ‘‘When conducted properly by banks who have benefited from CRA-encouraged invest- vised in 1995 to reduce compliance burdens are knowledgeable about their local mar- ments. This has resulted in increases in on small banks and allow for streamlined ex- kets, who use this knowledge to develop suit- homeownership and business development, amination. able products, and have adequately promoted leading to the rebirth of many American The CRA has been extremely successful in those products to the low- and moderate-in- neighborhoods. However, many communities encouraging financial institutions to help come segments of the community, CRA can remain underserved by capital and invest- meet the credit needs of rural communities be a safe, sound and profitable business.’’— ment vehicles. For this reason, reinforce- across the nation. Therefore, we urge you to May 17, 1995.

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00063 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8457 Chairman Greenspan noted during testi- ‘‘Let this evil, like slavery in the pre-Civil One example of a CRA success story would mony before the House Banking Committee War period, let it exist, but do not expand be the NAACP’s Community Development on February 11, 1999 that CRA has ‘‘very sig- it.’’—Senate Banking Committee Markup and Resource Centers (CDRCs). The NAACP, nificantly increased the amount of credit in Hearing, September 11, 1998. working together with NationsBank, opened communities’’ that the changes have been ‘‘CRA has since been corrupted into a sys- our first CDRC in 1992 in part to help ‘‘quite profound.’’ tem of legalized extortion, often with the as- NationsBank comply with CRA. Since that ‘‘CRA has helped financial institutions to sistance of regulators. Moreover, it has in- time, NAACP–CDRCs have made mortgage, discover new markets that may have been creasingly replaced market-directed finan- consumer and small business loan referrals underserved before.’’—May 17, 1995 repeated cial activity with politically directed and amounting to over $100 million, and more January 12, 1998. motivated channeling of private sector fi- than 10,000 individuals and businesses have nancial resources. . . . This cronyizing (sic) received counseling or technical assistance CRA ADMINISTRATION AND DEMOCRATIC of the American economy is more typical of through CRDCs. SUPPORTERS a third world economy and will undoubtedly Due to the vital role the banking industry ‘‘We must pass a stronger Community Re- be damaging to our national economic plays in the success or failure of every Amer- investment Act that challenges to lend to growth.’’—Letter to Senate Committee on ican neighborhood, CRA is a necessary tool entrepreneurs and promotes development the Budget, March 5, 1999. for the sustained economic development of projects that reinforce community and our nation. Thus the NAACP urges you, in neighborhood goals.’’—Governor Bill Clinton THE WHITE HOUSE, the strongest terms possible, to oppose any and Senator Al Gore, ‘‘Putting People Washington, March 2, 1999. amendments or bills that would in any way First,’’ 1992. Hon. PAUL S. SARBANES, weaken the effectiveness of CRA. The ‘‘[T]he town banker is doing pretty well U.S. Senate, Washington, DC. NAACP also urges you, again in the strong- where you live—in a big city or a small DEAR PAUL: This Administration has been est terms possible, to support any move to town. And yet, unbelievably enough, when a strong proponent of financial legislation expand or modernize CRA as the financial that would reduce costs and increase access we are proving it is working, the Community services industry is allowed to change and to financial services for consumers, busi- Reinvestment Act is under fire again.’’— grow. By not including CRA in any restruc- nesses and communities. Nevertheless, we President Clinton to the U.S. Conference of turing of the financial services industry, you cannot support the ‘‘Financial Services Mod- Mayors, January 29, 1999. would effectively be denying whole commu- The CRA has ‘‘helped to build homes, cre- ernization Act of 1999,’’ as currently pro- nities access to much-needed mortgages, posed by Chairman Gramm, now pending be- ate jobs, and restore hope in communities consumer or small business loans, or basic fi- fore the Senate Banking Committee. across America.’’—President Clinton, Letter nancial assistance. In its current form, the bill would under- to Senator Paul Sarbanes and Senator Phil I hope that you will feel free to contact me mine the effectiveness of the Community Re- if you have any questions regarding the Gramm, March 2, 1999. investment Act (CRA), a law that has helped ‘‘We must protect the Community Rein- NAACP position on CRA, or if there is any to build homes, create jobs, and restore hope vestment Act, which expands access to cap- way that I can work with you to ensure that in communities across America. The CRA is ital from mainstream financial institutions. CRA is allowed to continue to prosper and working, and we must preserve its vitality as provide assistance to people and commu- We have greatly improved CRA by stream- we write the financial constitution for the nities across the nation. lining its regulations so that they focus on 21st Century. The bill would deny financial Sincerely, performance, not paperwork. CRA has been services firms the freedom to organize them- HILARY O. SHELTON, an enormous success.’’—Treasury Secretary selves in the way that best serves their cus- Director. Robert Rubin, Letter to Senator Phil tomers, and prohibit a structure with proven Gramm, February 1, 1999. advantages for safety and soundness. The bill Mr. BRYAN. I note that the distin- ‘‘It’s very significantly increased the would also provide inadequate consumer pro- guished chairman wants to speak. The amount of credit that’s available in the com- tections. Finally, the bill could expand the Senator from Nevada would like to get munities, and if one looks at the detailed ability of depository institutions and non- 5 to 6 minutes at some point, if that statistics, some of the changes have been financial firms to affiliate, at a time when quite profound.’’—Federal Reserve Chairman can be accommodated. experience around the world suggests the Mr. GRAMM. Mr. President, under Alan Greenspan, Testimony before the House need for caution in this area. Banking and Financial Services Committee, I agree that reform of the laws governing the unanimous consent request, I was February 11, 1999. our nation’s financial services industry to be recognized next. ‘‘[C]redit is the key to the American would promote the public interest. However, I suggest we let Senator MACK speak dream. Without it, people cannot share the I will veto the Financial Services Moderniza- for 4 minutes, have the distinguished tremendous wealth of our free market sys- tion Act if it is presented to me in its cur- Senator from Nevada speak for 4 min- tem—cannot buy a home, own a car, or send rent form. utes, and then I will speak for 4 min- a child to college.’’—Former Rep. Joseph Sincerely, utes and we will be through. Would Kennedy (D–MA), House Floor Statement BILL CLINTON. during the Debate on the Financial Institu- that work? Mr. BRYAN. That is fine. tions Safety and Consumer Choice Act, No- NATIONAL ASSOCIATION FOR THE The PRESIDING OFFICER. Without vember 1, 1991. ADVANCEMENT OF COLORED PEOPLE, WHAT SENATOR GRAMM HAS SAID ABOUT CRA Washington, DC, March 2, 1999. objection, it is so ordered. The Senator from Florida. ‘‘I believe that perhaps the greatest na- Re the Financial Services Modernization Act tional scandal in America . . . is a scandal and the Community Reinvestment Act. Mr. MACK. Mr. President, I thank Senator GRAMM and the other Members where a law is being used in such a way as to Hon. PAUL S. SARBANES, extract bribes and kickbacks and in such a U.S. Senate, Washington, DC. on the floor for this time. I will be way as to mandate the transfer of literally DEAR SENATOR SARBANES: The National As- brief. hundreds of millions of dollars and to sociation for the Advancement of Colored I have spoken on this issue through- misallocate billions and tens of billions of People (NAACP), the nation’s oldest and out my time in the Senate serving on dollars of credit.’’—Senate Floor Statement, largest grassroots civil rights organization, the Banking Committee which now is October 5, 1998. strongly supports the Community Reinvest- into its 11th year. I also make these ‘‘[A]ll over the country banks that have ment Act (CRA) and opposes any attempts to comments from the perspective of an exemplary records in community lending weaken it. The CRA has been instrumental and that have received the highest ratings in the revitalization of literally tens of thou- individual who was president of a small on CRA are routinely shaken down every sands of communities nationwide, and is an bank in southwest Florida for 5 years time they want to open a branch, every time important tool in the NAACP’s efforts to out of a 16-year banking career. they want to start a new bank, every time help people and communities achieve their One would think, listening to the they want to engage in a merger.’’—Senate goals at no cost to the taxpayer. comments that have been made by the Floor Statement, October 5, 1998. Through CRA, financial institutions are distinguished Senator from Maryland, ‘‘[CRA] conjures up in my mind the ‘‘pro- discovering that there are benefits to work- that we were proposing to repeal CRA. tection’’ racket of an earlier era, where the ing in and with low to moderate income and We are not proposing that at all. There little merchant had the gangster come into minority communities. Since its enactment his place of business and say, ‘You know, in 1977, CRA has helped lenders tap into pre- may be Members who want to do that, somebody could come in here and do you viously unchartered areas and consequently but that is not what the issue is about. some real harm, and I am willing to protect they are learning what a viable, profitable The issue is about regulatory overkill. you.’ ’’—Senate Floor Statement, September market the low-moderate and minority com- This little bank that I was president 30, 1998. munities are. of had about $60 million in assets—very

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00064 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 8458 CONGRESSIONAL RECORD—SENATE May 5, 1999 small bank—in a community that was provisions which relate to small banks The PRESIDING OFFICER. The Sen- developed, one of these Florida devel- that eliminate their need to even file a ator’s time has expired. The Senator opments, that began in the late 1950s. report. All they have to do is to point from Texas. To suggest that this small community for the bank examiner and say the Mr. GRAMM. Mr. President, this has bank in a very well-defined and con- records are in the file cabinet. They been a long debate and I think a good fined market was not providing re- need do no more. So this is not, in my debate. Rather than trying to go back sources to that market is just absurd. judgment, an onerous burden. and answer specific points that have If we did not lend money into that And with respect to the new services been made, and correct statements, let market, we would, in fact, have gone that we permit banks to participate in, me just try to cut to the heart of this. broke. So all I am suggesting is the if Secretary Rubin and other experts This is not about banks, even though amendment being proposed here is who are looking at the banking field the Independent Bankers, the Amer- being sold as if we were trying to re- are correct, that is the wave of the fu- ican Bankers Association, the Bankers peal CRA. The information I have is ture. If we do not require CRA as the Roundtable oppose this amendment with the committee position: Only 2.8 condition of availing oneself of these and support the underlying bill. percent of the total assets of the bank- new financial services, securities and This is not about insurance compa- ing industry in America are affected by insurance, in effect we marginalize and nies. This is not about securities com- this carve-out, 2.8 percent. There were relegate CRA to a much lesser role. panies. This is about right and wrong. 16,000 banks audited over a 9-year pe- What is accomplished? Hundreds of I have presented today, from redacted riod and only three of those banks—I millions of dollars have been invested agreements, secret agreements that am talking about small banks now— in the inner cities in our country. have been entered into by community only three of those banks were found to Thousands of minority businesses have groups and banks, three examples, the be significantly out of compliance. had an opportunity to participate, only three we have, where over and Small banks in America need some which they would not otherwise have over again community groups are paid regulatory relief. That is all we are gotten, and home ownership opportuni- cash payments in return for them with- suggesting here. Again, my experience ties have expanded for literally mil- drawing objections which they have was this little bank of $60 million in as- lions of Americans. It would seem to made to banks taking specific action, sets had to assign one individual whose me those are the kind of issues we can or where they have agreed not to raise job it was to put pins into a map in our agree on—Democrats, Republicans, an objection. market showing where we had made conservatives and liberals. CRA has ac- So the first thing we are trying to do real estate loans. That is all we had to complished much. is bring integrity to the process by pre- venting people, in essence, from paying do. But I had to assign one person to do We have gone through this before. A witnesses. How do we try to do that? that. She had to put programs into ef- year ago, we nearly got a bill. It passed We try to do it in the following way: If fect in the bank to make sure we were by a bipartisan majority in the House, you are a bank and you have an excel- complying with lending to our commu- with virtually the identical provisions lent CRA record, you have been in com- nity. It was the only place we could that relate to CRA as contained in the pliance for three audits in a row and have loaned. Bryan amendment. It passed 16 to 2 out So the idea that we needed to have you are in compliance now—we do not of the Banking Committee in this ses- the Community Reinvestment Act for in any way limit the ability of anybody sion of Congress; in the House Banking my bank and for small community to object to that bank doing what it Committee by a vote of 51 to 8. This banks is absurd. I ask my colleagues to has a right to do under law—all we are legislation has progressed with, again, reject the amendment and to support saying is you are innocent until proven virtually the identical provisions as it the committee position. guilty if you have a long record of com- relates to CRA that the Bryan amend- I yield the remainder of my time. pliance. If you are going to come in and ment contains. The PRESIDING OFFICER. The Sen- prevent a bank from taking an action ator from Nevada. So why are we going through this? they have earned the right to do based Mr. BRYAN. I thank the chairman The protagonists, the bankers, the in- on audits on community lending, and for accommodating me and allowing surance companies and the securities you come in and say they are racists, me to speak for 4 minutes. industry, do not oppose this legisla- or they are loan sharks, that is not Let me say we had much debate and tion. We are going through this be- enough. What we require is you present much discussion. There are amend- cause our able chairman, whom we all substantial evidence. ments on bills that come and go. They greatly respect, says he needs leverage How is that defined? The Supreme really do not impact the overall out- in dealing with the House. The last Court defines substantial evidence as come. This amendment is the most im- time I looked at the record of the com- ‘‘more than a mere scintilla . . . such portant amendment that will be con- position of the House, the Republican relevant evidence as a reasonable mind sidered in this debate. If the Bryan Party was in the majority. Among its might accept as adequate to support a amendment loses, we convert what can leaders were people such as TOM DELAY claim.’’ be a bipartisan effort to get this legis- and DICK ARMEY, not exactly what you That is not a high standard. That is lation, which I strongly support and would call liberal exponents, bleeding- simply a credibility standard. And all supported in the last Congress—and it heart types. over America—we have professional becomes immediately a partisan vote, It seems to me the argument that we protesters in Boston who are pro- and that legislation has no chance in need leverage makes no sense at all. testing bank mergers in Illinois. What that form of becoming law. Whatever Finally, let me say this may be the do they have to do with community one’s view is on CRA, and I understand only opportunity in this Congress to lending in Illinois? Nothing. But they we have widely different views, I re- vote on a civil rights amendment, a file a protest. The bank is deathly spectfully submit this is not the vehi- process that has worked well and has afraid of being held up in its merger, cle to make this the issue. If, as the served the nation well. It is not ob- for example. Obviously, they do not distinguished chairman and others jected to by those who are struggling want to be called bad names by people have said, CRA needs to be revisited, to reach the compromises on this piece who are professionals at calling people let’s do so in the context of some type of legislation. We should enact the bad names. So they end up paying of other legislation that is presently Bryan amendment and move forward these groups cash. That is not right. before the Banking Committee. We and get this bill over to the House, get This is an issue of right and wrong. have had no hearings at all on this. it to conference and signed into law by The second issue is the issue relating The Bryan amendment does two very the President. We have that oppor- to small banks. Little banks in rural simple things. One, it retains the cur- tunity only if the Bryan amendment communities in total hold only 2 per- rent CRA provisions, including those prevails. cent of the assets of banks, but in 16,300

VerDate Aug 04 2004 13:32 Oct 02, 2004 Jkt 069102 PO 00000 Frm 00065 Fmt 0686 Sfmt 0634 E:\BR99\S05MY9.002 S05MY9 May 5, 1999 CONGRESSIONAL RECORD—SENATE 8459 audits of these banks, each one of them and nays have been ordered. The clerk are based on the Glass-Steagall Act, on average cost the bank $80,000 to will call the roll. legislation passed in 1935, over 60 years comply with. They found three banks The legislative clerk called the roll. ago! in 9 years that are substantially out of Mr. FITZGERALD (when his name The world has changed a great deal compliance. They made these little was called). Present. since then, and it is going to change banks pay $1.3 billion to find three bad Mr. REID. I announce that the Sen- further and faster as we move into the actors. And little banks all over Amer- ator from New Jersey (Mr. LAUTEN- 21st century. We need to update our ica are threatened by this regulatory BERG) is necessarily absent. outdated laws to account for this burden. So we exempt them from it. I also announce that the Senator change and to give flexibility to Amer- Mr. President, 44 percent of the en- from Louisiana (Ms. LANDRIEU) is ab- ican companies. forcement effort is going to banks with sent attending a funeral. At the same time, we must make 2.8 percent of the capital. Take that en- I further announce that, if present sure that any bill we pass treats all the forcement effort and put it where the and voting, the Senator from New Jer- segments of the financial industry fair- money is and you will get more com- sey (Mr. LAUTENBERG) and the Senator ly, and that there is a level playing munity lending, not less. from Louisiana (Ms. LANDRIEU) would field for all of the groups involved. Finally, it is not as if the Sarbanes each vote ‘‘no.’’ If history is any indication, any new amendment simply strikes our provi- The result was announced—yeas 52, law we pass will be with us for a long time, so we had better get it right. sions. But the Sarbanes amendment is nays 45, as follows: We’ve been working to get it right the largest expansion of CRA in Amer- [Rollcall Vote No. 101 Leg.] for a long time. Eleven years ago, when ican history. YEAS—52 I was a member of the House Banking It would impose a million-dollar-a- Abraham Frist Murkowski Committee, we were able to report a fi- day fine on bank officers and board Allard Gorton Nickles nancial services modernization bill to Ashcroft Gramm Roberts members if they fell out of compliance. the floor. The American Bankers Association and Bennett Grams Roth Bond Grassley Santorum Last year the House passed a bill and the Independent Bankers Association Brownback Gregg Sessions the Senate was able to pass a bill out have urged us not to do this, because Bunning Hagel Shelby of committee. they will not be able to get board mem- Burns Hatch Smith (NH) Campbell Helms As a Member of the House last year, Smith (OR) bers to serve and they will not be able Chafee Hutchinson I supported the bill that passed by one Snowe to hire officers if they have to buy in- Cochran Hutchison Stevens vote in the House. It wasn’t perfect. surance to potentially pay a million- Collins Inhofe Coverdell Kyl Thomas There were things I would have liked dollar-a-day fine if they fall out of Craig Lott Thompson to change. compliance with this regulation. Crapo Lugar Thurmond But I believed at the time that we What is the justification for this reg- DeWine Mack Voinovich couldn’t allow the search for perfection ulatory overkill when you have had Domenici McCain Warner to block real progress. Enzi McConnell three cases of substantial noncompli- That’s even more true this year. ance out of 16,300 audits over 9 years? NAYS—45 We can talk about banking reform— What is wrong with this picture? Akaka Edwards Lieberman and negotiate issues—for another What is wrong with the picture is, Baucus Feingold Lincoln twelve years—and we won’t ever be Bayh Feinstein Mikulski sadly, that many of our Democrat col- Biden Graham Moynihan able to make everyone totally happy. leagues have decided, even though the Bingaman Harkin Murray There are too many competing inter- spokesman for CRA testifying before Boxer Hollings Reed ests and too much complexity is in- our committee said, yes, there are Breaux Inouye Reid volved in the rapidly changing finan- Bryan Jeffords Robb abuses and, yes, they hurt the process Byrd Johnson Rockefeller cial services industry for us ever to and, yes, there is what they call green Cleland Kennedy Sarbanes find a regulatory framework that will mail. Most people call it blackmail. Conrad Kerrey Schumer completely satisfy all of the players in- Daschle Kerry Specter volved. But our colleagues have taken the ex- Dodd Kohl Torricelli treme position that not only will they Dorgan Leahy Wellstone It’s not going to happen. not address these abuses, they are Durbin Levin Wyden At some point, we just have to do the going to vastly expand this to insur- best we can and move ahead. I’m con- ANSWERED ‘‘PRESENT’’—1 vinced we have reached that point ance, to securities and, with these mil- Fitzgerald lion-dollar-a-day fines, producing a sit- now—we should pass this bill. Fortunately, the bill our committee uation where every abuse we are con- NOT VOTING—2 approved this year is even better than cerned about today is going to be Landrieu Lautenberg the bills we considered last year. Chair- greatly expanded. The motion was agreed to. man GRAMM and his staff did a good I urge our Democrat colleagues, if Mr. GRAMM. Mr. President, I move job—the committee did a good job. you support CRA, to help us bring an to reconsider the vote. It is time to move ahead. end to these abuses. If you support Mr. SARBANES. I move to lay that We should pass a clean bill quickly CRA, end the regulatory paperwork motion on the table. and send a message to the other body burden overkill so we can focus in this The motion to table was agreed to. that we are serious about financial law on the real problem. While groups Mr. BUNNING. Mr. President, I rise services reform. claim we are endangering CRA, it is today in support of S. 900, which will This bill has many important provi- those who will not fix clear wrongs modernize our financial services laws. sions. And I’m not going to talk about that scream out that endanger it. If our financial industries are going them all, but I would like to mention Mr. President, I move to table the to be able to compete in the world mar- one issue in particular. pending amendment and ask for the ket in the next century, we must mod- The one issue my bankers bring up yeas and the nays. ernize our depression-era banking laws. every time they come to visit is Com- The PRESIDING OFFICER (Mr. The next century is almost here. We munity Reinvestment Act or CRA re- BROWNBACK). Is there a sufficient sec- all talk about a Y2K problem. What form. ond? about the antique banking law prob- I am very pleased the chairman has There appears to be a sufficient sec- lem? Entering the new century with agreed to put CRA provisions in the ond. antiquated banking laws would be fool- bill and that we were able to pass Sen- The yeas and nays were ordered. hardy. We have to reform our financial ator SHELBY’s amendment in com- The PRESIDING OFFICER. The service system. mittee that will provide CRA relief, es- question is on agreeing to the motion Most of the financial services and pecially to small banks in my State to table amendment No. 303. The yeas bank laws that are on the books today and across the Nation.

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Senator SHELBY’s amendment will Ten years ago, May 4, 1989, the fed- the people of Mexico. They proved exempt 154 small banks in Kentucky eral debt stood at $2,770,422,000,000 (Two their military mettle to themselves from Federal CRA burdens. trillion, seven hundred seventy billion, and the world, and their government, These banks have always invested in four hundred twenty-two million). led by President Juarez, secured legit- the community. That is where their Fifteen years ago, May 4, 1984, the imacy in the eyes of other nations. business is. A bank in Clinton, Ken- federal debt stood at $1,489,259,000,000 Finally, La Batalla de Puebla as- tucky does not lend in Louisville or (One trillion, four hundred eighty-nine serted the right of people living in Lexington, it lends in Clinton. billion, two hundred fifty-nine million) former European colonies to self deter- I have a letter from Robert Black, which reflects a debt increase of more mination and national sovereignty, and president and CEO of the Clinton Bank. than $4 trillion—$4,073,790,386,516.94 it unified all the citizens of Mexico, Mr. Black says: ‘‘We were using good (Four trillion, seventy-three billion, from landowners to laborers, in a com- CRA practices long before the burden- seven hundred ninety million, three mon cause. It marks the point when some regulation was passed. This regu- hundred eighty-six thousand, five hun- people stopped seeing themselves as lation is now requiring much of our dred sixteen dollars and ninety-four subjects of monarchy in a distant land time preparing documentation and cents) during the past 15 years. or restricted their loyalty to a par- ticular state or region, but instead placing pins in a map just to prove that f we made loans in every community.’’ viewed themselves as citizens of a new I should mention that Clinton, Ken- CINCO DE MAYO nation, a nation united under the tucky was not named after Bill Clin- Mr. DOMENICI. Mr. President, today, green, white and red colors of the Mexi- ton. May 5, or ‘‘Cinco de Mayo,’’ marks an can flag. I would also like to read a passage important holiday for Mexicans and Much has been said in recent years from a letter from E.L. Williams, presi- Mexican-Americans alike, and it will about the ‘‘commercialization’’ of Cino dent of the Citizens Deposit Bank of be observed with celebrations and fes- de Mayo, and it is true that importance Arlington, in Arlington Kentucky. tivities across the United States. Con- of this holiday often has been over- Mr. Williams states: ‘‘In our opinion, trary to a popular misconception, looked. However, to most Mexican- the time and money afforded to CRA Cinco de Mayo does not commemorate Americans, or Chicanos, Cinco de Mayo compliance in small banks could be Mexico’s independence from Spain. has a special meaning. Many scholars used to a much greater advantage, such That holiday is celebrated on Sep- believe La Batalla de Puebla produced as lending and assisting the low to tember 16. Instead, Cinco de Mayo the first military hero from the Amer- moderate income population for which marks the victory in 1862 of the Mexi- ican Southwestern region in General the CRA was originally implemented.’’ can army over a larger, better armed Ignacio Zaragosa, who was born in These small banks will lend in their and better trained invading French Texas. The holiday has long been a les- own communities with or without army at La Batalla de Puebla. son in overcoming great odds through CRA. They don’t need Federal regu- After gaining independence in 1821, determination and unity. Today, Cinco lators breathing down their necks to Mexico endured a series of set backs de Mayo is an occasion for people of Mexican descent to come together to make sure they are doing what they while trying to establish a republic. By express pride in their history, and I en- would be doing anyway. the late 1850s, Mexico was in the grips courage all Americans to enjoy this op- I would personally like to see even of a severe economic crisis, and the portunity to celebrate and appreciate greater reform of CRA—across the treasury was bankrupt. In 1861, Presi- the contributions of Mexican culture. board—but our small banks really need dent Benito Juarez placed a morato- and deserve relief and this bill provides rium halting payments on foreign debt. f it. Since much of Mexico’s debt was owed RUMORS OF NURSING HOME In closing, Mr. President, I repeat to France, Napoleon III responded by BANKRUPTCY that this bill is not perfect. But it is a invading Mexico. After landing in the Mr. GRASSLEY. Mr. President, I dramatic improvement over the an- port of Veracruz, the French army, serve as chairman of the Senate Aging tique financial laws we are operating which was considered the finest mili- Subcommittee and I feel a necessity to under now and it is a dramatic im- tary force of the period, expected to inform my colleagues about the issue provement over the Sarbanes sub- march through the country and easily of rumors about the pending bank- stitute. capture the capital, Mexico City. How- ruptcy of some nursing home chains in We must enter the 21st century ready ever, a small Mexican army, under the the United States. to compete and this bill will make that command of General Ignacio Zaragosa, There are reports in the press, and in possible. mounted a strong defense at the town discussions with my colleagues I have It is a good bill—I urge my colleagues of Pueblo and routed the invading received information, indicating that to support it. force. one and possibly two large nursing f The stunning victory was short-lived, home chains may be facing bankruptcy though. The French returned with rein- THE VERY BAD DEBT BOXSCORE in the near future. That has an eco- forcements and were able to defeat nomic side and it has a human side. I Mr. HELMS. Mr. President, at the Mexican forces the following year. But will speak first about the human side. close of business yesterday, Tuesday, they were only able to control Mexico Should one or both of these nursing May 4, 1999, the federal debt stood at for four years, and President Juarez re- home chains go bankrupt, we would $5,563,049,386,516.94 (Five trillion, five gained power in 1867. have an immediate challenge to ensure hundred sixty-three billion, forty-nine Although, in the end, La Batalla de the continued care of somewhere be- million, three hundred eighty-six thou- Puebla had little lasting military sig- tween 35,000 residents, on the one hand, sand, five hundred sixteen dollars and nificance, it was, culturally, a water- and 70,000, on the other, in these re- ninety-four cents). shed event for the fledging nation, and spective homes where they are cur- One year ago, May 4, 1998, the federal for Latin America as a whole. After rently under care. This would be a sig- debt stood at $5,477,263,000,000 (Five seeing Europe’s best army routed by a nificant task. Nursing home residents trillion, four hundred seventy-seven hastily gathered and largely untrained are frail and are not easily moved. billion, two hundred sixty-three mil- Mexican defense, European leaders be- Moving them runs the risk of causing lion). came more wary of exerting military ‘‘transfer trauma,’’ a condition that Five years ago, May 4, 1994, the fed- force in the Americans. Europe never can result in death. Therefore, it is eral debt stood at $4,572,995,000,000 sent another invading force to the critical that we keep focused on pre- (Four trillion, five hundred seventy- Americas after this episode. venting avoidable harm and take pre- two billion, nine hundred ninety-five The victory at Puebla also instilled a cautions to prevent this from hap- million). great sense of pride and patriotism in pening.

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