S8956 CONGRESSIONAL RECORD — SENATE July 24, 1998 Mr. FORD. I announce that the Sen- supervisory oversight of insured credit (1) the term ‘‘Administration’’ means the Na- ator from California (Mrs. BOXER) and unions, and for other purposes. tional Credit Union Administration; (2) the term ‘‘Board’’ means the National the Senator from Arkansas (Mr. BUMP- The Senate proceeded to consider the Credit Union Administration Board; ERS) are necessarily absent. bill, which had been reported from the (3) the term ‘‘Federal banking agencies’’ has The PRESIDING OFFICER (Mr. AL- Committee on Banking, Housing, and the same meaning as in section 3 of the Federal LARD). Are there any other Senators in Urban Affairs, with an amendment to Deposit Insurance Act; the Chamber desiring to vote? strike all after the enacting clause and (4) the terms ‘‘insured credit union’’ and The result was announced—yeas 90, inserting in lieu thereof the following: ‘‘State-chartered insured credit union’’ have the same meanings as in section 101 of the Federal nays 1, as follows: SECTION 1. SHORT TITLE; TABLE OF CONTENTS. Credit Union Act; and [Rollcall Vote No. 235 Leg.] (a) SHORT TITLE.—This Act may be cited as (5) the term ‘‘Secretary’’ means the Secretary the ‘‘Credit Union Membership Access Act’’. YEAS—90 of the Treasury. (b) TABLE OF CONTENTS.—The table of con- Abraham Feinstein Lugar tents for this Act is as follows: TITLE I—CREDIT UNION MEMBERSHIP Akaka Ford Mack Sec. 1. Short title; table of contents. SEC. 101. FIELDS OF MEMBERSHIP. Allard Frist McConnell Section 109 of the Federal Credit Union Act Ashcroft Glenn Mikulski Sec. 2. Findings. Sec. 3. Definitions. (12 U.S.C. 1759) is amended— Baucus Gorton Moseley-Braun (1) in the first sentence— Biden Graham Moynihan TITLE I—CREDIT UNION MEMBERSHIP (A) by striking ‘‘Federal credit union member- Bingaman Gramm Murkowski Sec. 101. Fields of membership. ship shall consist of’’ and inserting ‘‘(a) IN GEN- Bond Grams Murray Breaux Grassley Nickles Sec. 102. Criteria for approval of expansion of ERAL.—Subject to subsection (b), Federal credit Brownback Gregg Reed membership of multiple common- union membership shall consist of’’; and Bryan Hagel Reid bond credit unions. (B) by striking ‘‘, except that’’ and all that Byrd Harkin Robb Sec. 103. Geographical guidelines for commu- follows through ‘‘rural district’’; and Campbell Hatch Roberts nity credit unions. (2) by adding at the end the following new Chafee Hollings Rockefeller TITLE II—REGULATION OF CREDIT subsections: Cleland Hutchinson Roth UNIONS ‘‘(b) MEMBERSHIP FIELD.—Subject to the other Coats Hutchison Santorum provisions of this section, the membership of any Cochran Inhofe Sarbanes Sec. 201. Financial statement and audit re- Federal credit union shall be limited to the mem- Collins Inouye Sessions quirements. bership described in 1 of the following cat- Conrad Jeffords Shelby Sec. 202. Conversion of insured credit unions. egories: Coverdell Johnson Smith (NH) Sec. 203. Limitation on member business loans. Craig Kennedy Smith (OR) ‘‘(1) SINGLE COMMON-BOND CREDIT UNION.—1 Sec. 204. Serving persons of modest means with- group that has a common bond of occupation or D’Amato Kerrey Snowe in the field of membership of cred- Daschle Kerry Specter association. DeWine Kohl Thomas it unions. ‘‘(2) MULTIPLE COMMON-BOND CREDIT Dodd Landrieu Thompson Sec. 205. National Credit Union Administration UNION.—More than 1 group— Domenici Lautenberg Thurmond Board membership. ‘‘(A) each of which has (within the group) a Dorgan Leahy Torricelli Sec. 206. Report and congressional review re- common bond of occupation or association; and Durbin Levin Warner quirement for certain regulations. ‘‘(B) the number of members of each of which Faircloth Lieberman Wellstone TITLE III—CAPITALIZATION AND NET (at the time the group is first included within Feingold Lott Wyden WORTH OF CREDIT UNIONS the field of membership of a credit union de- NAYS—1 Sec. 301. Prompt corrective action. scribed in this paragraph) does not exceed any Kyl Sec. 302. National credit union share insurance numerical limitation applicable under sub- fund equity ratio, available assets section (d). NOT VOTING—9 ratio, and standby premium ‘‘(3) COMMUNITY CREDIT UNION.—Persons or Bennett Burns Kempthorne charge. organizations within a well-defined local com- Boxer Enzi McCain Sec. 303. Access to liquidity. munity, neighborhood, or rural district. Bumpers Helms Stevens ‘‘(c) EXCEPTIONS.— TITLE IV—MISCELLANEOUS PROVISIONS ‘‘(1) GRANDFATHERED MEMBERS AND GROUPS.— The bill (S. 2307), as amended, was Sec. 401. Study and report on differing regu- ‘‘(A) IN GENERAL.—Notwithstanding sub- passed. latory treatment. section (b)— (The text of the bill will be printed in Sec. 402. Review of regulations and paperwork ‘‘(i) any person or organization that is a mem- a future edition of the RECORD.) reduction. ber of any Federal credit union as of the date of Mr. SARBANES. Mr. President, I Sec. 403. Treasury report on reduced taxation enactment of the Credit Union Membership Ac- move to reconsider the vote. and viability of small banks. cess Act may remain a member of the credit union after that date of enactment; and Mr. D’AMATO. I move to lay that SEC. 2. FINDINGS. The Congress finds the following: ‘‘(ii) a member of any group whose members motion on the table. (1) The American credit union movement constituted a portion of the membership of any The motion to lay on the table was began as a cooperative effort to serve the pro- Federal credit union as of that date of enact- agreed to. ductive and provident credit needs of individ- ment shall continue to be eligible to become a The PRESIDING OFFICER (Mr. uals of modest means. member of that credit union, by virtue of mem- bership in that group, after that date of enact- GRAMS). Under the previous order, the (2) Credit unions continue to fulfill this public ment. Chair appoints the following Senators purpose, and current members and membership groups should not face divestiture from the fi- ‘‘(B) SUCCESSORS.—If the common bond of any to serve as conferees on the transpor- group referred to in subparagraph (A) is defined nancial services institution of their choice as a tation appropriations bill. by any particular organization or business en- result of recent court action. The Presiding Officer appointed Mr. (3) To promote thrift and credit extension, a tity, subparagraph (A) shall continue to apply SHELBY, Mr. DOMENICI, Mr. SPECTER, meaningful affinity and bond among members, with respect to any successor to the organiza- tion or entity. Mr. BOND, Mr. GORTON, Mr. BENNETT, manifested by a commonality of routine inter- ‘‘(2) EXCEPTION FOR UNDERSERVED AREAS.— action, shared and related work experiences, in- Mr. FAIRCLOTH, Mr. STEVENS, Mr. LAU- Notwithstanding subsection (b), in the case of a TENBERG, Mr. BYRD, Ms. MIKULSKI, Mr. terests, or activities, or the maintenance of an Federal credit union, the field of membership REID of Nevada, Mr. KOHL, Mrs. MUR- otherwise well-understood sense of cohesion or category of which is described in subsection identity is essential to the fulfillment of the pub- RAY, and Mr. INOUYE conferees on the (b)(2), the Board may allow the membership of lic mission of credit unions. part of the Senate. the credit union to include any person or orga- (4) Credit unions, unlike many other partici- nization within a local community, neighbor- f pants in the financial services market, are ex- hood, or rural district if— empt from Federal and most State taxes because CREDIT UNION MEMBERSHIP ‘‘(A) the Board determines that the local com- they are member-owned, democratically oper- munity, neighborhood, or rural district— ACCESS ACT ated, not-for-profit organizations generally ‘‘(i) meets the requirements of paragraph (3) The PRESIDING OFFICER. Under managed by volunteer boards of directors and and subparagraphs (A) and (B) of paragraph because they have the specified mission of meet- (4) of section 233(b) of the Bank Enterprise Act the previous order, the Senate will pro- ing the credit and savings needs of consumers, ceed to the consideration of H.R. 1151, of 1991, and such additional requirements as the especially persons of modest means. Board may impose; and which the clerk will report. (5) Improved credit union safety and sound- ‘‘(ii) is underserved, based on data of the A bill (H.R. 1151) to amend the Federal ness provisions will enhance the public benefit Board and the Federal banking agencies (as de- Credit Union Act to clarify existing law with that citizens receive from these cooperative fi- fined in section 3 of the Federal Deposit Insur- regard to the field of membership of Federal nancial services institutions. ance Act), by other depository institutions (as credit unions, to preserve the integrity and SEC. 3. DEFINITIONS. defined in section 19(b)(1)(A) of the Federal Re- purpose of Federal credit unions, to enhance As used in this Act— serve Act); and July 24, 1998 CONGRESSIONAL RECORD — SENATE S8957

‘‘(B) the credit union establishes and main- ‘‘(1) IN GENERAL.—The Board shall— amended by adding at the end the following tains an office or facility in the local commu- ‘‘(A) encourage the formation of separately new subparagraphs: nity, neighborhood, or rural district at which chartered credit unions instead of approving an ‘‘(C) ACCOUNTING PRINCIPLES.— credit union services are available. application to include an additional group with- ‘‘(i) IN GENERAL.—Accounting principles ap- ‘‘(d) MULTIPLE COMMON-BOND CREDIT UNION in the field of membership of an existing credit plicable to reports or statements required to be GROUP REQUIREMENTS.— union whenever practicable and consistent with filed with the Board by each insured credit ‘‘(1) NUMERICAL LIMITATION.—Except as pro- reasonable standards for the safe and sound op- union shall be uniform and consistent with gen- vided in paragraph (2), only a group with fewer eration of the credit union; and erally accepted accounting principles. than 3,000 members shall be eligible to be in- ‘‘(B) if the formation of a separate credit ‘‘(ii) BOARD DETERMINATION.—If the Board cluded in the field of membership category of a union by the group is not practicable or consist- determines that the application of any generally credit union described in subsection (b)(2). ent with the standards referred to in subpara- accepted accounting principle to any insured ‘‘(2) EXCEPTIONS.—In the case of any Federal graph (A), require the inclusion of the group in credit union is not appropriate, the Board may credit union, the field of membership category of the field of membership of a credit union that is prescribe an accounting principle for applica- which is described in subsection (b)(2), the nu- within reasonable proximity to the location of tion to the credit union that is no less stringent merical limitation in paragraph (1) of this sub- the group whenever practicable and consistent than generally accepted accounting principles. section shall not apply with respect to— with reasonable standards for the safe and ‘‘(iii) DE MINIMUS EXCEPTION.—This subpara- ‘‘(A) any group that the Board determines, in sound operation of the credit union. graph shall not apply to any insured credit writing and in accordance with the guidelines ‘‘(2) APPROVAL CRITERIA.—The Board may not union, the total assets of which are less than and regulations issued under paragraph (3), approve any application by a Federal credit $10,000,000, unless prescribed by the Board or an could not feasibly or reasonably establish a new union, the field of membership category of appropriate State credit union supervisor. single common-bond credit union, the field of which is described in subsection (b)(2) to include ‘‘(D) LARGE CREDIT UNION AUDIT REQUIRE- membership category of which is described in any additional group within the field of mem- MENT.— subsection (b)(1) because— bership of the credit union (or an application by ‘‘(i) IN GENERAL.—Each insured credit union ‘‘(i) the group lacks sufficient volunteer and a Federal credit union described in subsection having total assets of $500,000,000 or more shall other resources to support the efficient and ef- (b)(1) to include an additional group and be- have an annual independent audit of the finan- fective operation of a credit union; come a credit union described in subsection cial statements of the credit union, performed in ‘‘(ii) the group does not meet the criteria that (b)(2)), unless the Board determines, in writing, accordance with generally accepted auditing the Board has determined to be important for that— standards by an independent certified public ac- the likelihood of success in establishing and ‘‘(A) the credit union has not engaged in any countant or public accountant licensed by the managing a new credit union, including demo- unsafe or unsound practice (as defined in sec- appropriate State or jurisdiction to perform graphic characteristics such as geographical lo- tion 206(b)) that is material during the 1-year those services. cation of members, diversity of ages and income period preceding the date of filing of the appli- ‘‘(ii) VOLUNTARY AUDITS.—If a Federal credit levels, and other factors that may affect the fi- cation; union that is not required to conduct an audit nancial viability and stability of a credit union; ‘‘(B) the credit union is adequately capital- under clause (i), and that has total assets of or ized; more than $10,000,000 conducts such an audit ‘‘(iii) the group would be unlikely to operate ‘‘(C) the credit union has the administrative for any purpose, using an independent auditor a safe and sound credit union; capability to serve the proposed membership who is compensated for his or her audit services ‘‘(B) any group transferred from another cred- group and the financial resources to meet the with respect to that audit, the audit shall be it union— need for additional staff and assets to serve the performed consistent with the accountancy laws ‘‘(i) in connection with a merger or consolida- new membership group; of the appropriate State or jurisdiction, includ- tion recommended by the Board or any appro- ‘‘(D) pursuant to the most recent evaluation ing licensing requirements.’’. priate State credit union supervisor based on of the credit union under section 215, the credit (b) TECHNICAL AND CONFORMING AMEND- safety and soundness concerns with respect to union is satisfactorily providing affordable cred- MENT.—Section 202(a)(6)(B) of the Federal Cred- that other credit union; or it union services to all individuals of modest it Union Act (12 U.S.C. 1782(a)(6)(B)) is amend- ‘‘(ii) by the Board in the Board’s capacity as means within the field of membership of the ed by striking ‘‘subparagraph (A)’’ and insert- conservator or liquidating agent with respect to credit union; ing ‘‘subparagraph (A) or (D)’’. that other credit union; or ‘‘(E) any potential harm that the expansion of SEC. 202. CONVERSION OF INSURED CREDIT ‘‘(C) any group transferred in connection with the field of membership of the credit union may UNIONS. a voluntary merger, having received conditional have on any other insured credit union and its Section 205(b) of the Federal Credit Union Act approval by the Administration of the merger members is clearly outweighed in the public in- (12 U.S.C. 1785(b)) is amended— application prior to October 25, 1996, but not terest by the probable beneficial effect of the ex- (1) in paragraph (1), by striking ‘‘Except with having consummated the merger prior to Octo- pansion in meeting the convenience and needs the prior written approval of the Board, no in- ber 25, 1996, if the merger is consummated not of the members of the group proposed to be in- sured credit union shall’’ and inserting ‘‘Except later than 180 days after the date of enactment cluded in the field of membership; and as provided in paragraph (2), no insured credit of the Credit Union Membership Access Act. ‘‘(F) the credit union has met such additional union shall, without the prior approval of the ‘‘(3) REGULATIONS AND GUIDELINES.—The requirements as the Board may prescribe, by Board’’; Board shall issue guidelines or regulations, after regulation.’’. (2) by redesignating paragraph (2) as para- notice and opportunity for comment, setting SEC. 103. GEOGRAPHICAL GUIDELINES FOR COM- graph (3); and forth the criteria that the Board will apply in MUNITY CREDIT UNIONS. (3) by inserting after paragraph (1) the follow- determining under this subsection whether or Section 109 of the Federal Credit Union Act ing new paragraph: not an additional group may be included within (12 U.S.C. 1759) is amended by adding at the end ‘‘(2) CONVERSION OF INSURED CREDIT UNIONS the field of membership category of an existing the following new subsection: TO MUTUAL SAVINGS BANKS.— credit union described in subsection (b)(2). ‘‘(g) REGULATIONS REQUIRED FOR COMMUNITY ‘‘(A) IN GENERAL.—Notwithstanding para- ‘‘(e) ADDITIONAL MEMBERSHIP ELIGIBILITY CREDIT UNIONS.— graph (1), an insured credit union may convert PROVISIONS.— ‘‘(1) DEFINITION OF WELL-DEFINED LOCAL COM- to a mutual savings bank or savings association ‘‘(1) MEMBERSHIP ELIGIBILITY LIMITED TO IM- MUNITY, NEIGHBORHOOD, OR RURAL DISTRICT.— (if the savings association is in mutual form), as MEDIATE FAMILY OR HOUSEHOLD MEMBERS.—No The Board shall prescribe, by regulation, a defi- those terms are defined in section 3 of the Fed- individual shall be eligible for membership in a nition for the term ‘well-defined local commu- eral Deposit Insurance Act, without the prior credit union on the basis of the relationship of nity, neighborhood, or rural district’ for pur- approval of the Board, subject to the require- the individual to another person who is eligible poses of— ments and procedures set forth in the laws and for membership in the credit union, unless the ‘‘(A) making any determination with regard to regulations governing mutual savings banks and individual is a member of the immediate family the field of membership of a credit union de- savings associations. or household (as those terms are defined by the scribed in subsection (b)(3); and ‘‘(B) CONVERSION PROPOSAL.—A proposal for ‘‘(B) establishing the criteria applicable with Board, by regulation) of the other person. a conversion described in subparagraph (A) ‘‘(2) RETENTION OF MEMBERSHIP.—Except as respect to any such determination. shall first be approved, and a date set for a vote ‘‘(2) SCOPE OF APPLICATION.—The definition provided in section 118, once a person becomes a thereon by the members (either at a meeting to prescribed by the Board under paragraph (1) member of a credit union in accordance with be held on that date or by written ballot to be shall apply with respect to any application to this title, that person or organization may re- filed on or before that date), by a majority of form a new credit union, or to alter or expand main a member of that credit union until the the directors of the insured credit union. Ap- the field of membership of an existing credit person or organization chooses to withdraw proval of the proposal for conversion shall be by union, that is filed with the Board after the from the membership of the credit union.’’. the affirmative vote of a majority of the members date of enactment of the Credit Union Member- of the insured credit union who vote on the pro- SEC. 102. CRITERIA FOR APPROVAL OF EXPAN- ship Access Act.’’. SION OF MEMBERSHIP OF MULTIPLE posal. COMMON-BOND CREDIT UNIONS. TITLE II—REGULATION OF CREDIT ‘‘(C) NOTICE OF PROPOSAL TO MEMBERS.—An Section 109 of the Federal Credit Union Act UNIONS insured credit union that proposes to convert to (12 U.S.C. 1759) is amended by adding at the end SEC. 201. FINANCIAL STATEMENT AND AUDIT RE- a mutual savings bank or savings association the following new subsection: QUIREMENTS. under subparagraph (A) shall submit notice to ‘‘(f) CRITERIA FOR APPROVAL OF EXPANSION (a) IN GENERAL.—Section 202(a)(6) of the Fed- each of its members who is eligible to vote on the OF MULTIPLE COMMON-BOND CREDIT UNIONS.— eral Credit Union Act (12 U.S.C. 1782(a)(6)) is matter of its intent to convert— S8958 CONGRESSIONAL RECORD — SENATE July 24, 1998 ‘‘(i) 90 days before the date of the member vote ‘‘(2) an insured credit union that— ‘‘(1) prescribe additional criteria for annually on the conversion; ‘‘(A) serves predominantly low-income mem- evaluating the record of any insured credit ‘‘(ii) 60 days before the date of the member bers, as defined by the Board; or union that is organized to serve a well-defined vote on the conversion; and ‘‘(B) is a community development financial in- local community, neighborhood, or rural district ‘‘(iii) 30 days before the date of the member stitution, as defined in section 103 of the Com- in meeting the credit needs and credit union vote on the conversion. munity Development Banking and Financial In- service needs of the entire field of membership of ‘‘(D) NOTICE OF PROPOSAL TO BOARD.—The stitutions Act of 1994. the credit union; and Board may require an insured credit union that ‘‘(c) DEFINITIONS.—As used in this section— ‘‘(2) prescribe procedures for remedying the proposes to convert to a mutual savings bank or ‘‘(1) the term ‘member business loan’— failure of any insured credit union described in ‘‘(A) means any loan, line of credit, or letter savings association under subparagraph (A) to paragraph (1) to meet the criteria established of credit, the proceeds of which will be used for submit a notice to the Board of its intent to con- pursuant to paragraph (1), including the dis- a commercial, corporate or other business invest- vert during the 90-day period preceding the date approval of any application by the credit union ment property or venture, or agricultural pur- of the completion of the conversion. pose; and to expand the field of membership of the credit ‘‘(E) INAPPLICABILITY OF ACT UPON CONVER- ‘‘(B) does not include an extension of credit— union. SION.—Upon completion of a conversion de- ‘‘(i) that is fully secured by a lien on a 1- to ‘‘(d) EMPHASIS ON PERFORMANCE, NOT PAPER- scribed in subparagraph (A), the credit union 4-family dwelling that is the primary residence WORK.—In evaluating any insured credit union shall no longer be subject to any of the provi- of a member; under this section, the Board— sions of this Act. ‘‘(ii) that is fully secured by shares in the ‘‘(1) shall focus on the actual performance of ‘‘(F) LIMIT ON COMPENSATION OF OFFICIALS.— credit union making the extension of credit or the insured credit union; and ‘‘(i) IN GENERAL.—No director or senior man- deposits in other financial institutions; ‘‘(2) may not impose burdensome paperwork or agement official of an insured credit union may ‘‘(iii) that is described in subparagraph (A), if recordkeeping requirements.’’. receive any economic benefit in connection with it was made to a borrower or an associated mem- (b) ANNUAL REPORTS.—With respect to each of a conversion of the credit union as described in ber that has a total of all such extensions of the first 5 years that begin after the date of en- subparagraph (A), other than— credit in an amount equal to less than $50,000; actment of this Act, the Board shall include in ‘‘(I) director fees; and ‘‘(iv) the repayment of which is fully insured the annual report to the Congress under section ‘‘(II) compensation and other benefits paid to or fully guaranteed by, or where there is an ad- 102(d) of the Federal Credit Union Act, a report directors or senior management officials of the vance commitment to purchase in full by, any on the progress of the Board in implementing converted institution in the ordinary course of agency of the Federal Government or of a State, section 215 of that Act (as added by subsection business. or any political subdivision thereof; or (a) of this section). ENIOR MANAGEMENT OFFICIAL ‘‘(ii) S .—For pur- ‘‘(v) that is granted by a corporate credit SEC. 205. NATIONAL CREDIT UNION ADMINISTRA- poses of this subparagraph, the term ‘senior union (as that term is defined by the Board) to TION BOARD MEMBERSHIP. management official’ means a chief executive of- another credit union. Section 102(b) of the Federal Credit Union Act ficer, an assistant chief executive officer, a chief ‘‘(2) the term ‘net worth’— (12 U.S.C. 1752a(b)) is amended— financial officer, and any other senior executive ‘‘(A) with respect to any insured credit union, (1) by striking ‘‘(b) The Board’’ and inserting officer (as defined by the appropriate Federal means the credit union’s retained earnings bal- ‘‘(b) MEMBERSHIP AND APPOINTMENT OF banking agency pursuant to section 32(f) of the ance, as determined under generally accepted BOARD.— Federal Deposit Insurance Act). accounting principles; and ‘‘(1) IN GENERAL.—The Board’’; and ‘‘(G) CONSISTENT RULES.— ‘‘(B) with respect to a credit union that serves (2) by adding at the end the following new ‘‘(i) IN GENERAL.—Not later than 6 months predominantly low-income members, as defined paragraph: after the date of enactment of the Credit Union by the Board, includes secondary capital ac- ‘‘(2) APPOINTMENT CRITERIA.— Membership Access Act, the Administration counts that are— ‘‘(A) EXPERIENCE IN FINANCIAL SERVICES.—In shall promulgate final rules applicable to char- ‘‘(i) uninsured; and considering appointments to the Board under ter conversions described in this paragraph that ‘‘(ii) subordinate to all other claims against paragraph (1), the President shall give consider- are consistent with rules promulgated by other the credit union, including the claims of credi- ation to individuals who, by virtue of their edu- financial regulators, including the Office of tors, shareholders, and the Fund; and cation, training, or experience relating to a ‘‘(3) the term ‘associated member’ means any Thrift Supervision and the Office of the Comp- broad range of financial services, financial serv- member having a shared ownership, investment, troller of the Currency. The rules required by ices regulation, or financial policy, are espe- or other pecuniary interest in a business or com- this clause shall provide that charter conversion cially qualified to serve on the Board. mercial endeavor with the borrower. by an insured credit union shall be subject to ‘‘(B) LIMIT ON APPOINTMENT OF CREDIT UNION regulation that is no more or less restrictive ‘‘(d) EFFECT ON EXISTING LOANS.—An insured credit union that has, on the date of enactment OFFICERS.—Not more than 1 member of the than that applicable to charter conversions by Board may be appointed to the Board from other financial institutions. of this section, a total amount of outstanding member business loans that exceeds the amount among individuals who, at the time of the ap- ‘‘(ii) OVERSIGHT OF MEMBER VOTE.—The mem- pointment, are, or have recently been, involved ber vote concerning charter conversion under permitted under subsection (a) shall, not later than 3 years after that date of enactment, re- with any insured credit union as a committee this paragraph shall be administered by the Ad- member, director, officer, employee, or other in- ministration, and shall be verified by the Fed- duce the total amount of outstanding member business loans to an amount that is not greater stitution-affiliated party.’’. eral or State regulatory agency that would have SEC. 206. REPORT AND CONGRESSIONAL REVIEW jurisdiction over the institution after the conver- than the amount permitted under subsection (a).’’. REQUIREMENT FOR CERTAIN REGU- sion. If either the Administration or that regu- LATIONS. SEC. 204. SERVING PERSONS OF MODEST MEANS latory agency disapproves of the methods by A regulation prescribed by the Board shall be which the member vote was taken or procedures WITHIN THE FIELD OF MEMBERSHIP OF CREDIT UNIONS. treated as a major rule for purposes of chapter applicable to the member vote, the member vote (a) IN GENERAL.—Title II of the Federal Credit 8 of title 5, United States Code, if the regulation shall be taken again, as directed by the Admin- Union Act (12 U.S.C. 1781 et seq.) is amended by defines, or amends the definition of— istration or the agency.’’. adding at the end the following new section: (1) the term ‘‘immediate family or household’’ SEC. 203. LIMITATION ON MEMBER BUSINESS ‘‘SEC. 215. SERVING PERSONS OF MODEST MEANS for purposes of section 109(e)(1) of the Federal LOANS. WITHIN THE FIELD OF MEMBERSHIP Credit Union Act (as added by section 101 of The Federal Credit Union Act (12 U.S.C. 1701 OF CREDIT UNIONS. this Act); or et seq.) is amended by inserting after section 107 ‘‘(a) CONTINUING AND AFFIRMATIVE OBLIGA- (2) the term ‘‘well-defined local community, the following new section: TION.—The purpose of this section is to reaffirm neighborhood, or rural district’’ for purposes of ‘‘SEC. 107A. LIMITATION ON MEMBER BUSINESS that insured credit unions have a continuing section 109(g) of the Federal Credit Union Act LOANS. and affirmative obligation to meet the financial (as added by section 103 of this Act). ‘‘(a) IN GENERAL.—On and after the date of services needs of persons of modest means, con- TITLE III—CAPITALIZATION AND NET enactment of this section, no insured credit sistent with safe and sound operation. WORTH OF CREDIT UNIONS union may make any member business loan that ‘‘(b) EVALUATION BY THE BOARD.—The Board SEC. 301. PROMPT CORRECTIVE ACTION. would result in a total amount of such loans shall, before the end of the 12-month period be- (a) IN GENERAL.—Title II of the Federal Credit outstanding at that credit union at any one ginning on the date of enactment of the Credit Union Act (12 U.S.C. 1781 et seq.) is amended by time equal to more than the lesser of— Union Membership Access Act— ‘‘(1) 1.75 times the actual net worth of the ‘‘(1) prescribe criteria for periodically review- adding at the end the following new section: credit union; or ing the record of each insured credit union in ‘‘SEC. 216. PROMPT CORRECTIVE ACTION. ‘‘(2) 1.75 times the minimum net worth re- providing affordable credit union services to all ‘‘(a) RESOLVING PROBLEMS TO PROTECT quired under section 216(c)(1)(A) for a credit individuals of modest means (including low- and FUND.— union to be well capitalized. moderate-income individuals) within the field of ‘‘(1) PURPOSE.—The purpose of this section is ‘‘(b) EXCEPTIONS.—Subsection (a) does not membership of the credit union; and to resolve the problems of insured credit unions apply in the case of— ‘‘(2) provide for making the results of the re- at the least possible long-term loss to the Fund. ‘‘(1) an insured credit union chartered for the views publicly available. ‘‘(2) PROMPT CORRECTIVE ACTION REQUIRED.— purpose of making, or that has a history of pri- ‘‘(c) ADDITIONAL CRITERIA FOR COMMUNITY The Board shall carry out the purpose of this marily making, member business loans to its CREDIT UNIONS REQUIRED.—The Board shall, by section by taking prompt corrective action to re- members, as determined by the Board; or regulation— solve the problems of insured credit unions. July 24, 1998 CONGRESSIONAL RECORD — SENATE S8959

‘‘(b) REGULATIONS REQUIRED.— ‘‘(2) ADJUSTING NET WORTH LEVELS.— ‘‘(4) FAILURE TO SUBMIT ACCEPTABLE PLAN ‘‘(1) INSURED CREDIT UNIONS.— ‘‘(A) IN GENERAL.—If, for purposes of section WITHIN TIME ALLOWED.— ‘‘(A) IN GENERAL.—The Board shall, by regu- 38(c) of the Federal Deposit Insurance Act, the ‘‘(A) FAILURE TO SUBMIT ANY PLAN.—If an in- lation, prescribe a system of prompt corrective Federal banking agencies increase or decrease sured credit union fails to submit a net worth action for insured credit unions that is— the required minimum level for the leverage limit restoration plan within the time allowed under ‘‘(i) consistent with this section; and (as those terms are used in that section 38), the paragraph (3), the Board shall— ‘‘(ii) comparable to section 38 of the Federal Board may, by regulation, and subject to sub- ‘‘(i) promptly notify the credit union of that Deposit Insurance Act. paragraph (B) of this paragraph, correspond- failure; and ‘‘(B) COOPERATIVE CHARACTER OF CREDIT ingly increase or decrease 1 or more of the net ‘‘(ii) give the credit union a reasonable oppor- UNIONS.—The Board shall design the system re- worth ratios specified in subparagraphs (A) tunity to submit a net worth restoration plan. quired under subparagraph (A) to take into ac- through (D) of paragraph (1) of this subsection ‘‘(B) SUBMISSION OF UNACCEPTABLE PLAN.—If count that credit unions are not-for-profit co- in an amount that is equal to not more than the an insured credit union submits a net worth res- operatives that— difference between the required minimum level toration plan within the time allowed under ‘‘(i) do not issue capital stock; most recently established by the Federal bank- paragraph (3) and the Board determines that the plan is not acceptable, the Board shall— ‘‘(ii) must rely on retained earnings to build ing agencies and 4 percent of total assets (with ‘‘(i) promptly notify the credit union of why net worth; and respect to institutions regulated by those agen- the plan is not acceptable; and ‘‘(iii) have boards of directors that consist pri- cies). ‘‘(ii) give the credit union a reasonable oppor- marily of volunteers. ‘‘(B) DETERMINATIONS REQUIRED.—The Board tunity to submit a revised plan. ‘‘(2) NEW CREDIT UNIONS.— may increase or decrease net worth ratios under ‘‘(5) ACCEPTING PLAN.—The Board may accept ‘‘(A) IN GENERAL.—In addition to regulations subparagraph (A) only if the Board— a net worth restoration plan only if the Board under paragraph (1), the Board shall, by regu- ‘‘(i) determines, in consultation with the Fed- determines that the plan is based on realistic as- lation, prescribe a system of prompt corrective eral banking agencies, that the reason for the sumptions and is likely to succeed in restoring action that shall apply to new credit unions in increase or decrease in the required minimum the net worth of the credit union. lieu of this section and the regulations pre- level for the leverage limit also justifies the ad- ‘‘(g) RESTRICTIONS ON UNDERCAPITALIZED scribed under paragraph (1). justment in net worth ratios; and CREDIT UNIONS.— ‘‘(B) CRITERIA FOR ALTERNATIVE SYSTEM.— ‘‘(ii) determines that the resulting net worth ‘‘(1) RESTRICTION ON ASSET GROWTH.—An in- The Board shall design the system prescribed ratios are sufficient to carry out the purpose of sured credit union that is undercapitalized shall under subparagraph (A)— this section. not generally permit its average total assets to ‘‘(i) to carry out the purpose of this section; ‘‘(C) TRANSITION PERIOD REQUIRED.—If the increase, unless— ‘‘(ii) to recognize that credit unions (as co- Board increases any net worth ratio under this ‘‘(A) the Board has accepted the net worth operatives that do not issue capital stock) ini- paragraph, the Board shall give insured credit restoration plan of the credit union for that ac- tially have no net worth, and give new credit unions a reasonable period of time to meet the tion; unions reasonable time to accumulate net increased ratio. ‘‘(B) any increase in total assets is consistent worth; ‘‘(d) RISK-BASED NET WORTH REQUIREMENT with the net worth restoration plan; and ‘‘(iii) to create adequate incentives for new FOR COMPLEX CREDIT UNIONS.— ‘‘(C) the net worth ratio of the credit union credit unions to become adequately capitalized ‘‘(1) IN GENERAL.—The regulations required increases at a rate that is consistent with the by the time that they either— under subsection (b)(1) shall include a risk- net worth restoration plan. ‘‘(I) have been in operation for more than 10 based net worth requirement for insured credit ‘‘(2) RESTRICTION ON MEMBER BUSINESS years; or unions that are complex, as defined by the LOANS.—Notwithstanding section 107A(a), an ‘‘(II) have more than $10,000,000 in total as- Board based on the portfolios of assets and li- insured credit union that is undercapitalized sets; abilities of credit unions. may not make any increase in the total amount ‘‘(iv) to impose appropriate restrictions and ‘‘(2) STANDARD.—The Board shall design the of member business loans (as defined in section requirements on new credit unions that do not risk-based net worth requirement to take ac- 107A(c)) outstanding at that credit union at any make sufficient progress toward becoming ade- count of any material risks against which the one time, until such time as the credit union be- quately capitalized; and net worth ratio required for an insured credit comes adequately capitalized. ‘‘(v) to prevent evasion of the purpose of this union to be adequately capitalized may not pro- ‘‘(h) MORE STRINGENT TREATMENT BASED ON section. vide adequate protection. OTHER SUPERVISORY CRITERIA.—With respect to ‘‘(c) NET WORTH CATEGORIES.— ‘‘(e) EARNINGS-RETENTION REQUIREMENT AP- the exercise of authority by the Board under ‘‘(1) IN GENERAL.—For purposes of this section PLICABLE TO CREDIT UNIONS THAT ARE NOT regulations comparable to section 38(g) of the the following definitions shall apply: WELL CAPITALIZED.— Federal Deposit Insurance Act— ‘‘(1) the Board may not reclassify an insured ‘‘(A) WELL CAPITALIZED.—An insured credit ‘‘(1) IN GENERAL.—An insured credit union union is ‘well capitalized’ if— that is not well capitalized shall annually set credit union into a lower net worth category, or ‘‘(i) it has a net worth ratio of not less than aside as net worth an amount equal to not less treat an insured credit union as if it were in a 7 percent; and than 0.4 percent of its total assets. lower net worth category, for reasons not per- ‘‘(ii) it meets any applicable risk-based net ‘‘(2) BOARD’S AUTHORITY TO DECREASE EARN- taining to the safety and soundness of that worth requirement under subsection (d). INGS-RETENTION REQUIREMENT.— credit union; and ‘‘(A) IN GENERAL.—The Board may, by order, ‘‘(2) the Board may not delegate its authority ‘‘(B) ADEQUATELY CAPITALIZED.—An insured decrease the 0.4 percent requirement in para- to reclassify an insured credit union into a credit union is ‘adequately capitalized’ if— graph (1) with respect to a credit union to the lower net worth category or to treat an insured ‘‘(i) it has a net worth ratio of not less than extent that the Board determines that the de- credit union as if it were in a lower net worth 6 percent; and category. ‘‘(ii) it meets any applicable risk-based net crease— ‘‘(i) is necessary to avoid a significant re- ‘‘(i) ACTION REQUIRED REGARDING CRITICALLY worth requirement under subsection (d). demption of shares; and UNDERCAPITALIZED CREDIT UNIONS.— ‘‘(C) UNDERCAPITALIZED.—An insured credit ‘‘(ii) would further the purpose of this section. ‘‘(1) IN GENERAL.—The Board shall, not later union is ‘undercapitalized’ if— ‘‘(B) PERIODIC REVIEW REQUIRED.—The Board than 90 days after the date on which an insured ‘‘(i) it has a net worth ratio of less than 6 per- shall periodically review any order issued under credit union becomes critically undercapital- cent; or subparagraph (A). ized— ‘‘(ii) it fails to meet any applicable risk-based ‘‘(f) NET WORTH RESTORATION PLAN RE- ‘‘(A) appoint a conservator or liquidating net worth requirement under subsection (d). QUIRED.— agent for the credit union; or ‘‘(D) SIGNIFICANTLY UNDERCAPITALIZED.—An ‘‘(1) IN GENERAL.—Each insured credit union ‘‘(B) take such other action as the Board de- insured credit union is ‘significantly under- that is undercapitalized shall submit an accept- termines would better achieve the purpose of capitalized’— able net worth restoration plan to the Board this section, after documenting why the action ‘‘(i) if it has a net worth ratio of less than 4 within the time allowed under this subsection. would better achieve that purpose. percent; or ‘‘(2) ASSISTANCE TO SMALL CREDIT UNIONS.— ‘‘(2) PERIODIC REDETERMINATIONS REQUIRED.— ‘‘(ii) if— The Board (or the staff of the Board) shall, Any determination by the Board under para- ‘‘(I) it has a net worth ratio of less than 5 per- upon timely request by an insured credit union graph (1)(B) to take any action with respect to cent; and with total assets of less than $10,000,000, and an insured credit union in lieu of appointing a ‘‘(II) it— subject to such regulations or guidelines as the conservator or liquidating agent shall cease to ‘‘(aa) fails to submit an acceptable net worth Board may prescribe, assist that credit union in be effective not later than the end of the 180-day restoration plan within the time allowed under preparing a net worth restoration plan. period beginning on the date on which the de- subsection (f); or ‘‘(3) DEADLINES FOR SUBMISSION AND REVIEW termination is made, and a conservator or liq- ‘‘(bb) materially fails to implement a net OF PLANS.—The Board shall, by regulation, es- uidating agent shall be appointed for that credit worth restoration plan accepted by the Board. tablish deadlines for submission of net worth union under paragraph (1)(A), unless the Board ‘‘(E) CRITICALLY UNDERCAPITALIZED.—An in- restoration plans under this subsection that— makes a new determination under paragraph sured credit union is ‘critically undercapital- ‘‘(A) provide insured credit unions with rea- (1)(B) before the end of the effective period of ized’ if it has a net worth ratio of less than 2 sonable time to submit net worth restoration the prior determination. percent (or such higher net worth ratio, not to plans; and ‘‘(3) APPOINTMENT OF LIQUIDATING AGENT RE- exceed 3 percent, as the Board may specify by ‘‘(B) require the Board to act on net worth QUIRED IF OTHER ACTION FAILS TO RESTORE NET regulation). restoration plans expeditiously. WORTH.— S8960 CONGRESSIONAL RECORD — SENATE July 24, 1998

‘‘(A) IN GENERAL.—Notwithstanding para- sons for that disagreement, the Board shall not (A) in paragraph (1)(A), by striking ‘‘himself’’ graphs (1) and (2), the Board shall appoint a appoint a conservator or liquidating agent for and inserting ‘‘itself’’; and liquidating agent for an insured credit union if the credit union, unless the Board, after consid- (B) by adding at the end the following new the credit union is critically undercapitalized on ering the views of the official, has determined paragraph: average during the calendar quarter beginning that— ‘‘(3) LIQUIDATION TO FACILITATE PROMPT COR- 18 months after the date on which the credit ‘‘(i) the Fund faces a significant risk of loss RECTIVE ACTION.—The Board may close any union became critically undercapitalized. with respect to the credit union if a conservator credit union for liquidation, and appoint itself ‘‘(B) EXCEPTION.—Notwithstanding subpara- or liquidating agent is not appointed; and or another (including, in the case of a State- graph (A), the Board may continue to take such ‘‘(ii) the appointment is necessary to reduce— chartered insured credit union, the State official other action as the Board determines to be ap- ‘‘(I) the risk that the Fund would incur a loss having jurisdiction over the credit union) as liq- propriate in lieu of appointment of a liquidating with respect to the credit union; or uidating agent of that credit union, if— agent if— (II) any loss that the Fund is expected to ‘‘(A) the Board determines that— ‘‘(i) the Board determines that— incur with respect to the credit union; and ‘‘(i) the credit union is significantly under- ‘‘(I) the insured credit union has been in sub- ‘‘(D) the Board may not delegate any deter- capitalized, as defined in section 216, and has stantial compliance with an approved net worth mination under subparagraph (C). no reasonable prospect of becoming adequately restoration plan that requires consistent im- ‘‘(m) CORPORATE CREDIT UNIONS EXEMPTED.— capitalized, as defined in section 216; or provement in the net worth of the credit union This section does not apply to any insured cred- ‘‘(ii) the credit union is critically under- since the date of the approval of the plan; and it union that— capitalized, as defined in section 216; and ‘‘(II) the insured credit union has positive net ‘‘(1) operates primarily for the purpose of ‘‘(B) in the case of a State-chartered insured income or has an upward trend in earnings that serving credit unions; and credit union, the Board has complied with sec- the Board projects as sustainable; and ‘‘(2) permits individuals to be members of the tion 216(l).’’. ‘‘(ii) the Board certifies that the credit union credit union only to the extent that applicable (c) CONSULTATION REQUIRED.—In developing is viable and not expected to fail. law requires that such persons own shares. regulations to implement section 216 of the Fed- ‘‘(4) NONDELEGATION.— ‘‘(n) OTHER AUTHORITY NOT AFFECTED.—This eral Credit Union Act (as added by subsection ‘‘(A) IN GENERAL.—Except as provided in sub- section does not limit any authority of the (a) of this section), the Board shall consult with paragraph (B), the Board may not delegate the Board or a State to take action in addition to the Secretary, the Federal banking agencies, authority of the Board under this subsection. (but not in derogation of) that required under and the State officials having jurisdiction over ‘‘(B) EXCEPTION.—The Board may delegate this section. State-chartered insured credit unions. the authority of the Board under this subsection ‘‘(o) DEFINITIONS.—For purposes of this sec- (d) DEADLINES FOR REGULATIONS.— with respect to an insured credit union that has tion the following definitions shall apply: (1) IN GENERAL.—Except as provided in para- less than $5,000,000 in total assets, if the Board ‘‘(1) FEDERAL BANKING AGENCY.—The term graph (2), the Board shall— (A) publish in the Federal Register proposed permits the credit union to appeal any adverse ‘Federal banking agency’ has the same meaning regulations to implement section 216 of the Fed- action to the Board. as in section 3 of the Federal Deposit Insurance eral Credit Union Act (as added by subsection ‘‘(j) REVIEW REQUIRED WHEN FUND INCURS Act. ET WORTH (a) of this section) not later than 270 days after MATERIAL LOSS.—For purposes of determining ‘‘(2) N .—The term ‘net worth’— whether the Fund has incurred a material loss ‘‘(A) with respect to any insured credit union, the date of enactment of this Act; and (B) promulgate final regulations to implement with respect to an insured credit union (such means retained earnings balance of the credit that section 216 not later than 18 months after that the inspector general of the Board must union, as determined under generally accepted the date of enactment of this Act. make a report), a loss is material if it exceeds accounting principles; and ‘‘(B) with respect to a low-income credit (2) RISK-BASED NET WORTH REQUIREMENT.— the sum of— (A) ADVANCE NOTICE OF PROPOSED RULE- ‘‘(1) $10,000,000; and union, includes secondary capital accounts that MAKING.—Not later than 180 days after the date ‘‘(2) an amount equal to 10 percent of the are— ‘‘(i) uninsured; and of enactment of this Act, the Board shall pub- total assets of the credit union at the time at ‘‘(ii) subordinate to all other claims against lish in the Federal Register an advance notice of which the Board initiated assistance under sec- the credit union, including the claims of credi- proposed rulemaking, as required by section tion 208 or was appointed liquidating agent. tors, shareholders, and the Fund. 216(d) of the Federal Credit Union Act, as added ‘‘(k) APPEALS PROCESS.—Material supervisory ‘‘(3) NET WORTH RATIO.—The term ‘net worth by this Act. determinations, including decisions to require ratio’ means, with respect to a credit union, the (B) FINAL REGULATIONS.—The Board shall prompt corrective action, made pursuant to this ratio of the net worth of the credit union to the promulgate final regulations, as required by section by Administration officials other than total assets of the credit union. that section 216(d) not later than 2 years after the Board may be appealed to the Board pursu- ‘‘(4) NEW CREDIT UNION.—The term ‘new credit the date of enactment of this Act. ant to the independent appellate process re- union’ means an insured credit union that— (e) EFFECTIVE DATE.— quired by section 309 of the Riegle Community ‘‘(A) has been in operation for less than 10 (1) IN GENERAL.—Except as provided in para- Development and Regulatory Improvement Act years; and graph (2), section 216 of the Federal Credit of 1994 (or, if the Board so specifies, pursuant to ‘‘(B) has not more than $10,000,000 in total as- Union Act (as added by this section) shall be- separate procedures prescribed by regulation). sets.’’. come effective 2 years after the date of enact- ‘‘(l) CONSULTATION AND COOPERATION WITH (b) CONSERVATORSHIP AND LIQUIDATION ment of this Act. STATE CREDIT UNION SUPERVISORS.— AMENDMENTS TO FACILITATE PROMPT CORREC- (2) RISK-BASED NET WORTH REQUIREMENT.— ‘‘(1) IN GENERAL.—In implementing this sec- TIVE ACTION.— Section 216(d) of the Federal Credit Union Act tion, the Board shall consult and seek to work (1) CONSERVATORSHIP.—Section 206(h) of the (as added by this section) shall become effective cooperatively with State officials having juris- Federal Credit Union Act (12 U.S.C. 1786(h)) is on January 1, 2001. diction over State-chartered insured credit amended— (f) REPORT TO CONGRESS REQUIRED.—When unions. (A) in paragraph (1)— the Board publishes proposed regulations pursu- ‘‘(2) EVALUATING NET WORTH RESTORATION (i) in subparagraph (D), by striking ‘‘or’’ at ant to subsection (d)(1)(A), or promulgates final PLAN.—In evaluating any net worth restoration the end; regulations pursuant to subsection (d)(1)(B), the plan submitted by a State-chartered insured (ii) in subparagraph (E), by striking the pe- Board shall submit to the Congress a report that credit union, the Board shall seek the views of riod at the end and inserting a semicolon; and specifically explains— the State official having jurisdiction over the (iii) by adding at the end the following new (1) how the regulations carry out section credit union. subparagraphs: 216(b)(1)(B) of the Federal Credit Union Act (as ‘‘(3) DECIDING WHETHER TO APPOINT CON- ‘‘(F) the credit union is significantly under- added by this section), relating to the coopera- SERVATOR OR LIQUIDATING AGENT.—With respect capitalized, as defined in section 216, and has tive character of credit unions; and to any decision by the Board on whether to ap- no reasonable prospect of becoming adequately (2) how the regulations differ from section 38 point a conservator or liquidating agent for a capitalized, as defined in section 216; or of the Federal Deposit Insurance Act, and the State-chartered insured credit union— ‘‘(G) the credit union is critically under- reasons for those differences. ‘‘(A) the Board shall— capitalized, as defined in section 216.’’; and (g) CONFORMING AMENDMENTS.— ‘‘(i) seek the views of the State official having (B) in paragraph (2)— (1) AMENDMENTS RELATING TO ENFORCEMENT jurisdiction over the credit union; and (i) in subparagraph (A), by striking ‘‘In the OF PROMPT CORRECTIVE ACTION.—Section 206(k) ‘‘(ii) give that official an opportunity to take case’’ and inserting ‘‘Except as provided in sub- of the Federal Credit Union Act (12 U.S.C. the proposed action; paragraph (C), in the case’’; and 1786(k)) is amended— ‘‘(B) the Board shall, upon timely request of (ii) by adding at the end the following new (A) in paragraph (1), by inserting ‘‘or section an official referred to in subparagraph (A), subparagraph: 216’’ after ‘‘this section’’ each place it appears; promptly provide the official with— ‘‘(C) In the case of a State-chartered insured and ‘‘(i) a written statement of the reasons for the credit union, the authority conferred by sub- (B) in paragraph (2)(A)(ii), by inserting ‘‘, or proposed action; and paragraphs (F) and (G) of paragraph (1) may any final order under section 216’’ before the ‘‘(ii) reasonable time to respond to that state- not be exercised unless the Board has complied semicolon. ment; with section 216(l).’’. (2) CONFORMING AMENDMENT REGARDING AP- ‘‘(C) if the official referred to in subparagraph (2) LIQUIDATION.—Section 207(a) of the Fed- POINTMENT OF STATE CREDIT UNION SUPERVISOR (A) makes a timely written response that dis- eral Credit Union Act (12 U.S.C. 1787(a)) is AS CONSERVATOR.—Section 206(h)(1) of the Fed- agrees with the proposed action and gives rea- amended— eral Credit Union Act (12 U.S.C. 1786(h)(1)) is July 24, 1998 CONGRESSIONAL RECORD — SENATE S8961

amended by inserting ‘‘or another (including, in ‘‘(A) IN GENERAL.—The Board shall effect a the options that insured credit unions have the case of a State-chartered insured credit pro rata distribution to insured credit unions available for meeting those needs. union, the State official having jurisdiction over after each calendar year if, as of the end of that ‘‘(g) SHARING INFORMATION WITH FEDERAL the credit union)’’ after ‘‘appoint itself’’. calendar year— RESERVE BANKS.—The Board shall, for the pur- (3) AMENDMENT REPEALING SUPERSEDED PRO- ‘‘(i) any loans to the Fund from the Federal pose of facilitating insured credit unions’ access VISION.—Section 116 of the Federal Credit Union Government, and any interest on those loans, to liquidity, make available to the Federal re- Act (12 U.S.C. 1762) is repealed. have been repaid; serve banks (subject to appropriate assurances SEC. 302. NATIONAL CREDIT UNION SHARE IN- ‘‘(ii) the Fund’s equity ratio exceeds the nor- of confidentiality) information relevant to mak- SURANCE FUND EQUITY RATIO, mal operating level; and ing advances to such credit unions, including AVAILABLE ASSETS RATIO, AND ‘‘(iii) the Fund’s available assets ratio exceeds the Board’s reports of examination.’’. STANDBY PREMIUM CHARGE. 1.0 percent. TITLE IV—MISCELLANEOUS PROVISIONS (a) IN GENERAL.—Section 202 of the Federal ‘‘(B) AMOUNT OF DISTRIBUTION.—The Board SEC. 401. STUDY AND REPORT ON DIFFERING Credit Union Act (12 U.S.C. 1782) is amended— shall distribute under subparagraph (A) the REGULATORY TREATMENT. (1) by striking subsection (b) and inserting the maximum possible amount that— (a) STUDY.—The Secretary shall conduct a following: ‘‘(i) does not reduce the Fund’s equity ratio study of— ‘‘(b) CERTIFIED STATEMENT.— below the normal operating level; and (1) the differences between credit unions and ‘‘(1) STATEMENT REQUIRED.— ‘‘(ii) does not reduce the Fund’s available as- other federally insured financial institutions, ‘‘(A) IN GENERAL.—For each calendar year, in sets ratio below 1.0 percent. including regulatory differences with respect to the case of an insured credit union with total ‘‘(C) CALCULATION BASED ON CERTIFIED STATE- regulations enforced by the Office of Thrift Su- assets of not more than $50,000,000, and for each MENTS.—In calculating the Fund’s equity ratio pervision, the Office of the Comptroller of the semi-annual period in the case of an insured and available assets ratio for purposes of this Currency, the Federal Deposit Insurance Cor- credit union with total assets of $50,000,000 or paragraph, the Board shall determine the aggre- poration, and the Administration; and more, an insured credit union shall file with the gate amount of the insured shares in all insured (2) the potential effects of the application of Board, at such time as the Board prescribes, a credit unions from insured credit unions cer- Federal laws, including Federal tax laws, on certified statement showing the total amount of tified statements under subsection (b) for the credit unions in the same manner as those laws insured shares in the credit union at the close of final reporting period of the calendar year re- are applied to other federally insured financial the relevant period and both the amount of its ferred to in subparagraph (A).’’; institutions. (b) REPORT.—Not later than 1 year after the deposit or adjustment of deposit and the amount (4) in subsection (c), by adding at the end the date of enactment of this Act, the Secretary of the insurance charge due to the Fund for following new paragraph: that period, both as computed under subsection shall submit a report to the Congress on the re- ‘‘(4) TIMELINESS AND ACCURACY OF DATA.—In sults of the study required by subsection (a). (c). calculating the available assets ratio and equity ‘‘(B) EXCEPTION FOR NEWLY INSURED CREDIT ratio of the Fund, the Board shall use the most SEC. 402. REVIEW OF REGULATIONS AND PAPER- UNION.—Subparagraph (A) shall not apply with WORK REDUCTION. current and accurate data reasonably avail- Section 303 of the Riegle Community Develop- respect to a credit union that became insured able.’’; and during the reporting period. ment and Regulatory Improvement Act of 1994 (5) by striking subsection (h) and inserting the (12 U.S.C. 4803) is amended to read as follows: ‘‘(2) FORM.—The certified statements required following: to be filed with the Board pursuant to this sub- ‘‘SEC. 303. REGULAR REVIEW OF REGULATIONS ‘‘(h) DEFINITIONS.—For purposes of this sec- AND PAPERWORK REDUCTION. section shall be in such form and shall set forth tion, the following definitions shall apply: such supporting information as the Board shall ‘‘(a) REVIEW.—During the 1-year period fol- ‘‘(1) AVAILABLE ASSETS RATIO.—The term lowing the date of enactment of the Credit require. ‘available assets ratio’, when applied to the ‘‘(3) CERTIFICATION.—The president of the Union Membership Access Act, each Federal Fund, means the ratio of— credit union or any officer designated by the banking agency and the National Credit Union ‘‘(A) the amount determined by subtracting— board of directors shall certify, with respect to Administration shall, to the maximum extent ‘‘(i) direct liabilities of the Fund and contin- each statement required to be filed with the possible and consistent with the principles of gent liabilities for which no provision for losses Board pursuant to this subsection, that to the safety and soundness, statutory law and policy, has been made, from best of his or her knowledge and belief the state- and the public interest— ‘‘(ii) the sum of cash and the market value of ment is true, correct, complete, and in accord- ‘‘(1) conduct a review of the regulations and unencumbered investments authorized under written policies of each such agency— ance with this title and the regulations issued section 203(c), to ‘‘(A) to streamline and modify those regula- under this title.’’; ‘‘(B) the aggregate amount of the insured tions and policies in order to improve efficiency, (2) in subsection (c)(1)(A), by striking clause shares in all insured credit unions. reduce unnecessary costs, and reduce the paper- (iii) and inserting the following: ‘‘(2) EQUITY RATIO.—The term ‘equity ratio’, work burden for insured depository institutions; ‘‘(iii) PERIODIC ADJUSTMENT.—The amount of when applied to the Fund, means the ratio of— and each insured credit union’s deposit shall be ad- ‘‘(A) the amount of Fund capitalization, in- ‘‘(B) to remove inconsistencies and outmoded justed as follows, in accordance with procedures cluding insured credit unions’ 1 percent capital- and duplicative requirements; and determined by the Board, to reflect changes in ization deposits and the retained earnings bal- ‘‘(2) work jointly to make uniform all regula- the credit union’s insured shares: ance of the Fund (net of direct liabilities of the tions and guidelines implementing common stat- ‘‘(I) annually, in the case of an insured credit Fund and contingent liabilities for which no utory or supervisory policies. union with total assets of not more than provision for losses has been made); to ‘‘(b) REPORT TO CONGRESS.—Not later than 1 $50,000,000; and ‘‘(B) the aggregate amount of the insured year after the date of enactment of the Credit ‘‘(II) semi-annually, in the case of an insured shares in all insured credit unions. Union Membership Access Act, each agency re- credit union with total assets of $50,000,000 or ferred to in subsection (a) shall submit a report ‘‘(3) INSURED SHARES.—The term ‘insured more.’’; shares’, when applied to this section, includes to Congress detailing the progress of the agency (3) in subsection (c), by striking paragraphs in carrying out this section and making rec- share, share draft, share certificate, and other (2) and (3) and inserting the following: ommendations to the Congress on the need for similar accounts as determined by the Board, ‘‘(2) INSURANCE PREMIUM CHARGES.— statutory changes, if any, that would assist in but does not include amounts exceeding the in- ‘‘(A) IN GENERAL.—Each insured credit union the effort to reduce the paperwork burden for sured account limit set forth in section 207(c)(1). shall, at such times as the Board prescribes (but insured institutions.’’. not more than twice in any calendar year), pay ‘‘(4) NORMAL OPERATING LEVEL.—The term ‘normal operating level’, when applied to the SEC. 403. TREASURY REPORT ON REDUCED TAX- to the Fund a premium charge for insurance in ATION AND VIABILITY OF SMALL an amount stated as a percentage of insured Fund, means an equity ratio specified by the BANKS. shares (which shall be the same for all insured Board, which shall be not less than 1.2 percent The Secretary shall, not later than 1 year credit unions). and not more than 1.5 percent.’’. after the date of enactment of this Act, submit ‘‘(B) RELATION OF PREMIUM CHARGE TO EQ- (b) EFFECTIVE DATE.—This section and the a report to the Congress containing— UITY RATIO OF FUND.—The Board may assess a amendments made by this section shall become (1) recommendations for such legislative and premium charge only if— effective on January 1 of the first calendar year administrative action as the Secretary deems ap- ‘‘(i) the Fund’s equity ratio is less than 1.3 beginning more than 180 days after the date of propriate, that would reduce and simplify the percent; and enactment of this Act. tax burden for— ‘‘(ii) the premium charge does not exceed the SEC. 303. ACCESS TO LIQUIDITY. (A) insured depository institutions having less amount necessary to restore the equity ratio to Section 204 of the Federal Credit Union Act than $1,000,000,000 in assets; and 1.3 percent. (12 U.S.C. 1784) is amended by adding at the end (B) banks having total assets of not less than ‘‘(C) PREMIUM CHARGE REQUIRED IF EQUITY the following new subsections: $1,000,000,000 nor more than $10,000,000,000; and (2) any other recommendations that the Sec- RATIO FALLS BELOW 1.2 PERCENT.—If the Fund’s ‘‘(f) ACCESS TO LIQUIDITY.—The Board shall— equity ratio is less than 1.2 percent, the Board ‘‘(1) periodically assess the potential liquidity retary deems appropriate that would preserve shall, subject to subparagraph (B), assess a pre- needs of each insured credit union, and the op- the viability and growth of small banking insti- mium charge in such an amount as the Board tions that the credit union has available for tutions in the United States. determines to be necessary to restore the equity meeting those needs; and PRIVILEGE OF THE FLOOR ratio to, and maintain that ratio at, 1.2 percent. ‘‘(2) periodically assess the potential liquidity Mr. SARBANES. Mr. President, I ask ‘‘(3) DISTRIBUTIONS FROM FUND REQUIRED.— needs of insured credit unions as a group, and unanimous consent that Dean S8962 CONGRESSIONAL RECORD — SENATE July 24, 1998 Shahinian of our committee be allowed rative, but indeed I am talking about shareholders, without falling into an- on the floor of the Senate during con- the backbone of this country—the op- other taxable area. sideration of this bill. portunity to look his or her neighbor There are things we can do and The PRESIDING OFFICER (Mr. AL- in the eye, who knows that they are should be doing. But we shouldn’t be LARD). Without objection, it is so or- good and who knows they will work to attempting to do them, in my opinion, dered. pay back that loan, as opposed to on this bill because it clouds the issue Mr. D’AMATO addressed the Chair. somebody 2,000 miles away who doesn’t of whether or not we are going to give The PRESIDING OFFICER. The Sen- even see that person, who gets an ap- credit unions the opportunity to con- ator from New York is recognized. plication, who views it in terms of tinue to serve their people. Mr. D’AMATO. Mr. President, I ask what the income is or the fact that the Let me suggest this. Our Senate bill unanimous consent that staff of the person is out of work, or the fact that goes much further than the House bill Committee on Banking, Housing, and the person has a small farm and is run- to ensure the safety and the soundness Urban Affairs be permitted access to ning against tough times and says, no, of credit unions through tougher, more the floor during consideration of this and turns them down. detailed provisions requiring a system bill. It has traditionally been the credit of prompt, corrective action for feder- The PRESIDING OFFICER. Without union neighbor, knowing a neighbor ally insured credit unions. objection, it is so ordered. employee, working next to his co-em- This is not a giveaway. This is not Mr. D’AMATO addressed the Chair. ployee, recognizing their needs, mak- the same bill that came from the The PRESIDING OFFICER. The Sen- ing that money available so they can House. It is improved. It is tougher on ator from New York is recognized. send their kid to school. It is one of the them and fairer on them. We sat down Mr. D’AMATO. Mr. President, today, great strengths of this country, and it and negotiated with them. We said to we consider H.R. 1151, the Credit Union gives us economic diversity, it gives them that we are not going to place at Membership Access Act, which is criti- people choice, and it provides competi- risk the FDIC insurance for the Amer- cal legislation. It is legislation nec- tion. ican taxpayer. They agreed. essary to preserve the ability of all There are those who do not like com- The system is be patterned after the Americans to join the credit union of petition, who set up a whole series—al- prompt corrective action provisions of their choice, and to ensure that 73 mil- most a canard as to, ‘‘Oh, no; credit the Federal Deposit Insurance Act. lion Americans who are currently unions are a problem.’’ They are a This is a different bill from the one members of a credit union in no way problem, because they give people af- that comes from the House. It is aimed have their membership status jeopard- fordable opportunities to borrow at the at protecting our taxpayers. ized. lowest rates, because they don’t pay in- The Senate bill also includes for the Credit unions work, Mr. President. come taxes. Why? They are not paying first time capital requirements for all They work for working families, they dividends out to people. Where do those federally insured credit unions, includ- work for the little guy. And in their moneys go? Those moneys go so that ing a risk-based capital requirement hour of gravest need, it is time for Con- additional loans are available to their for complex credit unions. Together, gress to work for them. I urge my col- members. I love it. I think it is great. these provisions represent the most leagues to support this legislation as I think it really is Americana at its significant legislative reform of credit enthusiastically as our friends in the best. union safety and soundness since 1970 House did—by an overwhelming vote of During good and prosperous times, when the National Credit Union insur- 411–8. I am confident that we will act we should not turn away and we should ance fund was created. to preserve the rights of all Americans not create conditions that make it dif- We have included the enhanced safe- to join credit unions now and into the ficult, if not impossible, for them to ty and soundness provisions upon the future. serve the needs of our neighbors and recommendation of the Treasury De- Mr. President, this legislation was our friends, and people in all of our partment following an extensive Treas- crafted in response to a Supreme Court communities. ury Department study placed in legis- ruling that was decided on a very nar- Mr. President, it is not good enough lation by our colleague, Senator BEN- row legal point, handed down on Feb- to say, ‘‘I am going to vote for a credit NETT. These are basic, prudent ap- ruary 25 of this year. That ruling union bill,’’ and then attempt to fix a proaches to successfully manage any fi- placed 20 million Americans in imme- whole series of measures aimed at im- nancial institution that Congress has diate jeopardy and tens of millions of peding the credit unions from doing already applied to banks and thrifts. In others of being kicked out of the credit their job. There are going to be some of the long run, it is the American tax- unions they belong to. Who are these my good friends and colleagues who are payer that we protect by assuring that Americans? They are small business going to come here and say, ‘‘We want credit unions reach and attain high employees and small business owners, to make it possible for others in the fi- levels of capital, or face restrictions low- and moderate-income earners, nancial services area to recognize that with respect to their operations. farmers, laborers, church members— we love them and we care for them,’’ et Credit unions, no matter how small the hard-working American men and cetera. or how large, need a sufficient capital women who have a right to affordable There are going to be a number of buffer to handle unexpected downturns financial services as much as anyone amendments that are going to be put in the economy and subsequent losses. else. forth. Some of these amendments, and The capital requirements in this bill For decades, the American dream has one in particular, one that would at- will see to it that those goals are been made a reality by credit unions. tempt to remove the Community Rein- achieved. These cooperatives reach out to indi- vestment Act from the obligation of We all know how important preven- viduals, associations and communities community banks—if that is passed, tion is, along with legislative over- who have had the door slammed in that will spell a veto of this bill. sight, when dealing with financial in- their faces by other financial institu- I am not suggesting to you we stitutions. Credit unions are no dif- tions. Make no mistake about it, Mr. shouldn’t help community banks. I ferent from other financial institutions President, the economy, while strong want to help them. Indeed, our Presi- when it comes to prevention and over- today, the economy—such that people dent who presides today has come sight. can get loans for a variety of reasons— forth. I want to commend the Senator There are those who will say you are may not always be that strong. I hope from Colorado for some very creative, going in and giving to the masses. No. it is. But if history is any reminder of long overdue actions to help commu- We responded to their legitimate con- what may be in the future, there will nity banks in the most positive way by cerns that they can continue business. be difficult times. seeing to it that they do not have un- But we have tougher end requirements It has always been the credit union fair tax burdens placed upon them, by as it relates to sound operation and that has given to the little guy, the seeing that they have the opportunity oversight and the ability to close those forgotten middle class—I don’t mean to expand their board of directors or down who may not be meeting their ob- little in terms of size and not as a pejo- their shareholders, the number of ligations. July 24, 1998 CONGRESSIONAL RECORD — SENATE S8963 In 1991, the GAO issued an extensive panded safety and soundness provisions ness lending. Credit unions may make busi- study which detailed the recommenda- in title III of the bill, we will ensure ness loans only to their members, and can- tions for corporate credit union invest- that credit union business lending does not make loans to business corporations. ments and capital ratios that were not present any safety and soundness Under the National Credit Union Adminis- tration’s regulations, each business loan later adopted. These recommendations concerns. In a July 13 letter to the ma- must be fully secured with good-quality col- were also adopted by the NCUA. jority leader, Secretary Rubin has stat- lateral, the borrower must be personally lia- The failure of Cap Corp. in 1995 raised ed Treasury’s position that the prompt ble on the loan, and business loans to any specific concerns about the interest corrective action in capital standard one borrower generally cannot exceed 15 per- rate risk that corporate credit unions provisions in the bill represent an ade- cent of the credit union’s reserves. Credit were taking. Our committee held hear- quate response to any safety and unions’ business loans have delinquency ings in early 1995 and later reported soundness concerns about credit union rates that are comparable to those on com- out a bill, S. 883. In 1997, NCUA issued business lending. mercial loans made by community banks and thrifts, and charge-off (i.e., loss) rates a comprehensive revision of the rules Furthermore, I have a copy of the statement of the administration policy that compare favorably with those of banks governing corporate credit unions to and thrifts. We believe that existing safe- address concerns arising from the fail- dated July 22, 1998, which states that guards—together with such new statutory ure of Cap Corp. there is no safety and soundness basis protections as the 6 percent capital require- Mr. President, credit unions all over for additional business loan require- ment, the risk-based capital requirement for are now in solid shape, as concluded in ments. complex credit unions, and the system of the exhaustive study done by Treasury I ask unanimous consent that Sec- prompt corrective action—represent an ade- last year. The new safety and sound- retary Rubin’s letter and the State- quate response to safety and soundness con- ness provisions, as recommended by ment of the Administration Policy be cerns about credit unions’ business lending. printed in the RECORD. We look forward to working with you and the Treasury Department, will further other Senators to secure expeditious passage strengthen insured credit unions across There being no objection, the mate- rial was ordered to be printed in the of a clean bill. the country and, in so doing, protect Sincerely, ECORD our taxpayers. R , as follows: ROBERT E. RUBIN, Our legislation also goes much fur- DEPARTMENT OF THE TREASURY, Secretary of the Treasury. ther than the House in placing for the Washington, DC, July 13, 1998. first time significant restrictions on Hon. TRENT LOTT, STATEMENT OF ADMINISTRATION POLICY Majority Leader, U.S. Senate, member business loans. We are going H.R. 1151—CREDIT UNION MEMBERSHIP ACCESS Washington, DC. ACT to hear something about that. We are DEAR TRENT: I appreciate your scheduling going to hear that we should restrict H.R. 1151, the Credit Union Membership Ac- The Administration strongly supports Sen- loans that credit unions can make. cess Act, for Senate floor action beginning ate passage of H.R. 1151, as approved by the While the House bill simply puts a July 17. I am writing to urge expeditious Senate Banking Committee, without extra- Senate passage of the bill—as approved by neous or controversial amendments. The full freeze on current regulations and re- Senate should reject amendments rejected at quires a study, our bill places statu- the Banking Committee on April 30—without any extraneous amendments. the Banking Committee mark-up, such as tory limits on the amount of total In revising the statute governing federal the amendment that would substantially business loans available for credit credit unions’ field of membership, the bill weaken the Community Reinvestment Act unions. would protect existing credit union members by exempting certain banks from the Act’s This is not a bill crafted to please all. and membership groups, and remove uncer- requirements. If H.R. 1151 were presented to This is a bill crafted to permit credit tainty created by the Supreme Court’s AT&T the President with such an amendment, the unions to do that which they do best— decision. Secretary of the Treasury would recommend The bill’s safety and soundness provisions that the President veto the bill. to make those loans, those personal The Senate Banking Committee version re- loans to their members, and, yes, to would represent the most significant legisla- tive reform of credit union safety and sound- flects a careful balancing of important goals: meet the needs of the small business- ness safeguards since the creation of the Na- (1) protecting existing credit union members men. tional Credit Union Share Insurance Fund in and membership groups; (2) removing uncer- In the Senate bill, the total amount 1970. The bill would institute capital stand- tainty created by the Supreme Court’s AT&T of outstanding member business loans ards for all federally insured credit unions, decision; (3) facilitating credit union expan- of a federally insured credit union can- including a risk-based capital requirement sion beyond core membership groups in ap- not exceed 12.25 percent of the assets of for complex credit unions. It would create a propriate circumstances, such as when nec- system of prompt corrective action—specifi- essary to meet the needs of underserved the credit union. Credit unions that be- areas; (4) reforming credit union safety and come undercapitalized—that is, less cally tailored to credit unions as not-for- profit, member-owned cooperatives. It would soundness safeguards, by instituting capital than 6 percent of their net worth—are also take a series of steps to make the Share standards and a risk-based capital require- prohibited from making new commer- Insurance Fund even stronger and more re- ment, as well as further strengthening the cial loans that would result in an in- silient. Share Insurance Fund; and (5) reaffirming crease in the total amount of member These reforms involve little cost or burden and reinforcing credit unions’ mission of business loans outstanding. Credit to credit unions today, yet they could pay serving persons of modest means. The Ad- unions that presently exceed the mem- enormous dividends in more difficult times. ministration strongly opposes any efforts to upset this balance by stripping the bill of ber business loan limits will be given 3 The bill rightly reaffirms and reinforces credit unions’ mission of serving persons of any of these important provisions. years in which to come into compli- modest means. Section 204 would require Specifically, Section 204 would require ance. periodic review of each federally insured periodic review of each Federally-insured Mr. President, this is a pretty tough credit union’s record of meeting the needs of credit union’s record of meeting the needs of loan limitation, the first time. It is not such persons within its field of membership. such persons within its membership. This re- in the House bill—never had any limi- This requirement is flexible, tailored to cred- quirement is flexible, tailored to credit tations on business loans. There are it unions, and will impose no unreasonable unions, and will impose no unreasonable bur- going to be some who genuinely feel burden. It rests on the Congressionally man- den. It rests on the Congressionally man- that should be curtailed even further. I dated mission of credit unions and on the dated mission of credit unions and on the benefits of federal deposit insurance. Such benefits of Federal deposit insurance. Inclu- would suggest to go further would real- deposit insurance gives credit union mem- sion of Section 204 is particularly important ly do violence to the ability of almost bers ironclad assurance about the safety of to keeping credit unions focused on their 200 of the Nation’s 1,500 credit unions their savings, and thus helps credit unions public mission in view of how the bill liberal- that make these loans available today. compete for deposits with larger, more wide- izes the common bond requirement. It is unintended mischief that will take ly known financial institutions (just as it In addition, the Administration sees no place if that legislation passes. I say helps community banks and thrifts). Section safety and soundness basis for an amend- ‘‘unintended,’’ Mr. President. Notwith- 204 is particularly appropriate in view of how ment that would limit the ability of credit unions to make business loans to their mem- standing unintended, the consequences the bill liberalizes the common bond require- ment and thus facilitates credit unions’ ex- bers. Existing safeguards, coupled with the will not be fair and will be disruptive. pansion beyond their core membership new capital and other reforms in the bill, are These restrictions on business lend- groups. sufficient to protect against any safety and ing in our bill are real and they are Finally, I would like to comment on the soundness risk from member business lend- meaningful, and together with the ex- safety and soundness of credit unions’ busi- ing. S8964 CONGRESSIONAL RECORD — SENATE July 24, 1998 PAY-AS-YOU-GO-SCORING by the Supreme Court decision. This progress on the appropriations bills. H.R. 1151 would affect direct spending and legislation passed the House of Rep- This is a good bill. But I still think the receipts; therefore it is subject to the pay-as- resentatives in the beginning of April Senate should work during the day and you-go requirements of the Omnibus Budget by a vote of 411 to 8. The Senate Bank- be home with their families at night. Reconciliation Act of 1990. The Administra- ing Committee, after holding two hear- That is a novel idea that I still advo- tion’s preliminary estimate is that H.R. 1151 cate, so I am going to be with my wife would have a net budget cost of zero. ings on the issue, marked up the legis- eating supper Monday night at 7 Mr. D’AMATO. We need to act expe- lation on April 30 and reported it with amendments to the full Senate by a o’clock. Good luck before then. But we ditiously on this legislation. I am deep- will try to accommodate everybody, in- ly grateful to the Senate majority vote of 16 to 2. Since April 30, we have been looking for an opening on the cluding my favorite lady in the world. leader for making this time available Mr. SARBANES. I just want to un- so that we can go forward. Make no Legislative Calendar in order to take the matter up in the Chamber, and the derscore the intention is, and we have mistake about it, without the ability every reasonable expectation that, we to add new members and new groups, majority leader has provided this open- ing. are going to be able to complete this the credit union movement would be bill finally by Tuesday morning and do fatally injured. If I could have the attention of the majority leader, I would like to ask, it a good deal of it by Monday evening. I am convinced that we are going to In addition to the broad bipartisan move in a prompt way and that the leg- is my understanding the intention now is to do the opening statements—I support for this legislation in the Con- islation will pass by an overwhelming gress, it is strongly supported by the know that Senator SHELBY and others margin. Why? Because it is the right administration. Senator D’AMATO has thing to do. It is the right thing to do have amendments—and begin debate on the amendments, continue that on already placed in the RECORD a letter for 73 million Americans who now be- that Secretary Rubin, our very able Monday afternoon beginning at about 1 long to credit unions, for the 20 million Secretary of the Treasury, sent to the o’clock, and any votes that would tran- Americans whose current credit union majority leader and to the minority spire in relationship to the amend- membership is threatened, and for the leader urging expeditious Senate pas- ments which have been offered would 675 million Americans and small busi- sage of the bill without any extraneous occur beginning about 6 o’clock Mon- nesses who may be shut out, prevented amendments. Of course, the amend- day evening? from joining a credit union in the fu- ments are the important issue that we Mr. LOTT. Mr. President, if the Sen- ture. I certainly urge my colleagues to will be considering over the next few ator will yield, we would have to begin support and expeditiously act on this days. important legislation. those votes a little earlier than that, President Clinton has personally in- Mr. President, before I yield the probably at 5:30. It would be partially dicated his support for this legislation, floor, I would be remiss if I did not driven by how many votes we have. If urging the Senate to pass the bill with- thank my colleague, the ranking mem- we just had one vote lined up, for in- out weighing it down with extraneous ber of the Banking Committee, Senator stance, we could begin about 5:45. If we and controversial amendments that SARBANES, the distinguished senior have two or three, we would have to would seriously jeopardize the legisla- Senator from Maryland, for his out- begin at 5:30 in order to get the voting tion. H.R. 1151 is also supported by a standing contribution and leadership in sequence completed by 6:30. very diverse range of groups in the helping to craft this legislation and to So that is what we are up against. We community including the Consumer bring it to this point in a totally bipar- are trying to accommodate Senators Federation of America, the Seniors Co- tisan fashion. We would not be here po- coming in late and Senators who have alition, the National Farmers Union, sitioned to go forth on this legislation to leave after 6:30. But the hope is that National Educational Association, were it not for his outstanding leader- you would have two or three amend- Americans for Tax Reform, the Amer- ship and that of a dedicated bipartisan ments ready to be voted on Monday ican Small Business Association, AFL– staff, might I add, on the minority afternoon beginning around 5:30, with CIO, and the National Urban Coalition. side. They have done an absolutely fab- the understanding that if we need to The broad support for this legislation ulous job in bringing us to this point. hold that first vote a little while for suggests the important role credit I yield the floor. Senators coming in with a close plane unions play in our economy. Since the PRIVILEGE OF THE FLOOR connection, we would be prepared to do founding of the first credit union in the Mr. SARBANES. Mr. President, I ask that, and then have the vote probably United States in 1909, almost a century unanimous consent that Patience Sin- on the Shelby amendment and final ago, credit unions have served as a way gleton and Loretta Garrison, staff passage Tuesday morning at 9:30. for people of average means, without members, be allowed privileges of the I discussed that with Senator easy access to credit, to pool their sav- floor. DASCHLE, and he and I worked on try- ings in order to make loans to fellow The PRESIDING OFFICER (Mr. ing to accommodate Senators’ sched- credit union members at competitive DEWINE). Without objection, it is so or- ules on all sides. I believe, if you could interest rates. dered. go ahead and get debate on all amend- Mr. President, the impetus for H.R. Mr. SARBANES. Mr. President, first ments today and Monday, then we 1151 came from a Supreme Court deci- I want to thank my colleague, Chair- could have one or two or three votes sion earlier this year. In a 5 to 4 deci- man D’AMATO, for his kind words and Monday afternoon, sometime between sion, the Court held that under the to underscore the very effective leader- 5:30 and 6, probably not later than 5:45, Federal Credit Union Act a federally ship which the chairman has exercised and then the last two votes Tuesday chartered credit union may only have a in bringing this legislation to this morning. single common bond of occupation. point. This bill came out of the com- Mr. SARBANES. As I understand it, This overturned a policy of the Na- mittee on a vote of 16 to 2. We had very some people will be scrambling to be tional Credit Union Administration, strong support within the Senate here. I think if we didn’t start before the regulators of the credit unions, Banking, Housing, and Urban Affairs 5:45, or if we let that first vote run a first adopted in 1982, which permitted Committee, and I have been pleased to little bit—— multiple groups each having a separate be able to work closely with the chair- Mr. LOTT. A little bit, except Sen- common bond to be part of a single man in trying to craft this legislation. ators have to leave at 6:30, and I am Federal credit union. We had, as usual, outstanding con- one of them, and that is the schedule I The consequence of that Supreme tributions by members of the staff on am particularly interested in. Court decision is to prohibit the forma- both the Republican and the Demo- Mr. SARBANES. Of course, the Sen- tion of multiple group credit unions. cratic sides, and we are most appre- ator could make the beginning of the Even if the lower courts, in implement- ciative to them for the many long last vote and leave. ing the Supreme Court decision, permit hours they have put in on this legisla- Mr. LOTT. As long as I am out of existing multiple group credit unions tion. here at 6:30, everything will be fine. to stay in business and to accept mem- The time is now to straighten out the Once again, I know we have had to bers from their current groups, em- credit union challenge which was posed work late, but we have made good ployees from the large majority of July 24, 1998 CONGRESSIONAL RECORD — SENATE S8965 companies in the United States will ized’’ and 6 percent to be ‘‘adequately worth. This would put a limit on mem- find their future opportunities to be- capitalized.’’ A credit union with a net ber business loans for a well-capital- come a member of a Federal credit worth ratio of less than 6 percent ized credit union at approximately union seriously constrained by the Su- would be ‘‘undercapitalized,’’ at 4 per- 12.25 percent of its total loans. Loans of preme Court’s decision. cent it would be ‘‘significantly under- less than $50,000 would be excluded— The National Credit Union Adminis- capitalized,’’ and at 2 percent ‘‘criti- that is an operating practice cur- tration generally does not permit cally undercapitalized.’’ The legisla- rently—and we would continue to ad- groups with less than 500 employees to tion provides a system of prompt cor- here to that. start a credit union because it is rective action which requires the Na- Many credit unions are chartered for judged the group is not broad enough tional Credit Union Administration to or have a history of making business or numerous enough to support a credit take a series of progressively more loans to their members. Members of a union in a safe and sound manner. The stringent measures if the credit union specialized vocation—farmers, fisher- only way for employees of these com- falls below the ‘‘adequately capital- men, taxi drivers and so forth—would panies to join a credit union is if the ized’’ level. Each insured credit union not be subject to this limit. companies affiliate with existing credit that is undercapitalized would be re- Furthermore, this legislation im- unions. So, if new multiple bond credit quired to submit an acceptable net poses, for the first time, a modest but unions are prohibited, this will no worth restoration plan to the NCUA. meaningful community obligation with longer be possible and millions of Until that plan is approved, the credit respect to reinvestment in insured Americans may be denied the oppor- union generally would not be permitted credit unions, which has been carefully tunity to join a credit union. This out- to increase its average total assets. If tailored to the membership-based na- come is clearly undesirable, in my an insured credit union becomes criti- ture of credit unions. It would require view, and is, of course, the basis for the cally undercapitalized according to the the National Credit Union Administra- broad bipartisan support for enacting standards I mentioned earlier, the tion to prescribe criteria for periodi- this legislation. NCUA would be required to liquidate cally reviewing the record of each in- This legislation would first grand- the credit union, appoint a conserva- sured credit union in providing afford- father existing multiple group credit tor, or take such other action as it de- able credit union services to all indi- unions and allow them to add members termines could better achieve the pur- viduals of modest means, including from their current groups. In addition, pose of protecting the credit union in- low- and moderate-income individuals, it would permit Federal credit unions surance fund. within the field of membership of the to have multiple groups, each of which, I have taken a few moments to dwell credit union, and provide for making after the first group, has a common on these provisions because I think such results publicly available. bond of occupation or association and they are quite important. They have The bill also directs the National has less than 3,000 members. The bill generally not been involved in the de- Credit Union Administration, in evalu- would also give the National Credit bate that has led up to considering the ating any insured credit union under Union Administration the power to au- measure on the floor, but I think Mem- this requirement, to focus on the ac- thorize credit unions to add additional bers need to appreciate the very impor- tual performance of the credit union groups if it finds the groups cannot tant safety and soundness provisions and not to impose burdensome paper- safely establish and operate a credit contained in this legislation. This is a work or recordkeeping requirements. union on their own. The Credit Union major step in ensuring financial stabil- We think this is a modest but impor- Administration could also permit a ity in the credit union industry. It has tant step in paying attention to the Federal credit union to add a person or led the Secretary of the Treasury, in needs of low- and moderate-income in- organization located in a local commu- the letter which he sent to the leader- dividuals, and thereby making access nity, neighborhood, or rural district ship, to make this statement. I just to credit more broadly available. that it has determined is underserved want to quote this paragraph from Sec- In conclusion, let me just say this is by other depository institutions. retary Rubin’s letter: a very carefully developed and bal- But, in order for a Federal credit The bill’s safety and soundness provisions anced piece of legislation. As I said, the union to accept additional membership would represent the most significant legisla- committee held two extensive hearings tive reform of credit union safety and sound- on the matter. It worked very carefully groups, the NCUA would have to find ness safeguards since the creation of the Na- that the credit union is adequately tional Credit Union Share Insurance Fund in over the provisions that have been in- capitalized, has adequate managerial 1970. The bill would institute capital stand- cluded in the legislation and brought or financial resources, and has a satis- ards for all federally insured credit unions, here before the Senate. This legislation factory examination record. The legis- including a risk-based capital requirement seeks to make credit union member- lation directs the Credit Union Admin- for complex credit unions. It would create a ship accessible while strengthening the istration to encourage the formation of system of prompt corrective action—specifi- safety and soundness of federally in- separately chartered credit unions cally tailored to credit unions as not-for- sured credit unions and encourages profit, member-owned cooperative. It would them to meet the financial service whenever practicable and consistent also take a series of steps to make the Share with safety and soundness. Insurance Fund even stronger and more re- needs of all of their members. In addition to addressing the mem- silient. I strongly urge the support of this bership issue, this legislation requires These reforms involve little cost or burden legislation by my colleagues. I strongly significant new safety and soundness to credit unions today, yet they could pay urge my colleagues to reject extra- standards for Federal credit unions. enormous dividends in more difficult times. neous amendments that may be offered These new requirements are based on We worked closely with the Treasury to the legislation that may complicate recommendations contained in a care- in considering the provisions that were or jeopardize its enactment. We now fully prepared study of credit unions by in the legislation. I think this is a need to move this legislation forward. the Treasury Department conducted at major step forward. I really commend I think a very careful package has the direction of the Congress and sub- this aspect of the legislation to my col- been put together here. The credit mitted last year. leagues as they consider the overall union movement supports the legisla- Earlier, in legislation, the Congress bill. tion as reported by the committee. The directed the Treasury Department to Furthermore, this bill imposes, for administration supports the legislation study credit unions and to submit a re- the first time, a limit on commercial as reported by the committee. I re- port to the Congress. A good deal of lending by credit unions. No such limit spect, obviously, the motivation of my what is contained in this legislation re- currently exists. The bill provides that colleagues who intend to offer amend- flects the outcome of that study. a credit union would be generally lim- ments, but I can only point out that The bill imposes, for the first time, ited in its member business loans to no those amendments would greatly com- statutory capital standards on Federal more than the lesser of 1.75 times the plicate our efforts to move this legisla- credit unions. The bill requires an in- minimum net worth required for well- tion to final passage and signature into sured credit union to have a net worth capitalized credit unions—namely 7 law by the President. I very much hope ratio of 7 percent to be ‘‘well capital- percent—or 1.7 times its actual net my colleagues can back the work that S8966 CONGRESSIONAL RECORD — SENATE July 24, 1998 was done by the committee in bringing is totally inapplicable to credit unions ment, and that in doing so, they will be this matter to the Senate floor. and the credit union movement. regularly evaluated by the Federal I, again, thank Chairman D’AMATO The name—it is a wonderful sounding Government, and their record will be for his skillful work in developing the name for a program that has nothing looked at to see if the credit union is legislation to this point and bringing it to do with any one word in the name— ‘‘providing’’—I want you to remember, to the floor of the Senate. is Community Reinvestment Act. In that is ‘‘ing’’—‘‘. . . providing afford- Mr. President, I yield the floor. this bill, for the first time ever, we able credit union services to all indi- Mr. GRAMM addressed the Chair. apply in three different ways this Fed- viduals of modest means . . . within The PRESIDING OFFICER. The Sen- eral mandate and credit allocation to the field of membership of the credit ator from Texas. credit unions. union. . . .’’ Mr. GRAMM. Mr. President, let me Let me explain why, despite all the In other words, in this section, the add my voice to those who have con- arguments you can make on the merits Federal Government will evaluate gratulated Senator D’AMATO and Sen- or demerits of the Community Rein- whether or not this credit union, in ator SARBANES for this bill. I believe vestment Act, why it does not belong making loans, in allocating the money we have put together a good bill. I on this bill. of the people who have joined the cred- think it is a dramatic improvement Credit unions are voluntary, private it union, is providing affordable serv- over the House bill. It does, for the associations. They are nonprofit orga- ices—and I don’t know how you define first time, in an effective manner begin nizations. They are tax-exempt organi- ‘‘affordable.’’ I think I know how you to look at capital requirements and zations. They represent a collective ef- define ‘‘providing;’’ you test whether safety and soundness, and, in doing so, fort of members to pool their savings they are actually doing it, although I it will dramatically improve the qual- with a common objective. They pool could imagine some very interesting ity and regulation of credit unions all their savings and they lend to each and intrusive methods of testing that over the country. I think those who are other, the members of the credit union. the regulators might conjure up. But part of the credit union movement In doing so, they perform a cooperative the test of ‘‘providing’’ can be a very want people to know that their depos- credit function. In many cases, they rigorous test, since the standard is not its are safe, sound, insured, regulated provide credit that would not be avail- whether the credit union is offering its and protected in the savers’ interest. able, certainly at rates that would not services, it is not whether they are try- Second, the bill, for the first time, be available, in many cases, to the con- ing to do it. They are required to do it. begins to put appropriate limits on the sumer. They are to be ‘‘providing’’—you are amount of business loans that credit They are not in the business of pro- evaluating whether they are ‘‘. . . pro- unions can make. There are those who moting any broad, general purposes, viding affordable credit union services believe, and I happen to be one of them, such as the general welfare of the coun- to all individuals of modest means . . . that credit unions were chartered to try or the community. They are small, within the field of membership of the provide consumer credit to their mem- private associations that are organized credit union.’’ bers as part of a cooperative effort. A for the purpose of promoting the wel- You need to understand, field of dramatic movement of credit unions fare of their members. The whole pur- membership and membership are two into commercial lending would cir- pose is to pool nickels, dimes and dol- different things. A credit union consid- cumvent the whole intent of the credit lars to build a cash base that can be ers itself successful if it is able to get union movement, and in my opinion, it lent to members for things such as about 20 percent of the people who would be a negative factor on the buying a new car or new truck, buying could join that credit union to join it. progress of the credit union movement. a new tractor. So that in any field of membership, In this bill, we for the first time set The objective of the credit union is normally about 80 percent of the people limits on the amount of credit union to promote the interest of credit union in the field of membership who were in- assets that can go into commercial members. It is not a for-profit organi- vited to join the credit union, who were loans. That is a very positive step. zation, and there is no logic to apply- invited to put up their money, said We deal with the common bond issue, ing to it a provision of law where the ‘‘No, I don’t want to join your credit and we settle once and for all the prin- Government adds an additional man- union; I don’t want to put my money ciple that every American ought to date that the credit unions should di- into your credit union.’’ But the first have the right to join a credit union— rect the money of those members to provision of this bill requires that the not any credit union—but join a credit support some end other than the well- credit union, to comply with this law union within an appropriate field of being of the people who put up the on Federally mandated capital alloca- membership. it my view, and I believe money in the first place. tion, must be ‘‘. . . providing afford- that we achieve this with this bill, that Let me explain how this works, and I able’’—and where are these terms de- it should be possible for every Amer- want to read you some language—in fined? Nowhere—‘‘credit union services ican citizen to find an appropriate field my mind, shocking language—that has to all individuals of modest means . . . of membership by which he or she can been included in this bill in the House, within the field of membership.’’ associate with others, and have the op- and language that I believe should be Now, I do not believe we ought to be portunity to join a credit union and to removed. forcing credit union members, who put affiliate with that credit union if they In the bill, the House has set up this up their own money, to provide serv- choose to do it. requirement for a Federal mandate and ices to people that had an opportunity Those are the positive things about capital allocation that goes by the to join the credit union but decided not this bill. I am a strong supporter of the name of community reinvestment. I to join it. I think that violates the bill. I intend to vote for this bill, but will talk in a moment as to why this whole spirit of the credit union move- there is one provision in the bill to provision has nothing to do with com- ment because a credit union is a coop- which I am very strongly opposed. munity or reinvestment. erative, and if you want credit union In this bill, for the first time ever, we This bill mandates that credit unions services, you join the credit union. You begin to have the Federal Government conform to this Federal capital alloca- participate in putting up the capital direct credit unions as to how they will tion. Here is how it is defined, and here and you apply for loans or services use their members’ money. In this bill, is basically how it works: from the credit union. for the first time ever, we begin the In three different places, we have a The second evaluation has to do with process of telling credit unions that reference to it in the bill. The first way community credit unions. And those the government is going to allocate that the bill would measure whether a are credit unions that serve an entire some of a credit union’s resources to credit union is complying with this community. This second provision re- promote a ‘‘public purpose,’’ even Federal mandate allocating their mem- quires that credit unions are ‘‘meet- though it may not be the purpose of bers’ hard-earned money is on page 58 ing’’—not trying to meet—and please credit union members. I believe that in new section 215. In subsection (b), it note, the law does not say that you not only is this very bad and dangerous is set out that credit unions have to ‘‘offer’’ services, that you offer ‘‘afford- public policy, but I think the logic of it comply with this community reinvest- able’’ services, whatever that means, to July 24, 1998 CONGRESSIONAL RECORD — SENATE S8967 all people of modest means within your banks, and if this bill passes un- the merger. That would be a very inter- field of membership. The law requires changed, they will be extorting re- esting inquiry. that you ‘‘provide’’ it. sources from credit unions. Here is how Next, California First Bank commit- Now, the second reference is, that it works. And I am going to give you ted that 60 percent of the employees you are ‘‘meeting the credit needs and some examples. And you are going to placed in middle and senior manage- credit union service needs of the entire be shocked by these examples. ment positions within the next 5 years field of membership of the credit What happens is that periodically would be minorities and women. And union.’’ That is on page 59—‘‘the entire you have this evaluation that is made finally, they committed to appoint field of membership. * * *’’ public, and whether or not the evalua- three minority and women directors. So again, you are in a community. tion is satisfactory, you have a group That is what they had to do in order This little credit union is providing of people who show up from various or- to get the right to merge with another services to people in a town with 5,000 ganizations to tell you how to use your bank. Now, listen to this next one. people; roughly 20 percent of those peo- resource for their benefit. ACORN is Sumitomo Bank of California—now I ple have joined the credit union. But very active in this effort, and there are do not know, but I guess that this law requires that they provide ‘‘af- many other organizations, it is a grow- Sumitomo Bank is a Japanese affiliate. fordable’’ services—whatever that ing industry—they show up at the bank I think it is relevant because I want means—to people who did not even join and they say, ‘‘You’re not meeting you to put yourself in this position. the credit union. How can that be your CRA requirements. And here are Let us assume that an Ohio bank had right? Clearly, in my opinion, it cannot some things we want you to do. And if opened an affiliate in the Dominican Republic and that some government be right. you’ll do these things, then we will say agency there had said that, ‘‘You are Now, the third case, very similar to that you’re meeting these require- not meeting your CRA requirements.’’ the first, except the language gets even ments, and we will stop protesting for And then they published that, and then more grandiose. Imagine writing a Fed- now.’’ eral law where you can threaten the It works like this. You have a bank a group of people came to the bank and deposit insurance of a credit union and who may have a perfect record on CRA said, ‘‘We want you to do some things so that we then will tell the govern- put it completely out of business. If it requirements, but they want to merge ment that you are meeting these re- does not have Federal deposit insur- with another bank. Even though they quirements.’’ Let’s see what the things ance, it is not going to be able to oper- may have never had anything other were that our Government in effect ate. This law applies to both Federal than an exemplary rating, protesters forced this bank to do. Let me read to credit unions and State credit unions, can enter the process and challenge the as long as they receive Federal deposit you what they did. merger on the grounds of community No. 1, $500 million was committed to insurance. reinvestment and cost the banks mil- CRA-related loans. No. 2, the bank Listen to this language. You have lions of dollars because of the delays regulation to see if the credit union is committed to spend 2 percent of in- that their protests cause. come on charity, nonprofit organiza- ‘‘satisfactorily’’—satisfactorily, mind Now, let me give you two examples of tions, with two-thirds of the money you—‘‘providing,’’ ‘‘affordable’’—I do where this has occurred. going to inner-city development, this not know how you define these terms. The first I will refer to happened in being cash, grant money. No. 3, the I have discussed ‘‘providing.’’ The cred- 1989 in California. And let me say, Mr. bank committed to appoint minority it union is actually doing it. It is not President, it is hard to get banks to board members. No. 4, the bank agreed ‘‘offering’’ services; it is ‘‘providing’’ talk about this. I recently spoke to the to appoint a paid five-member minor- them, services are being accepted and CEO of a major Fortune 500 company, ity advisory board to consult with received, not just offered. ‘‘Satisfac- and I mentioned to him an effort I am management. And, No. 5, the bank torily’’ is an undefined term, satisfac- supporting, an effort Senator SHELBY is agreed to give 20 to 25 percent of out- tory to whom? ‘‘Affordable’’ is unde- undertaking to provide CRA relief for side contracts to minority-owned ven- fined and undefinable —that the ‘‘cred- small community banks. When I men- dors. it union is satisfactorily providing af- tioned CRA, he said, ‘‘It’s extortion.’’ Now if that happened to an Ohio fordable credit union services to all in- If I called him up and asked, ‘‘Could I bank operating in the Dominican Re- dividuals of modest means within the use your name?’’ how many people who public, what would you call it? I would field of membership of the credit are being extorted want their name call it extortion. That is what I would union,’’ whether or not they join the used? They do not. They are afraid to call it. I would call it extortion, or credit union in the first place. have their name used. When a CEO of a maybe even expropriation, a taking of Mr. President, this provision does not Fortune 500 company in America is private property. belong in this bill. This provision is pi- afraid to say his mind publicly, to ex- Now, how does something like that racy. This provision came about be- pose extortion, something is wrong in happen? How it happens is that we let cause we have a crisis in the credit America. people write into law provisions like union movement because of the court Now, let me give you my examples ‘‘satisfactorily providing affordable ruling, a crisis which requires congres- and offer my amendment, and then we services,’’ which no one can define, no- sional action. And what those in the will debate this again on Monday. body knows what it means, and if you House, who put this provision in the In 1989, California First Bank wanted have to comply—a regulator that is bill, have, in essence, said is, that in to merge with Union Bank. But when willing to let protest groups file objec- order to resolve your crisis, you have they sought to merge, opposition was tions to banks merging, for example, to pay tribute. And the tribute you lodged under the CRA provisions of by simply the ability to hold that have to pay is that we are writing a banking law, and in order for these pro- merger up—they are able to extort re- provision of law which says that every tests to be withdrawn so that delays sources. year you will be evaluated by a group could be ended and the merger could go Now, I could go on for quite a while of Federal bureaucrats who will deter- forward, here is what California First and add to the list. For example, when mine whether you are satisfactorily Bank agreed to: One, to increase pur- Bank One wanted to merge with First providing affordable credit union serv- chases from women and minority- Chicago. But what do you think hap- ices to people who are not even mem- owned vendors to 20 percent of pur- pened when they filed that merger? bers of the credit union. And then they chases within the next 5 years. Second, What happened was, they had a group will publish their findings. they agreed to give charitable con- of protesters who showed up, who filed Now, what does this produce? What tributions, cash grants, not loans, in a boilerplate objection which could be this produces is a situation where you the amount of 1.4 percent of income in drawn up in 15 minutes by any lawyer literally—I am going to use some 1989 and 1.5 percent of income in 1990. who deals in this area. I am sure the strong language here; and I mean every Now, I do not know this, but if I were bank president said, ‘‘Well, we have an word of it—this produces a situation a U.S. attorney in that district, I would exemplary CRA record.’’ The where literally you have professional go look and see if they gave those con- protestors said, ‘‘We have objected to protesters who extort resources from tributions to the groups that protested your merger.’’ S8968 CONGRESSIONAL RECORD — SENATE July 24, 1998 So weeks go by, time goes by, and temple, saying, ‘‘You feel good about The PRESIDING OFFICER. The Sen- this is the Woodstock Institute that things, don’t you?’’ ator from South Dakota. objected in Chicago—I better be careful We will vote on this amendment on Mr. JOHNSON. Mr. President, I rise to get the name right—yes, in Chicago, Monday afternoon. to address the overall issue of the legis- the Woodstock Institute objected. So I don’t want credit unions to have to lation before the Senate, H.R. 1151. what happens in such cases? The bank be evaluated on whether or not they I want, first, to commend Chairman ends up allocating the resources of its are providing satisfactory, affordable D’AMATO and the ranking member, stockholders in order to eliminate the services to people who didn’t even join Senator SARBANES, for their help in objection just to be able to move for- the credit union. this legislation getting to the floor in a ward with its business. AMENDMENT NO. 3336 timely fashion. Now, let me read a quote to just show (Purpose: To strike provisions requiring I will not address the issue raised by the arrogance of these people who we credit unions to use the funds of credit my colleague from Texas. I know there are empowering under these laws. For- union members to serve persons not mem- are others who will want to talk about give me if I get a little excited about bers of the credit union) that at much greater length. it, but it is the kind of practice I hate Mr. GRAMM. Mr. President, as a re- There is an underlying legitimate de- worst. This comes from the proposed sult of not wanting that to happen, I bate there about whether an industry merger of NationsBank and Bank of send this amendment to the desk to that benefits from Federal insurance, America. They have received outstand- strike these provisions, and I ask for Federal regulation assuring that indus- ing CRA grades, but in spite of their its immediate consideration. try’s stability and long-term viability, The PRESIDING OFFICER. The unprecedented $350 billion CRA pack- should, in turn, have to commit itself clerk will report. ages of loans and services to inner cit- to making investments back into its The bill clerk read as follows: ies, et cetera, CRA activists are raising own community or not. That debate protests against the merger. One of the The Senator from Texas [Mr. GRAMM] pro- can go forward. But I want to talk poses an amendment numbered 3336. activist leaders has said the follow- briefly about the underlying bill. ing—remember, this is about banks Mr. GRAMM. Mr. President, I ask As we all, I think, understand, fol- that have exemplary CRA records, at unanimous consent that reading of the lowing the Supreme Court’s decision least according to the Government reg- amendment be dispensed with. earlier this year, the credit union ulators who regulate this activity. The PRESIDING OFFICER. Without membership of some 20 million credit These banks have exemplary records. objection, it is so ordered. union members all across America has But here is what the protester said, The amendment is as follows: been in some jeopardy. There was ini- ‘‘We will close down their branches and Strike section 204 of the bill and renumber tially legislation offered in the other ensure they fail in California.’’ That is the sections accordingly, and beginning on body that was designed simply to over- page 45, line 24, strike all through page 46, what they said. ‘‘We will close down turn the Supreme Court decision. The their branches and ensure they fail in line 4, and redesignate subparagraph (E) and (F) on page 46 as subparagraphs (D) and (E), other body chose not to do that. Never- California. This is going to be a street theless, they did reach a compromise fight and we’re prepared to engage in respectively. Mr. GRAMM. Mr. President, it is my bill that passed in April on an over- it.’’ whelmingly vote of 411–8. Do you know what this reminds me understanding this will be the first of? This reminds me of a little immi- vote we have on Monday. It is also my Following that debate, and passage of grant storeowner. He and his wife and understanding that there will probably that legislation, the Senate Banking three children are running a little be an hour set aside so each side will Committee took up our version of cred- store, and these great big hoods come have 30 minutes to debate the amend- it union legislation, with the under- knock on his door. They come in and ment. Rather than stay around today standing that prompt action was in say, ‘‘Somebody could do you some and debate it, I will use my 30 minutes fact needed. But again, rather than harm. There might be people who could on Monday. simply choosing to overturn the Su- come and break in your store, steal I thank my colleagues for their in- preme Court decision and rather than your goods. They might beat you up; dulgence. This is an important amend- simply choosing to pass the legislation they might break your arm. But I will ment. We ought not to add these oner- passed in the House, the Senate Bank- tell you what we will do. If you will ous CRA provisions to credit unions, ing Committee crafted its own version, pay us 5 percent of what you earn in which are investor owned, which are strengthening significantly the lan- this store, we will see that nobody set up as cooperatives to serve the peo- guage of that original H.R. 1151. comes and breaks your arm.’’ ple who are members. Now, there is a compromise involved That is what this reminds me of. Imagine, for example, in New York, here. Most Members in this body, and That is exactly what this reminds me where you have a credit union that was many Americans, are members of both of. set up so cabdrivers could save their credit unions and banks. It is impor- Now, I don’t like the fact that it is money and lend it to one another, and tant that they both be viable, strong going on. Some day I will get rid of it. the loans, then, would be made to buy contributors to our national economy. Some day this is going to be gone. I in- a Medallion so somebody could own It has always been—and it is the nature tend to speak out on this for so long their own cab. of compromises—that some will go with such great passion that in good Now, with CRA, the Federal Govern- away not entirely satisfied, but, on the time Congress is ultimately going to ment comes in and says, ‘‘Hey, how other hand, we can reach that balance rise up and stop this. That is not likely many loans have you made to people that will allow both the banking and to happen here today, but some day it who aren’t members of your credit credit union industries to go forward in will happen. union who could have been—they are in a fair and competitive fashion. That What I don’t want to do is, I don’t your field of membership, but they certainly, at least, is the goal of this want to start this business with credit didn’t choose to join your credit union; legislation. unions. Now, I am sure that we are how many Medallions have you helped So in the course of crafting this bill, going to hear from someone who will them buy?’’ we were able to arrive at bipartisan say credit unions don’t support this So Joe Brown, who put money into agreements on the level of restraint on amendment. Well, the credit unions the credit union for 15 years, finally expansion of credit unions that ought have been told, ‘‘You support the gets to the point where he thinks he to be put into legislative language. Gramm amendment, and maybe your can buy his Medallion, but because of There are some who would rather have bill won’t get passed. You support this this provision, the credit union has to no restraint whatsoever; others would amendment, and maybe the President take Joe’s money and lend it to some- rather have much greater restraint on won’t sign your bill. You support this body who never joined the credit union, what definition of ‘‘common bond’’ is amendment, and maybe it will mean never wanted to be in the credit union. used. We did reach a level of restraint endless delays.’’ Now, that is like say- If you can defend that, good luck. in our legislation that, for the first ing to someone sticking a gun to your I yield the floor. time, now exists. I think perhaps, most July 24, 1998 CONGRESSIONAL RECORD — SENATE S8969 importantly, the Senate Banking Com- islation from the National Farmers Swanjord, a staff member of mine, may mittee adopted the Treasury Depart- Union and a letter from the National have floor privileges during this de- ment’s recommendations on safety and Rural Electric Cooperative Association bate. soundness. be printed in the RECORD. The PRESIDING OFFICER. Without I think one of the greatest concerns There being no objection, the letters objection, it is so ordered. all of us have had in this body is to were ordered to be printed in the Mr. JOHNSON. Mr. President, we make sure that if we are going to have RECORD, as follows: have minimal time remaining in this an industry that is growing and pros- NATIONAL FARMERS UNION, 105th Congress. The schedule is full. We perous, that it have underlying regu- Washington, DC, June 23, 1998. have virtually the entire budget still to latory safety and soundness provisions Re Credit Union Membership Access Act. do, and other key issues are facing us. that are really necessary for its long- Hon. TIM JOHNSON, Frankly, we cannot afford to have this term viability and for the confidence of Member of the U.S. Senate, legislation held up with vetoes, veto the American consumers—not to men- Washington, DC. threats, with ongoing, never-ending ne- tion the confidence the taxpayers DEAR SENATOR JOHNSON: I am writing on gotiations. So I think it is very impor- ought to be able to have that they will behalf of the 300,000 members of the National tant that we move forward with this not be called upon at some future time Farmers Union (NFU) to urge you to support H.R. 1151, the Credit Union Membership Ac- legislation. to bail out an industry that may have A veto threat has been issued by the failed for lack of adequate safety and cess Act, which will restore an open field of membership to credit unions. In addition, we White House. If the CRA provisions are soundness provisions. I think one of urge you to oppose the Hagel-Bennett taken out—the ‘‘CRA-light’’ provi- the most important parts of the Senate amendment which would make it more dif- sions—we will lose our bipartisanship, response to the crisis that we have ficult for farmers and ranchers to obtain and it is a provision that is supported faced this year is stronger safety and loans from their credit unions. by the industry itself. It would appear soundness provisions and the adoption Farmers, ranchers, and rural citizens to me that we need to move forward ex- around the country are facing tough times of the Treasury’s recommendations. peditiously with this legislation. We The committee also took up the issue right now due to low commodity prices. The will be taking up bank regulatory re- of restraint on commercial lending—or Hagel-Bennett amendment would unneces- lief legislation later on this coming member business loans, as they are sarily restrict credit unions from making loans to their members for business pur- week perhaps. There will be other vehi- sometimes referred to—which now, for poses, and will worsen the difficult situation cles in which to debate some of these the first time, is in place. Again, there farmers, ranchers and rural citizens now extraneous matters dealing with the are those who would have much more face. banking industry and, peripherally, the severe restrictions and those who During our 95th annual convention, NFU credit union industry. But I think it would have no restrictions and ask why members affirmed their support for credit would be a mistake for us to be caught any restrictions ought to exist over unions: ‘‘We are unalterably opposed to any up in too many side issues on the un- and above our safety and soundness proposal that seeks to curtail services by standards. But this compromise was credit unions to their members under the derlying bill here. false guise of regulatory reform or financial There is an absolute urgency that we reached, and I think it is one that is soundness. Such proposals are especially dis- move this bill forward. If we do not, supported by the credit union industry criminatory against rural credit unions the membership of some 20 million and is supported by the consumer which provide agricultural credit services. Americans will, in fact, be in very real groups as well. And the Senate com- We pledge our support to the credit union and very great jeopardy. So with the mittee chose to retain language on movement in its efforts to combat the anti- CRA—or ‘‘CRA-light’’ as it is some- competitive regulatory tactics undertaken legislation that passed 411–8 in the times referred to—that was instituted by other segments of the financial services House, passed the Senate Banking by the other body when they took up industry.’’ Committee by a 16–2 vote, it would be H.R. 1151. We urge you to pass this important legisla- my hope that this coming week we Again, there are those who would tion, without adoption of the Hagel amend- could conclude debate on this bill, ob- ment. like to see a much more rigorous, ag- viously, with the adequate consider- Sincerely, ation of well-intended amendments, gressive approach to CRA taken, and LELAND SWENSON, there are those who are simply philo- President. hopefully limited in number, but then sophically disinclined to support any get this bill in its current form onto kind of CRA, even though this ‘‘light’’ NATIONAL RURAL ELECTRIC the President’s desk for signature. version is simply a direction to the reg- COOPERATIVE ASSOCIATION, I yield the floor. ulator of credit unions to come up with Arlington, VA, July 15, 1998. Mr. SHELBY addressed the Chair. some assurance that, in fact, credit Hon. TIM JOHNSON, The PRESIDING OFFICER. The Sen- U.S. Senate, ator from Alabama is recognized. unions are investing in their local com- Washington, DC. munities, which certainly has always Mr. SHELBY. Mr. President, some- DEAR SENATOR JOHNSON: On behalf of the thing was said just a minute ago about been the case, although now there are over 30 million Americans who currently re- larger credit unions with billions of ceive electricity from rural electric coopera- the threat of a veto by the President. I dollars of capital, and some question is tives, we strongly urge you to vote in favor have heard this a lot on different bills. raised there. In any event, this is a pro- of H.R. 1151, the Credit Union Membership But I know the process should work. vision that is accepted by the industry. Act, without any amendments. Especially when you have a principle We need a strong banking industry It is vitally important that certainty be that you believe in and that you know and we need a strong credit union in- brought to the nation’s credit unions and is right, you should not step aside be- their members. For many Americans credit dustry. They both have legitimate, im- cause someone intimates that they unions are their only source for affordable might veto it. That is part of the legis- portant roles to play in the provision banking and credit services. of credit across America. In my State H.R. 1151 represents an excellent balance lative process. of South Dakota, with some 700,000 among the competing financial interests and Mr. President, having said that, later citizens, almost 200,000 of them belong deserves to be enacted before the August re- in the debate—probably Monday when to credit unions. We have historically a cess. The House passed this measure by an we get back—I will be offering an long track record of utilization of co- overwhelming majority of 411–8 and the Sen- amendment to the bill dealing with the operative ventures, whether it is our ate Banking Committee reported the bill out Community Reinvestment Act, or in a 16–2 vote. CRA. My proposed amendment would rural electric, telephone co-ops, or H.R. 1151 has broad bipartisan and constitu- other agricultural cooperatives across ent support. Please pass this legislation. authorize a small bank exemption from the State. We have that long tradition, Thank you for your consideration. the Government-mandated credit re- one that has contributed significantly Sincerely, quirements of the Community Rein- to affording more options, a greater GLENN ENGLISH, vestment Act, which Senator GRAMM level of economic prosperity, to a great Chief Executive Officer. from Texas so eloquently talked about number of people across rural America. PRIVILEGE OF THE FLOOR earlier this morning. Community Mr. President, I ask unanimous con- Mr. JOHNSON. Mr. President, I ask banks, as you well know, as a Senator sent that a letter in support of this leg- unanimous consent that Scott and present Presiding Officer, by their S8970 CONGRESSIONAL RECORD — SENATE July 24, 1998 very nature, serve the needs of their Senator Proxmire later said: can see by the chart, small banks are community. The regulators have thus conferred sub- less efficient than large banks. They do not need a burdensome, gov- stantial economic benefits on private insti- Banks with less than $250 million in ernment mandate to force them to al- tutions without extracting any meaningful assets have an efficiency ratio of 63 locate credit or originate profitable quid pro quo for the public. percent versus that of large banks over loans. Make no mistake about it. Com- REVIEW $250 million with an efficiency ratio of munity banks would not exist very The central premise on which Sen- 60.5 percent. These inefficiencies trans- long if they didn’t take care of the ator Proxmire bases his justification late into a lower return on equity for whole community; and they do. for ‘‘extracting any meaningful quid small banks. Large banks have a re- Since H.R. 1151 increases the com- pro quo’’ may have existed in 1977, but turn on equity of 14.4 percent versus petitive advantage credit unions have absolutely does not exist today. Taken 11.3 percent for small banks. This over banks, we feel this amendment is one at a time, each and every claim means the average large bank has a re- necessary to reduce the inequities in Senator Proxmire used to justify CRA turn on equity 27 percent greater than this area and allow our small commu- in 1977 is no longer applicable today. small banks. nity banks to better meet the needs of Let us go through them one at a time: EXEMPTION OF BANK ASSETS consumers. Chartered institutions ‘‘receive a Contrary to what opponents of the Nine members of the Banking Com- semi-exclusive franchise to do business mittee sponsored a small bank exemp- amendment would have you believe, in a particular geographic area.’’ the small bank exemption would not tion amendment to H.R. 1151 in the Congress passed the Reigle-Neal ‘‘gut’’ CRA. committee markup. The amendment Interstate Banking and Branching Effi- resulted in a tie vote of nine to nine. Banks with less than $250 million in ciency Act of 1994, which allowed one assets account for less than 12 percent The nine members of the committee bank to acquire another bank in any that supported the amendment felt so of bank assets nationwide. Thus, 88 other state, thus subjecting small com- percent of bank assets are con- strongly about the small bank exemp- munity banks to the competition of ac- tion, that all nine members signed a centrated in banks with over $250 mil- quisition hungry megabanks. lion in assets and would still be subject statement of additional views to the Senator Proxmire also said: to CRA, assuming that the Shelby committee report, which is unusual. ‘‘Government limits the entry of amendment is adopted. Let me say from the start, CRA is a other potential competitors.’’ tax on community banks, CRA raises That was in 1977. I have a chart that will help put that the costs of inputs to banks by increas- Clearly this is not the case. The un- into perspective for my colleagues. Al- ing their regulatory burden and com- derlying bill, H.R. 1151 does not limit, though there are 8,110 small banks pliance costs. In addition, CRA forces but dramatically increases the entry of below $250 million in assets, those banks to make loans according to a potential competitors. banks account for only $593 billion in federal quota, increasing the risks, and The bill essentially says that credit combined assets. That means small therefore the costs, of borrowing to unions can serve every group in a com- banks account for 11.7 percent of bank consumers. Make no mistake about it, munity—making them the same as assets nationwide. the Community Reinvestment Act community banks. However, one bank—BankAmerica, raises the cost of borrowing through Senator Proxmire said in 1977 regard- the new bank resulting from the merg- higher loan rates and punishes savers ing CRA justification: er of NationsBank and BankAmerica— in the form of lower savings rates. Con- ‘‘Government also restricts competi- possesses assets of $570 billion or 11.3 gress I believe should adopt policies tion and the cost of money to the bank percent of total bank assets. Thus, one that lowers the cost of borrowing, and by limiting the rate of interest payable financial giant holds assets nearly as my amendment would do that. on savings deposits and prohibiting any big as that of all 8,110 small banks I would also point out that the fed- interest on demand deposits.’’ across America. That begs the ques- eral government does not know the de- This is no longer true. tion, why do we have to burden 8,110 mand for loans any better than the The Depository Institutions Deregu- small community banks that only ac- local banker. CRA preempts the free lation and Monetary Control Act of count for such a small portion of CRA market lending criteria of community 1980 phased out the interest rate ceil- monies? The vast majority of bank as- banks and imposes the judgment of fed- ings on savings deposits and introduced sets are concentrated in the large, bil- eral bureaucrats. CRA is government Negotiable Orders of Withdrawals lion dollar megabanks that can more mandated credit allocation, the form of (NOW Accounts) that allowed the pay- easily shoulder the burden. credit allocation that has proven disas- ment of interest on demand deposits to SMALL BANKS SERVE COMMUNITIES trous most recently in east Asia. We consumers. Small community banks have an ex- have an opportunity to reduce the PROXMIRE PREMISE NO LONGER EXISTS cellent record of serving their commu- scope of government mandated credit Twenty-one years later, the ‘‘sub- nities. Since over half of all banks and allocation with this amendment, and I stantial economic benefit’’ to which thrifts below $250 million have only one urge my colleagues to do so. Senator Proxmire refers no longer ex- or two branches, they really have no I want to revisit, and give a little ists. Since the benefit no longer exists, other place to go but to their commu- history contextually. neither should the Government man- nity to do business. Of the 8,970 small HISTORY date of credit allocation. Congress banks and thrifts, only nine—.1 per- When the Community Reinvestment should lift this mandate off small com- cent—received a ‘‘substantial non- Act was introduced in 1977, the bill’s munity banks. compliance’’ CRA rating in 1997. In ad- chief sponsor and chairman of the REGULATORY BURDEN dition, small banks have a better Banking Committee, William Proxmire According to a recent Federal Re- record with regard to the most com- stated: serve study, entitled, ‘‘The Cost of mon type of community-based lend- The authority to operate new deposit fa- ing—real estate lending. cilities is given away, free, to successful ap- Banking Regulation: A Review of the Evidence,’’ regulatory costs account Banks under $250 million had a real plicants even though the authority conveys estate lending to assets ratio of 37 per- a substantial economic benefit to the appli- for up to ‘‘13 percent of noninterest ex- cant. Those who obtain new deposit facilities penses’’ of banks. That is a lot of cent in 1997 versus 23.9 percent for receive a semi-exclusive franchise to do busi- money. In addition, the study con- large banks over $250 million. ness in a particular geographic area. The cluded that ‘‘(A)verage compliance FAIR LENDING LAWS Government limits the entry of other poten- costs for regulations are substantially The small bank exemption from CRA tial competitors into that area if such entry greater for banks at low levels of out- is not about discrimination. The fol- would unduly jeopardize existing financial lowing fair lending laws will still institutions. The Government also restricts put’’—in other words, smaller banks— competition and the cost of money to the ‘‘than for banks at moderate or high apply, including: The Fair Housing Act bank by limiting the rate of interest payable levels of output’’—or larger banks. of 1968 which prohibits discrimination on savings deposits and prohibiting any in- This regulatory burden is borne out on the basis of race, color, religion, terest on demand deposits. in the efficiency rate of banks. As you sex, national origin, familial status July 24, 1998 CONGRESSIONAL RECORD — SENATE S8971 and handicap in all aspects of the hous- Senator allegedly shows that the ra- land for shedding light on this debate, ing industry; the Equal Credit Oppor- tionale no longer applies—although I because I think it is very important tunity Act of 1974 which prohibits disagree with even that assertion—let that this debate be put in context and creditors from discrimination based on me read to you. I will read the next that the whole story be told. The truth race, color, religion, national origin, sentence, which didn’t appear on the is that this debate, reduced to its es- sex, marital status, age, or receipt of Senator’s chart, I regret to say. sentials, really does relate to a fun- public assistance; and the Home Mort- Mr. SHELBY. If the Senator will damental philosophical difference. Ei- gage Disclosure Act of 1975 which re- yield—— ther you are for the politics of conflict quires banks to keep current records of Mr. SARBANES. Let me make the and anger and ‘‘I got mine, too bad for its mortgage lending activity. point, and then I would be happy to you,’’ or you understand and appre- Any assertion that small banks do yield. ciate the value of a politics based on not serve their communities rings hol- The next sentence said: cooperation, on finding common low. Small banks must serve their The Government provides deposit insur- ground, and in recognizing that, as communities if they want to survive. ance through the FDIC and the FSLIC with Americans, we are all in this together. Any claim of discrimination also rings a financial backup from the U.S. Treasury. The fact of the matter is, the CRA is hollow given the fair lending laws that ‘‘The Government provides deposit not extortion, as, apparently, it was apply to all lenders. insurance through the FDIC and the called on this floor this morning. It is CONCLUSION FSLIC with a financial backup from a perfect example of coming up with a In conclusion, Mr. President, the the U.S. Treasury.’’ construct that allows financial service Community Reinvestment Act was in- That wasn’t quoted as a rationale institutions to do good while doing troduced in 1977 by Senator Proxmire why it is reasonable to expect financial well. I think it is very important for under the premise that banks receive a institutions to look after the needs of the listening public to understand that ‘‘substantial economic benefit.’’ That their community—because they are this gives money away to no one. These benefit does not apply today as we getting a very important Government institutions are not giving away enter the 21st century. support in the deposit insurance. money. They are not losing money. The small bank exemption from CRA Now, Senator Proxmire made the They get back every cent. In fact, the would go a long way in helping reduce statement in 1977. To prove his state- loss ratio, to the extent that we have the costs and risks of mandated credit ment, in the 1980s, and to underscore studies on this, the loss ratio for banks allocation. CRA is not only a bad law the meaningfulness of the public bene- doing business under the Community for banks, but it is also a bad law for fits provided to federally insured finan- Reinvestment Act is no different. consumers. CRA forces banks to under- cial institutions during the S&L crisis, Banks have done no more poorly while write risky loans because they find the GAO report says that ‘‘the direct under CRA. The Community Reinvest- that preferable to being terrorized and and indirect cost to the United States ment Act simply provides access to vandalized by so-called community taxpayers of resolving the savings and capital for underserved communities. groups that extort money from banks. loan crisis, namely delivering on this There are those of us who think that is As a result, consumers around this insurance which is provided to them, a good thing for America, that that country are being forced to subsidize was $132 billion—$132 billion—‘‘and helps everybody, that everybody bene- this terrorist activity in the form of that does not include the interest ex- fits when we do not have whole sectors higher loan rates, lower savings rates penses associated with financing the of our country, rural areas, inner-city and a lower return on equity. direct costs of the crisis which would areas—when we don’t have whole sec- Mr. President, I ask my colleagues to drive the figure even higher.’’ tors of our country cut off from capital support this very important amend- So, please, with all respect to the flows. ment on behalf of the small community former chairman of the Senate Bank- I was going to rise in opposition spe- banks around America but, more im- ing Committee, if we are going to start cifically to the amendment by the Sen- portantly, every bank customer who doing selections out of his statements, ator from Alabama to this credit union walks in to get a loan and is forced to certainly we should include what I re- bill. But, really, my remarks have to subsidize this government mandated gard as the most important single ra- be directed, I think, at both of the credit allocation. tionale that he put there: pending amendments, both the amend- I yield the floor. The Government provides deposit insur- ment of the Senator from Alabama, as Ms. MOSELEY-BRAUN addressed the ance through the FDIC and the FSLIC with well as the amendment of the Senator Chair. a financial backup from the U.S. Treasury. from Texas. The PRESIDING OFFICER. (Mr. Now, that comes right out of the Before I speak specifically on the GORTON). The Senator from Illinois. CONGRESSIONAL RECORD of January 24, amendment, however, I think it is im- Ms. MOSELEY-BRAUN. I thank the 1977, which is what the Senator said in portant to say what a strong supporter Chair. the letter he sent to Members he was I am of the underlying bill, H.R. 1151. I Mr. SARBANES. Mr. President, will quoting from. But, unfortunately, for commend and congratulate the Senator the Senator from Illinois yield me just the purposes of clarity in debate, that from New York as well as the Senator 2 minutes without losing her right to provision was not cited. Of course, that from Maryland for their very good the floor? is the very provision that became ap- work in resolving the issues that are Ms. MOSELEY-BRAUN. Certainly. plicable in the 1980s when we had the reflected by the Credit Union Member- Mr. SARBANES. Mr. President, be- S&L crisis, and we delivered to the ship Access Act, which was reported fore the Senator from Alabama leaves tune of $132 billion in order to honor out of our Banking Committee by a the floor—because this is going to turn the deposit insurance requirements. vote of 16 to 2. The fact is this, the un- into a very interesting debate, and I Obviously, without the deposit insur- derlying legislation, responds to a rul- want to make clear the parameters of ance requirements, you wouldn’t have ing by the U.S. Supreme Court that, it, obviously—he sent out a letter these industries. They are absolutely frankly, terrified a number of people quoting Senator Proxmire. I am sure dependent on them to provide a basic that they would lose their ability to he is a good former trial lawyer, and he level of financial stability and con- participate in credit unions. Certainly would anticipate that we would go and sumer confidence. this legislation will put an end to those read all of the Proxmire statement So I appreciate the Senator yielding, fears. from which he was making selections but I thought it was important to get I believe credit unions play such an which were reflected on the chart that that on the RECORD at this point, al- important role in the panoply of finan- he just showed us. though we will bring it up again in the cial institutions in our country pre- Now, from that Proxmire statement, debate later on. cisely because we have to have ways to the very one containing these selec- The PRESIDING OFFICER. The Sen- make certain that ordinary citizens tions which the Senator says is his ra- ator from Illinois. will be able to access credit and cap- tionale for supporting the Community Ms. MOSELEY-BRAUN. Mr. Presi- ital, will have someone they can put a Reinvestment Act, and from which the dent, I thank the Senator from Mary- face on, who is in the neighborhood, S8972 CONGRESSIONAL RECORD — SENATE July 24, 1998 who is part and parcel of the commu- has been there precisely because we Another thing that CRA is not is nity. Those values, associated with fi- want to make certain that individuals, sanctions. Again, this gets to the in- nancial institutions, is just as impor- people in communities, have a chance flammatory language we heard on the tant for our country as making certain to go into their neighborhood credit floor about extortion and a gun to the that our big banks and our big institu- union or credit union associated with head and all the rest of it. There are no tions can compete internationally. We their job and borrow money for college sanctions for poor performance, no ex- have to do both. We have to have the or whatever. So there is a basis point plicit sanctions. focus and the attention paid to Main advantage that the credit unions get. What it does is, the regulators will Street, to little towns and commu- The taxpayers, all of us, all Ameri- take an institution’s CRA ratings into nities, to parents who want to send cans who pay taxes, help make that account in making evaluations with re- their kids to college, to somebody who possible. That happens any time you gard to their attempts to expand or wants to borrow for a car, somebody create a tax exemption from something merge or otherwise change the way who wants to borrow for a house or that ought otherwise be taxed. If we they do business. What you have here whatever their immediate needs are. say we are going to tax everything then is a modest attempt to provide We have to have those kinds of oppor- from here to here, from A to D, but we the basis for community reinvestment, tunities in our system of financial in- are going to exempt this little part C and even that is under attack, again, I stitutions or financial services, as well to D and say, ‘‘Because you are doing think, by some shopworn and already, as the big banks and the institutions something we like, we are not going to hopefully, discredited politics that I capable of competing with the Euro- tax you for that,’’ that tax exemption, don’t believe the American people care pean and other industrialized nation’s then, has to be made up by everybody to hear anymore. It is fighting yester- banks that can aggregate huge else, right? So it becomes what we day’s battles all over, or, as Yogi Berra amounts of capital. sometimes call a tax expenditure. would say, ‘‘It’s deja vu all over So I think making certain the credit When you take something out of A to again.’’ unions are strong and secure and able D, that little part has to be made up if The amendment of the Senator from to provide access to capital and credit you have to get to D, and that is what Alabama seeks to exempt fully 86 per- for citizens is a very, very important happens if we provide for tax exemp- cent of our Nation’s banks—that is to thing, and, again, I strongly support tions generally. Everybody chips in; ev- say, those with under $250 million in the effort by the Senator from New erybody participates. assets—from the provisions of the Com- York and the Senator from Maryland It should be for that reason, if noth- munity Reinvestment Act. This is not in hammering out the basis of H.R. ing else, that we recognize that when the first time he has offered this 1151, and I support it. you talk about policy like this, it real- amendment. In 1995, this very amend- Having said that, I want to talk spe- ly does matter, it really does come ment was considered as part of a bank- cifically about the amendment of the down to recognizing we are all in this ing regulatory relief bill. At that time, Senator from Alabama as well as, more together, that we all have an invest- the Community Reinvestment Act reg- generally, about the conversation from ment, that we all share in these poli- ulations were undergoing revision to the Senator from Texas. I sat here, cies, and that finding the place for co- make them less burdensome and more frankly, when my blood wasn’t boiling operation and common ground makes a effective for banks and customers and over some of the conversation—actu- lot more sense for our country than, consumers and communities. The ally the Senator from Alabama has a again, finding the points of conflict, of amendment was unnecessary and coun- more soothing tone so he doesn’t get anger, and of ‘‘I got mine, too bad for terproductive then. It is even more so your blood up as much as might other- you.’’ now. In addition to failing to relate to wise happen. But it occurred to me it Another thing CRA is not, it does not anything having to do with the current was really important in this debate to have an explicit credit allocation cri- reality, it fails to make the case that it tell the listening audience and the gen- teria. There are no bureaucrats. This is will help effectuate the goals of the eral public what actually is going on another one of the old saws that just Community Reinvestment Act. here, because so much information has get people’s blood boiling, ‘‘Oh boy, The attempt to describe the CRA as been left out of the conversation so far. those nasty Federal bureaucrats telling overly burdensome to banks is not In the first instance, it is important us what to do.’’ There are no bureau- true, has not been true, it is not true. to understand what the Community crats telling the credit unions, the Frankly, the banks themselves have Reinvestment Act is not. Let’s start banks or anybody else, how to do their stepped forward to tell us that they be- there. CRA is not ‘‘fair lending.’’ It has jobs. It is a results-oriented kind of lieve the CRA is a positive thing that nothing to do with race as a specific legislation. allows them to do good and to do well. thing. It is not that. It has to do with And, in fact, there are, since the 1995 Let me share for a moment some of geographic distribution of capital, so it amendments, simply three separate the comments by members of the bank- relates to communities more than any- criteria: A lending test evaluates ing industry. thing else, not so much to individuals. whether or not a bank has a record of Alan Morris, commissioner of banks That is important to keep in mind as meeting the credit needs of its local for the Commonwealth of Massachu- we talk about CRA, because this debate community. Boy, is that awful. Has the setts, Division of Banks and Loan will continue into next week. bank met the credit needs of its local Agencies: The second point I think is impor- community. I would like to dispel any myths which tant to make, again in terms of what An investment test evaluates how may still exist about CRA, myths which CRA is not, CRA is not a giveaway. well a bank satisfies the credit needs of abound not only among some bankers but Every penny comes back—or at least as its local neighborhoods through quali- among many regulators and community much as to any other lending institu- fied community investments that bene- groups. CRA makes good business sense. Of tion. It is about loans. It is not a man- fit the assessment area. Another hor- the many bank failures which occurred in dated interest reduction. It is not re- rendous extortion we were hearing Massachusetts over the last 3 years, I can as- quiring financial institutions go into about a minute ago. sure you that not one is attributable to a social work. CRA is not charity. Finally, a service test that evaluates bank making too many CRA loans. We tend As the Senator from Maryland point- to forget, after all, that sound loans to peo- how well the needs of the community ple in businesses in an institution’s own ed out, the taxpayers put up the are being met by the bank’s retail de- local community is what CRA is all about. money, really, for deposit insurance. livery systems. The false assumptions by some that low and We also have a tax exemption with re- All of these things go into defining moderate income persons are not deserving gard, at least, to the credit unions. what CRA is about. Again, it is no bu- of or cannot use banking services is harmful There are bankers, frankly, who are reaucrat telling somebody on the front to the communities, the institutions and the more than a little annoyed that credit end how to do it, but it is assessing economy. unions have almost a 30 basis point ad- whether or not the decisions were made Again, this is something that affects vantage because of the tax exemption in the private sector in an appropriate us all. If we don’t have capital flows that they enjoy. But the tax exemption way that would achieve results. going to all parts of our country, it is July 24, 1998 CONGRESSIONAL RECORD — SENATE S8973 kind of like not having blood circulate bankers wanted to complain about CRA oversight hearings and we discov- to your feet. You can either get the something, they could have brought it ered cases of small banks in which the blood circulating to your feet, or you to the attention of this committee and service area consisted of two towns, can cut it off, or you can walk around this institution. They certainly have each with a population of about 10,000. in pain and misery. We can decide we the power and clout and have never The bank in that case was found to be are going to look at abandoned commu- been too shy in other regards when in substantial noncompliance with nities with boarded-up houses, with no they needed something—when they CRA because its loan portfolio con- jobs, where people cannot access cap- needed bailing out, when they needed sisted of only 5 percent of the total as- ital and credit, or we can do something support. This institution has been very sets of the bank. to get the blood pumping into those responsive to bankers, and I suggest Now, again, 5 percent—you say, how communities. And that is what the they have not been afraid to show their could that happen? You have a bank in Community Reinvestment Act does. faces and complain about the Commu- a little town. Why would it give only 5 Another banker talking about CRA: nity Reinvestment Act. percent of its loans in the town? Well, My message is simple: Community rein- Let’s talk a little bit about the his- in some instances the investments are vestment in low and moderate income com- tory of the CRA. The CRA was passed in Treasuries and other things like munities is good and profitable business. in 1977 to combat what was called the that which wind up being more profit- Again, doing good and well at the ‘‘redlining’’ of certain neighborhoods. able for the bottom line, but it cer- same time. Redlining refers to the practice of—in tainly does not serve the interests of Nora Brownell, senior vice president, some instances, people actually found the community. And that is not where corporate affairs, Meridian Bank Cor- evidence where red lines were drawn on banking laws—again, going back to poration: maps to indicate areas that were off 1935—that is not where the banking I want to reiterate the Community Rein- limits for lending. laws want to take us. Frankly, that vestment Act offers all of us an opportunity The goal of the CRA is to encourage does not in any way reflect or relate to to address major economic development and banks to meet the credit needs of their or in any way show support back for service issues in our environment today. entire communities, including low- and the kind of support that taxpayers and The question becomes, What battle moderate-income areas—nothing more, citizens overall give to these financial are we fighting here? What is going on? nothing less. This obligation had its institutions. Why are we fighting a battle that roots, frankly, in the Banking Act of The last time the efforts were made doesn’t exist? Why are we creating an 1935 which required banks to meet the to exempt small banks from the CRA— ersatz crisis, or why are we coming up convenience and needs of their commu- I am speaking specifically to the with an ersatz solution in search of a nities, and that, of course, was reiter- amendment by the Senator from Ala- problem if the bankers don’t think a ated in the Bank Holding Company Act bama—there was an article that ap- problem exists, if the credit unions are of 1956 and, of course, the bank char- peared in the Madison Capital Times in happy with the bill as it is? ters themselves. Wisconsin. It is ‘‘Bank measure bad for I point out the letter from the credit CRA is not new, really, in that re- farms.’’ Referring to that amendment, union—what is the quote—they are gard. There is precedence in other ex- the very same amendment, this article, happy with the bill ‘‘as passed by com- isting laws with regard to the intent of ‘‘Bank measure bad for farms’’ presents mittee.’’ ‘‘As passed by committee’’ making certain that banking and that the view of a concerned rural resident does not mean either the amendment the access to capital and credit are who was concerned about the by the Senator from Alabama or the evenly and equitably distributed unpainted barns and boarded-up rural amendment by the Senator from Texas. throughout all communities. businesses that she saw in her commu- If the credit unions like the bill as it The CRA does not require any banks nity. is, if the bankers aren’t upset with the to make bad loans. It only asks them I ask unanimous consent to have this Community Reinvestment Act, what to explore good loan possibilities in article printed in the RECORD. then are we talking about and why are their entire market area. CRA opens There being no objection, the mate- we talking about it? I submit to you, I new markets and allows banks, again, rial ordered to be printed in the say to my colleagues, that the reason to do good while doing well. RECORD, as follows: we are talking about it is that some Now, it is critical, again, to keep in [From the Madison Capital Times, July 20, people like to energize conflict and mind what it is and what it is not. It is 1995] anger as a part of their politics; that not an effort to treat banks as if they BANK MEASURE BAD FOR FARMS some people like to have people mad at were arms of the Government. It does (By Margaret Krome) each other, because when they get peo- not set up banks and financial institu- Earlier this week I drove past unpainted ple mad at each other, then they can tions as social service agencies. It is barns and boarded up rural businesses on my get their voters particularly angry and not about treating them as an equiva- way to a meeting. Like many city dwellers, their supporters particularly annoyed, lent of a Government grant. This is not I fretted about the health of farms I passed and out of that annoyance, they wind giving money away to anybody. It is and small towns I drove through, but felt up getting political power. That is not a credit allocation. It is not forcing powerless to help. what I think all of this really comes somebody to give credit to a particular However, we urbanites can protest policies that actively harm rural communities. One down to. group or particular community in a such proposal is before Congress right now. I don’t mean to be nasty, and I don’t particular way. And it certainly is not It would gut a major safeguard for money mean to be discourteous to any of my about minorities. borrowers, the Community Reinvestment colleagues, but it is just stunning to I certainly hope that nobody gets Act. me that we continue to have a debate away with demonizing the Community As in all communities, rural citizens need about the burdensome nature of the Reinvestment Act on the basis of race, credit. When farmers, other small businesses, Community Reinvestment Act when or demonize it, frankly, on the basis and rural citizens deposit their money in the banks themselves aren’t complain- that it is for inner-city communities their local bank, they do so both to protect their funds and with the hope that when they ing about it. because it is not. It is about commu- want to start a new business or bring a new To say they are not complaining nities all over the country, and par- family member into their farm operation, about it because they are scared, be- ticularly in rural communities. Actu- the local bank will, in turn, lend them cause there is a gun at their head, real- ally, rural communities in some in- money. ly—that then suggests they are not stances are more challenged than our But sometimes banks, and especially many only not being burdened but they are inner-city and urban areas in terms of rural banks, establish a very different pat- too cowardly to talk about it. I don’t getting access to capital and credit. tern, where local lending takes a lower prior- think any of the people who run these It is especially important to preserve ity than making more assured investments, like federal government securities. Thus, institutions are afraid to speak up for the CRA obligations for rural banks such banks drain local resources outside of their own interests, particularly bank- when often they are the only game in the very localities that support them, mak- ers. This institution has never been town for credit purposes. Several years ing it that much harder for local citizens to known not to listen to bankers. If ago, our Banking Committee held some get credit. S8974 CONGRESSIONAL RECORD — SENATE July 24, 1998 The Community Reinvestment Act was But sometimes banks, and especially many ment to H.R. 1151, the credit union legisla- passed in 1977 to make banks more respon- rural banks, establish a very different pat- tion, that is scheduled for floor action. In ad- sive to the credit needs of the community tern, where local lending takes a lower prior- dition, Senator Gramm plans to offer an they serve. The measure provides that before ity than making more assured investments, amendment that strikes provisions, in H.R. a bank can expand, be bought, merge with like Federal Government securities. Thus, 1151 that would ensure that credit unions another, or make other changes in business such banks drain local resources outside of provide services to all individuals of modest structure, its record of community reinvest- the very localities that support them, mak- means within their field of membership. ment is reviewed. ing it that much harder for local citizens to The Shelby amendment would exempt If community members voice dissatisfac- get credit. banks under $250 million in assets from CRA tion with how the bank has met local needs, She goes on—by the way, I do not coverage. This affects over 85% of banks na- or if the bank’s local lending rate is consist- know how many people who are listen- tionally. For citizens in Iowa, Kansas, Min- ently low, it triggers a regulatory yellow nesota, Montana, Nebraska, and Oklahoma, light. Before the bank’s plans can proceed, it ing to me now got a chance to hear the 95% of the banks would be exempt. must respond to citizen concerns. earlier comments about the nasty Fed- Rural Americans need the tools of the When M&I Bank proposed to buy out Val- eral Government, but, again, here this Community Reinvestment Act to ensure ac- ley Bank holdings in 1993, for example, citi- lady is saying they are taking money countability of their local lending institu- zens in southwestern Wisconsin held meet- out of home localities in rural commu- tions. It is needed to prevent rural banks ings to raise concerns about lending prac- nities and investing them in Federal from abandoning their commitment to serve tices in that 10-county region. Without ever Government securities. the millions of Americans living in smaller becoming a formal challenge, the process re- She goes on to describe how the Com- low and moderate-income communities. Un- sulted in M&I’s working with the community fortunately, small commercial banks do not to increase agricultural and small busi- munity Reinvestment Act spurred one automatically reinvest in their local com- nesses. bank in particular to increase its com- munities. This is documented by national Despite such successes, now comes H.R. mitment to agricultural and small data on reinvestment trends and loan to 1858, the ‘‘Financial Institution Regulatory businesses. And I quote. She says: asset ratios for banks across the country. Relief Act of 1995,’’ to the rescue of oppressed .. . in rural areas, where often there is lit- 50% of small banks have a loan-to-deposit bankers everywhere. In three simple swipes, tle competition among banks, it’s wrong to ratio below 70%, with 25% of these having it effectively eviscerates the CRA. revoke one of the few accountability meas- levels less than 58%. The data for 1997 re- First, it removes a citizen’s or community ures citizens have. veals that banks under $100 million in assets group’s ability to challenge a bank’s applica- received 82% of the substantial non-compli- tion for expansion based on its prior CRA Mr. President, I believe that she is ance ratings. performance. exactly right. Even if banks under $250 We strongly urge you to oppose these Second, it outright exempts banks with million represent a small percentage of amendments to H.R. 1151. The Shelby amend- less than $100 million in assets from CRA total banking assets, they still rep- ment ignores the important regulatory regulations, which especially hurts rural resent 100 percent of options for many changes since 1995 that have significantly re- areas, where such banks are located. In fact, small town residents. duced the paperwork and reporting issues for under H.R. 1858, CRA provisions would not To go back to the article, the author small banks. The Gramm amendment will apply in 34 of the state’s 72 mostly rural also writes: strike an important provision from the bill counties. that for the first time would require credit Finally, and incredibly, it allows banks be- If rural communities are to regain the vi- unions to meet the financial services needs tween $100 and $250 million in assets to ‘‘self- tality their citizens deserve, they need true of their entire field of membership. certify’’ their CRA compliance . . . as if any help and meaningful solutions. Permitting A vote against these amendments will help bank would ever be motivated to do other- banks free rein in the name of regulatory re- meet the credit demand of millions of family wise. lief is not one of them. farmers, rural residents, and local busi- The banking community’s complaint that In addition to the article that I just nesses. Thank you for considering our con- meeting CRA regulations is too costly is un- mentioned, I would like, Mr. President, cerns. convincing, given record profits that Wiscon- to have printed in the RECORD a letter. Sincerely, sin banks have registered in recent years. This letter, which I received yesterday, Center for Community Change; Center Granted, CRA-related paperwork for some expresses strong opposition to the for Rural Affairs; Federation of South- banks has been considerable at times, but ern Cooperatives; Housing Assistance after a 2-year regulatory reform process, amendment by the Senator from Ala- Council; Intertribal Agriculture Coun- even those problems were addressed in April bama. cil; Iowa Citizens for Community Im- with greatly lessened reporting requirements It asserts that: provement; National Catholic Rural and a streamlined examination process for Rural Americans need the tools of the Life Conference; National Family small banks. Community Reinvestment Act to ensure ac- Farm Coalition; National Farmers The ‘‘reforms’’ in H.R. 1858 are not de- countability of their local lending institu- Union; National Rural Housing Coali- signed to relieve banks of onerous reporting tions. It is needed to prevent rural banks tion; Rural Coalition. requirements. They appear to be poorly dis- from abandoning their commitment to serve Ms. MOSELEY-BRAUN. In addition, guised efforts to grant banks a carte blanche millions of Americans living in smaller low- I have received many letters from com- to invest local monies in whatever ways best and moderate-income communities. munity groups and other concerned suit their private profit-making interests. This letter, by the way, is signed by There’s nothing wrong with making a prof- citizens who oppose this amendment. it, but in rural areas, where often there’s lit- 11 groups: The Center for Community I must point out that, again, in 1995, tle competition among banks, it’s wrong to Change, the Center for Rural Affairs, when this amendment was proposed be- revoke one of the few accountability meas- the Federation of Southern Coopera- fore, letters were sent in opposition by ures citizens have. tives, the Housing Assistance Council, the Save CRA Coalition and others. Historically, banking officials hold all the the Intertribal Agriculture Council, Unlike many of the special interest cards during any local lending negotiation. Iowa Citizens for Community Improve- The CRA shifts that power balance by giving groups around here in Washington, ment, National Catholic Rural Life frankly, that group’s name lets you citizens a forum to air concerns about a Conference, National Family Farm Co- bank’s pattern of lending. know exactly what it stands for. The If rural communities are to regain the vi- alition, National Farmers Union, Na- Save CRA Coalition was established to tality their citizens deserve, they need true tional Rural Housing Coalition, and defeat the amendment of the Senator help an meaningful solutions. Permitting the Rural Coalition. from Alabama when it was previously banks free rein in the name of regulatory re- I ask unanimous consent that letter offered. lief is not one of them. be printed in the RECORD. The letter they sent, opposing the Ms. MOSELEY-BRAUN. The author There being no objection, the letter weakening of the CRA, was signed by stated in the article: was ordered to be printed in the 2,181 State and local government orga- As in all communities, rural citizens need Record, as follows: nizations, for-profit businesses, com- credit. When farmers, other small businesses, JULY 23, 1998. munity groups, unions, farm groups and rural citizens deposit their money in DEAR SENATOR: On behalf of the under- and faith-based organizations from their local bank, they do so both to protect signed organizations representing rural every State in the country, the Dis- their funds and with the hope that when they Americans, we are writing to express our want to start a new business or bring a new strong opposition to legislative efforts to trict of Columbia, Puerto Rico, and the family member into their farm operation, weaken the coverage of the Community Re- Virgin Islands, by the way, including a the local bank will, in turn, lend them investment Act (CRA). Our understanding is number of organizations from Alabama money. that Senator Shelby plans to offer an amend- and Texas. July 24, 1998 CONGRESSIONAL RECORD — SENATE S8975 Now, I am going to ask that the let- ments from banks and other organizations Many others agree with the Kansas ter be printed in the RECORD also. I am nationwide. We strongly believe that the reg- City study. Most major banks, includ- not intending to filibuster, and I know ulations agreed to by the nation’s financial ing NationsBank and Bank of America, that some of my colleagues are here on regulators effectively address whatever have reiterated their commitment to weaknesses banks have complained about in the floor wanting to speak, but there is CRA’s administration and thereby bolster its the CRA. As I recall, when we last had a long, long list of organizations which successes. a hearing in the Banking Committee, are very, very recognizable that I hope Proposed ‘‘regulatory relief’’ legislation some bankers testified in favor of keep- my colleagues have a chance to take a (S. 650 and H.R. 1858) would stifle local com- ing CRA intact. In fact, I was delighted look at to see the breadth and the level munity efforts by exempting an overwhelm- at a hearing we had of the Banking of opposition to the amendment by the ing majority of banks and allowing the rest Committee. Secretary Rubin had pre- Senator from Alabama and the opposi- to abandon their commitments to millions of viously come out in support of the Americans in low- and moderate-income tion to weakening the CRA. CRA, but I actually put the question to I hope that also every Member of the communities. In addition to provisions that explicitly modify the Community Reinvest- Chairman Greenspan, who is acknowl- Senate will have occasion to at least ment Act, other provisions in this legislation edged as the guru of financial every- review the names of the organizations deter community reinvestment efforts by thing, I guess, and Chairman Green- in their own State with regard to oppo- abolishing constructive channels for commu- span reiterated or spoke to his support sition to this amendment. My own nity input in decisions regarding bank merg- of the CRA, which I was absolutely de- State, what, it is three pages—Illinois ers and other corporate expansions, and lighted about. has page 9, page 10, and on to page 11. eliminating critical data collection require- I will give an earlier statement of They are just names in a single space ments that enable objective assessments of Chairman Greenspan: of organizations in opposition to that bank performance. Since its enactment in 1977, CRA has at- When conducted properly by banks which amendment. And I am sure if I were to tracted more than $60 billion worth of in- are knowledgeable about their local mar- take Missouri or Delaware or any of vestments in low- and moderate-income kets, CRA can be a safe, sound, and profit- the other States, they would be an communities around the country, and stimu- able business. CRA has prepared financial in- equally long list. I hope my colleagues lated local economies. Every dollar spent in stitutions to discover new markets that may will familiarize themselves—or New community-based development circulates have been underserved before. York—will familiarize themselves with through the economy an estimated five I see a number of my colleagues the names of the organizations that, times through vendors, suppliers, sub- standing and looking at me. I think again, are against weakening the Com- contractors and related workers. this means I am talking too long. I In light of the success of the CRA, we urge munity Reinvestment Act. you to strike provisions within S. 650 and don’t mean to filibuster this issue. I However, I ask unanimous consent H.R. 1858 that weaken the CRA and to oppose just want to say I believe I have spoken that the letter itself be printed in the any efforts to cripple this critical law. to the issue. There are facts and figures RECORD, but not the names of the orga- Sincerely, I would like to share with my col- nizations who signed the letter because 2,181 Organizations. leagues, but I know we will have an- that would take up too much space in Ms. MOSELEY-BRAUN. One of the other opportunity to do that because the RECORD. reasons that CRA has such broad sup- we will have this issue come up again There being no objection, the letter port is very simple. It does not force on Monday. was ordered to be printed in the banks to make bad loans. It encourages Suffice it to say that expanding the RECORD, as follows: them to examine unexplored markets Community Reinvestment Act to the SAVE THE CRA COALITION, in their service area, and it, again, al- credit unions, which apparently the Washington, DC, September 7, 1995. lows a financial institution to do good Senator from Texas doesn’t like very Hon. ALPHONSE D’AMATO, while doing well simultaneously. They much, is not something which has the U.S. Senate, Washington, DC. credit unions themselves riled up. They DEAR SENATOR D’AMATO: The following make money on these loans. state and local governments organizations, My favorite CRA story is about one like the bill we passed out of commit- for-profit businesses, community groups, banker who said that he hated the tee. They don’t want to have that unions, farms groups, and faith-based organi- CRA, but he did not think it was bur- amendment. They want to see us go zations oppose legislative changes in S. 650 densome. What he hated was the fact forward with H.R. 1151. and H.R. 1858 that weaken the Community that other banks did it, too. Other With regard to the CRA-gutting at- Reinvestment Act (CRA). CRA ensures that banks were complying with CRA. He tempt, taking out 85 percent of CRA creditworthy borrowers have access to the had discovered years ago—it was kind activity that the Senator from Ala- American system of commerical credit. It bama would suggest, I submit that also has given banks an incentive to discover of a market rating situation—he dis- profitable lending and investment opportuni- covered years ago that there were is an amendment that the credit ties in rural, suburban and urban commu- many cash-poor but credit-worthy cus- unions don’t want to see on this bill be- nities. Congress does not need to revise this toms out there. And he had previously cause it is too important to them. effective law. been the only one issuing loans in cer- With regard to just an overall appeal Preservation of CRA is vital to the work of tain low- and moderate-income areas to my colleagues, let me suggest that community developers and small business in low- and moderate-income neighbor- to find a solution like these two are nationwide, CRA has been the catalyst for hoods. suggesting in search of a problem does important local alliances among financial institutions, local businesses, nonprofits, So now with CRA in place, he was not do justice to the level of the co- and state and local governments. It has led forced to compete where he had once operation that we have seen in this to hundreds of thousands of modest-income enjoyed a monopoly. And so he was an- Congress, and particularly with this families becoming first-time home owners, noyed, if you will, that his monopoly Banking Committee, that CRA gives us generated new capital for small businesses over the areas that had not had access an opportunity to find common ground, and small and mid-size family farms, and to capital and credit, except via him— to work together, and to work together made financing available for local economic that that monopoly was now opened up for the good of our entire country. The development projects. Additionally, CRA has because other institutions were begin- alternative is an appeal to conflict and spurred the creation of innovative mecha- nisms for providing credit such as revolving ning to engage in those communities, anger which I think is beneath the Sen- loan funds and consortia. because and by virtue of the Commu- ate. I hope my colleagues will join me We recognize the value of making CRA a nity Reinvestment Act. in opposing both of these amendments. more performance-based system rather than Again, he had learned a lesson that I thank the Chair. I yield the floor. a process of documentation, however federal many bankers are now learning. Be- The PRESIDING OFFICER. The Sen- regulators have addressed this issue. On cause of CRA, community reinvest- ator from New York. April 19, 1995, the four bank regulatory agen- ment is the best way to do good while Mr. D’AMATO. Mr. President, I pro- cies issued final rules making CRA compli- doing well simultaneously. And CRA is pound a unanimous consent request: ance more effective. The process of revising these regulations covered two years of in- profitable for banks. In a survey con- That the pending Gramm amendment tense deliberation; public hearings involving ducted by the Federal Reserve Bank of be temporarily set aside; I further ask hundreds of bankers, community groups and Kansas, 98 percent of banks found that that at 4:30 p.m. on Monday, July 27, local officials; and nearly 14,000 written com- their CRA activities were profitable. the Senate resume consideration of the S8976 CONGRESSIONAL RECORD — SENATE July 24, 1998 Gramm amendment, with 1 hour for de- fident that will be the case here, as dustries that compete with credit bate equally divided prior to a motion well. We will get a good, strong vote unions. During the Banking Committee to table; I further ask that the tabling provided we don’t get sidetracked on hearing of these issues, back in March, vote occur at 5:30 p.m, with no second- some side issues. Whether they have one banking industry representative degree amendments in order to the merit or not, there will certainly be stated that ‘‘credit union membership amendment prior to the vote. other vehicles in the minds of some had become so compromised that mem- The PRESIDING OFFICER. Without people, but the idea we would allow it bership was being offered to members objection, it is so ordered. to be attached to this, running the of wealthy country clubs.’’ I am not Mr. D’AMATO. I believe my col- risk—you run the risk of having this making up this example. This one actu- league from Connecticut has a brief credit union legislation collapse. If ally happened. statement. I believe he has asked our that does happen, then the resulting Needless to say, those who support other colleagues that he be recognized. consequences of that collapse will have credit unions were very upset about Mr. DODD. Let me thank my col- to be borne by those who try to take that allegation because it would run leagues who are here, and I will keep advantage of this vehicle to add extra- contrary to the thrust of what credit these remarks brief. I thank my col- neous matters. That is very, very clear unions are supposed to do. We exam- leagues from Colorado, North Carolina, to credit union members all across the ined that allegation and it is was true, and Missouri. country. in fact, that there were wealthy coun- Briefly, Mr. President, let me, first of This is an opportunity for us to act try club memberships. all, extend my compliments to the dis- on this bill. I have strong views about What they fail to tell you is that the tinguished chairman of the Banking the amendment of our colleague from people being solicited to join the credit Committee and the ranking member, Alabama on CRA. I am opposed to what union were the cooks, janitors, Senator D’AMATO and Senator SAR- he wants to do. I know there are Mem- groundskeepers, and others. They BANES, for their excellent leadership in bers who strongly agree with what he weren’t members of the country club, bringing this bill on credit unions to wants to do. But also I will tell you they worked at the country club. Yet, the floor. This is a very, very impor- that if you allow that provision to be if you listened to the allegation, you tant piece of legislation. I think most added to this bill, you are going to assumed it was people who paid signifi- of my colleagues who have followed cause this bill to fall. If that is the cant fees to join the club, rather than this debate hoped we wouldn’t have had case, then the resulting consequences, I employees. That is the sort of misin- to come to the floor with a credit think, are terribly predictable. formation that is going on to try to de- union bill. But as a result of Supreme I am not going to necessarily, today, stroy this bill and this important cred- Court decisions, we have been forced to engage in the debate on the Shelby it union organization across the coun- act, and to act expeditiously in this amendment on the CRA, Community try. Congress. In fact, as a result of a letter Reinvestment Act, except to say that I The average credit union is still very drafted by the chairman, several oth- know in my State of Connecticut for small in size. It is limited by the num- ers, and myself, we have asked the the literally thousands of members of ber of people they serve. In my State of court not to initiate their decision so credit unions, the millions in the State Connecticut—an affluent State, a that there would be time for us legisla- of New York and California and else- strong middle class State—the average tively to respond to the Supreme Court where all across this country who are size of a credit union as an institution decision. watching this debate, knowing if this is $16 million in assets. In fact, if you This is not just any other bill we are bill falls because of a desire of some to take all the assets of all of my credit bringing up that may or may not have come up with an amendment here that unions in Connecticut and total them some importance on the Legislative has some appeal, I think the trans- up, they don’t equal the assets of one Calendar. It is critical that before this parency of the efforts will be quite ob- of my 10 largest banks in the State of Congress adjourn this piece of legisla- vious that, in fact, it is really not the Connecticut. I know that is not true in tion be considered and adopted and issue of CRA. every State, but in Connecticut, which signed into law if we are going to pro- There are those who, frankly, want is a fairly affluent State and has an ag- vide the kind of relief that must be to kill this bill, who don’t like the gressive, strong credit union organiza- sought as a result of the AT&T credit credit union bill but don’t really want tion, total assets of all of my credit union decision. to take it on directly and so will offer union members don’t equal the size of Again, my compliments to the lead- an extraneous amendment, hopefully, any one of the 10 largest banks. ership of Senator DOMENICI, Senator that might just narrowly get adopted, In fact, assets of all the 11,392 feder- SARBANES, and other members of the the bill collapses, and you have been ally insured credit unions was $327 bil- Banking Committee, who voted 16–2, I able to sort of smuggle the destruction lion, or less than the size of Chase think was the vote, that brought this of this important piece of legislation Manhattan Bank or Citibank. The bill to the floor of the U.S. Senate. through. It is extremely important asset size of the 11,452 federally insured It is critically important. Why is it that we deal with this bill in as clean banks is $5.2 trillion, compared to $327 important? It is important because if a fashion as possible, no matter how billion for all the credit unions. So the we are going to see members of credit appealing some of these amendments notion that somehow this is some great unions forced to leave their credit may be. So that is important. threat to commercial banking in this unions as a result of the AT&T credit The second question obviously we country, I think, is unwarranted, it is union decision, the resulting loss of want to still address is whether or not not credible at all. Small banks and those members could cause a credit we want the maximum possible number thrifts are threatened in many ways in union to become insolvent. That is the of Americans to have the choice of this country, but I suggest that they problem here, and that in itself would joining a credit union. I think people are much more threatened by aggres- create a drain on the taxpayer-backed ought to be free to make that choice of sive banking giants like NationsBank deposit insurance fund. joining a credit union. The overwhelm- than by any credit union. The loss of So, it is very, very important we not ing majority of credit unions provide banking services in many communities allow those credit unions to run the affordable financial services to work- that I visited has much more to do risk of losing its membership as a re- ing families all across this country. with aggressive takeovers and consoli- sult of that decision or our inability to Let me draw one theme that has been dations practiced by large national fi- act and then causing these credit raised during consideration of the nancial institutions or large regional unions to fail around the America. bill—that is whether credit unions institutions than it does competition None of that will happen, obviously, if have lost their mission of serving mid- from credit unions. That is the least of we move to adopt the legislation. dle-income Americans and families of these smaller banks’ and community I point out that in the House, the modest means, which was written into banks’ threats. other body, they adopted the legisla- the original act. The question surfaced The facts show that while credit tion, I think, something like 411–8. It because of a campaign of misinforma- unions have experienced modest was overwhelmingly adopted. I am con- tion, in my view, prompted by some in- growth since the implementation of July 24, 1998 CONGRESSIONAL RECORD — SENATE S8977 the multiple common bond, that sectors of our society that have been And let me say, the changing mar- growth is dwarfed by the growth in the too often in years past denied access to ketplace has changed the banking banking industry. financial services in our country. I world too. Glass-Steagall—the bank Ultimately, the complaints of the think it would be a mistake to jeopard- law that separates banks and securities bank and thrift industry boil down not ize this credit union bill, which has firms has almost no meaning in today’s so much to a loss of market share but come out of our committee with such a society. In fact, it is little adhered to. to the fact that credit unions offer cus- strong vote and such a strong vote in Mr. President, the workplace has tomers a pretty good deal. They offer the other body. changed dramatically since 1934. The customers higher interest rates on sav- I think on Monday we can certainly era of working for one company, with ings and checking, as well as lower in- do a great deal to relieve the anxiety one occupation, with one skill—for all terest rates on credit cards and certain and fears of literally millions of people of one’s life is gone. Technology and kinds of loans; credit unions don’t across the country who utilize credit global markets have forever changed charge their customers a fee for every unions for their financial security and our way of life. conceivable type of transaction. We their futures. They are going to be ter- These changes mean that a one group have reached a point in the banking in- ribly disappointed in this body if we credit union will have difficulty surviv- dustry where seeking out a new fee in- get involved in extraneous matters and ing in today’s day and age. come has replaced seeking out new bring this bill down. So over the week- Banks used to not have banks outside loan business as the way to make prof- end, I urge that members of credit their own States, and primarily within its. unions across the country certainly let their own community. Banks used to Not only are banks generating $3 bil- their Members of Congress know how be able to sell insurance in only towns lion a year in ATM fees—a subject mat- important this bill is to them and how of 5,000 people. Now they are limited to ter that the chairman of the commit- important it would be to keep off the United States. We need to update our bank laws as tee cares deeply about—$3 billion a amendments that could destroy our well—and I hope and anticipate that we year in ATM fees in excess of their ability to pass this legislation. I thank my colleagues for their gra- can do that. costs, but some banks even started And I have not stood in the way of charging customers for using a deposit ciousness. I compliment the chairman and Senator SARBANES for their fine the bank regulators that have had to slip at branches, or for having the te- update our laws through executive ac- merity to actually call a live person— work on this bill. Mr. FAIRCLOTH addressed the tion, rather than the Congress acting. if you can ever find one—on the phone And I think the same view is reason- during normal business hours. Chair. The PRESIDING OFFICER. The Sen- able with respect to credit unions. While the banks claim that credit But—as I said—there should be some unions offer a better deal because they ator from North Carolina. Mr. FAIRCLOTH. Mr. President, I limitations—and there are limitations don’t pay taxes, that is also a fiction. rise in support of H.R. 1151. Credit in this bill. Credit unions have no access to capital unions have played an important role Credit unions do not pay taxes. I am markets to raise funds; they keep the in our financial system. They have adamantly opposed to taxing credit capital needed to stay in business only given a helping hand and a hand-up to unions. through retained earnings. That is millions of Americans whom it other- The answer to this problem is not to vastly different from what the banks wise would not have been available to. impose taxes on credit unions. The an- do. Moreover, the banks also don’t ac- Nearly 70 million Americans are mem- swer is to reduce taxes for small banks. knowledge the many tax advantages bers of credit unions. I consider myself That is why Senator ALLARD and I in- they enjoy, such as being able to write a strong supporter of credit unions. We troduced legislation yesterday to make off billions in taxes every year for loan have over 195 in my State, including tax law changes to help community losses that never occur, or for receiving the second largest in the Nation. Over banks. We need to reduce regulation for a tax credit for any minimal premium 2 million people in North Carolina are small banks—that is why I will vote for they must pay toward maintaining tax- members of credit unions. I do not be- Senator SHELBY’s amendment to re- payer-guaranteed deposit insurance. lieve that we should limit their access Credit unions are nonprofit organiza- move CRA for community banks. to credit, and it is the principal reason We do not need to punish credit tions that put their earnings into both I support the credit unions in this bill. creating capital and keeping costs unions to help small banks—I think we We have to protect and preserve credit should simply help small banks. down for their customers, the actions unions for the future. that were precisely envisioned by Con- Let me also say this. Mr. President, this bill is not without We have done a number of things to gress in establishing the Federal credit controversy. This bill started out as a unions of 1934. change and reform the credit union in- court case in my home State. The case dustry. So, Mr. President, I think there is an went to the Supreme Court that began important role that our credit unions This bill is not without tough provi- in North Carolina and was decided sions for the credit union industry and play. There is good, healthy competi- against the credit unions. tion out there. Let me end where I some of them are pretty tough provi- Now, there has been a lot of heated sions. began. That is, I urge my colleagues— conversation about this legislation. We have limited commercial loans to those of you who truly care about al- Some of what has been said is correct, be made by credit unions to 12 percent lowing the Supreme Court decision to but a large part of it has been incor- of their assets. Before now, there was be dealt with legislatively—there is rect. no limit. And there was only a study in only one window where we are going to Very simply, this is what it would do. the House bill. get a chance to do this. Even if you This legislation would allow multiple We have required the NCUA to char- find yourself attracted to a standing- groups, each with their own common ter separate credit unions where pos- alone provision on the CRA issue— bond, to be part of one credit union. sible. which I don’t, but some do—even if you The Federal Credit Union Act of 1934 We have limited the use of geo- are slightly attracted to that amend- was unclear on this point. But begin- graphic charter credit unions to a ‘‘de- ment, by supporting that amendment ning in 1982, the National Credit Union fined’’ community—so that there can- you will bring down this bill, and then Administration has allowed groups to not be abuses in the chartering of geo- people are going to understand what be part of a credit union. The real ques- graphic credit unions. happened here. tion is whether Congress will support Finally, we have imposed prompt cor- So I certainly endorse and support the policy that has, in effect, been the rective action on credit unions—and we the comments of our colleague from Il- law since then, since the 1980s. I have have essentially established minimum linois, Senator CAROL MOSELEY-BRAUN, to conclude that the Congress will, but net worth requirements for credit who speaks eloquently on the issue of they are only going to do it with some unions. the Community Reinvestment Act—the limitations. So there are many reforms to the in- strength of it, how well it has worked, Essentially, this is why we have to dustry that have not been discussed by and how well it is working in reaching change the law. the opponents of this bill. S8978 CONGRESSIONAL RECORD — SENATE July 24, 1998 Mr. President, let me just say Mr. ALLARD addressed the Chair. ness provisions that we have added to again—this is an important bill to keep The PRESIDING OFFICER. The Sen- H.R. 1151. These provisions are vital to credit unions going into the future and ator from Colorado. protect credit union members. We want into the 21st century. Mr. ALLARD. Mr. President, I rise in the credit union members’ movement If we don’t pass this bill—it is uncer- support of H.R. 1151. to remain strong and well capitalized. tain if people can continue to join cred- First, I want to begin by thanking Let me turn to the issue of taxation. it unions. And there is the possibility Chairman D’AMATO for skillfully steer- From the beginning of this debate, I that persons could lose their right to ing the Credit Union Membership Act have opposed the taxation of credit be a member of a credit union. The dis- through the Senate Banking Commit- unions. They are collective organiza- trict court has not yet decided how tee and onto the Senate floor. tions. They are not-for-profit busi- this case will be implemented. It has been a pleasure to work with nesses. They pool their assets. Their It is simply wrong to suggest that if both him and his staff on this Senate gains go back to the members as as- we don’t pass this, that given benign Banking Committee. That also is sets. They also go back to their mem- neglect, it will probably go away. It speaking in behalf of my staff also. We bers as interest, and that interest is will not. We have to pass this bill so have been very appreciative of their taxable to the credit union members. that current members are assured of work in helping us with our issues and As I said earlier, credit unions exist to keeping their status. what you are doing for credit unions. help their members, and consequently I Mr. President, I thank you and urge I am pleased to support this credit do not believe that credit unions pass passage of the bill. But let me union bill in the Banking Committee, should be taxed. I have been concerned comment also on the two pending and I am pleased to continue to sup- with the tax and regulatory burden amendments. port it now. that remains on small financial insti- First, I support Senator GRAMM’s I have always been a supporter of the tutions, whether they are banks or amendment. credit union movement. The main rea- It makes absolutely no sense to put credit unions. Consequently, I will sup- son I have been supportive is because I CRA on credit unions. Credit unions port elimination of the Community Re- felt that any competition among finan- are member organizations to begin investment Act. I support lifting the cial institutions is vitally important. with. The very nature of credit unions CRA burden on small financial institu- And, obviously, the credit unions pro- is to lend to their members. To put tions, and I support reducing the tax vide the customer another choice out CRA on it is redundant, and ridiculous. burden on small banks. there; another way of meeting his The provisions in the H.R. 1151 is re- I raised this issue during the Banking banking and financial needs. dundant, as I said, and is, frankly, ab- Committee’s hearing last month on the During my years in the Colorado surd. Anybody that has looked at it proposed financial modernization legis- State Senate I worked closely with the knows it. lation. We need to do something to Colorado Credit Union League and the I strongly support Senator GRAMM’s make certain that our small commu- amendment. We do not need CRA for numerous credit unions and members nity banks can remain viable. We do credit unions. We need to reduce the that we have in Colorado. not want those banks to drown in the burden for small banks. Every bank I have been pleased to continue my burden of regulation and taxation. that I have talked to has a problem work with the Colorado Credit Unions At the time of the hearing I had with the CRA. It is too subjective. as a member of the Senate Banking brought up a question about sub- There are too few definitive standards. Committee. chapter S corporations and independ- Mr. President, there are 185 credit Small banks spend an inordinate ent banks, and, graciously, the chair- unions in Colorado. There are 1,321,000 amount of their time and money com- man says, ‘‘You know, I think maybe credit union members in Colorado. plying with Federal law when their you are on to something. We ought to And the credit unions hold nearly $7 lending is almost totally local. continue to pursue that.’’ Con- billion in assets in Colorado. I support Senator SHELBY’s amend- sequently, because of the strong sup- ment because CRA makes no sense for Credit Unions play a vital role in our port from the chairman in trying to small banks. Small banks can’t sur- communities. They provide an oppor- give tax relief to small banks, I put to- vive, if they don’t lend in their commu- tunity for groups of people to join to- gether some legislation. This has all nity. That is what CRA says they need gether and pool their assets. resulted because a small, independent to do. But for a small bank, where else Credit Unions are run by their mem- banker from my State of Colorado de- does it lend if it is not in its commu- bers. Those members make loans and cided to share with me some ideas he nity? help each other to get ahead and build had about S corporations and how we That was the purpose of the CRA to a prosperous life for their families and could help small banks through the begin with. It simply is not today via- for their communities. Tax Code. ble. To take deposits and lend in a Let me turn to several provisions in So the chairman was very receptive small community is what community the Credit Unions bill. to those concerns. He said, ‘‘Well, let’s banks do. I am particularly supportive of the work on it.’’ We worked on it. We have The Senator’s amendment exempts new capital requirements and the introduced some legislation that will 8,000 banks. But they account for only ‘‘prompt corrective action’’ require- be helpful to small bankers in Colorado 11 percent of the assets of the industry. ments that we put in the bill during and throughout the country. In fact, these 8,000-plus banks have our deliberations in the Senate Bank- It has become very clear that small roughly the same amount of assets as ing Committee. That is because I feel banks do want something done with one of our North Carolina banks. It is so strongly that we need to work to their subchapter S corporations. The not an unreasonable amendment. make sure that our financial institu- subchapter S provisions of the Internal Small banks are shrinking, they are tions remain safe and sound. Revenue Code reflect the desire of Con- disappearing, and the more burden we I have always felt that we were par- gress to eliminate the double tax bur- put on them the less there will be. ticularly blessed to be serving in the den on small business corporations. Just as I don’t think credit unions Senate particularly during a time when Subchapter S has been liberalized a threaten big banks, I don’t think ex- our economy is doing very well. number of times, and most recently in empting small banks from CRA is a As much as I would like to hope that 1996. Yesterday, I introduced legisla- threat to the CRA. our economy continues to prosper, his- tion that will expand and improve sub- The SHELBY amendment only ex- tory has shown us that periodically chapter S of the Internal Revenue empts 11.7 percent of the assets of the there are fluctuations in our economy; Code, and this is S. 2346. I am joined in banks of this country. there are good times and there are bad this effort by Senators D’AMATO, FAIR- As I said, we have one bank in North times. If we do not make good deci- CLOTH, HAGEL, ENZI, BENNETT, MACK, Carolina with roughly the same sions today to assure safety and sound- SHELBY, and GRAMS. This legislation amount of assets. ness, it is going to create problems in contains several provisions that will Mr. President, I thank you. I yield the future. So that is why I have been make the subchapter S election more the floor. so pleased with the safety and sound- widely available to small businesses in July 24, 1998 CONGRESSIONAL RECORD — SENATE S8979 all sectors. It also contains several pro- the long run will expand the economy when we have to take a stand and do visions of particular benefit to commu- and the tax base for individual small what is right. Sometimes you can’t nity banks that may be contemplating banks, and as a result, benefit all of have the adoration of all. Better to a conversion to the subchapter S. our citizens. This effort is not only a have the respect and to do what is Financial institutions were first worthwhile endeavor, it is one that all right. made eligible for the subchapter S elec- of us should seek to support, Repub- I will be urging that of my col- tion in 1996. This legislation builds on licans and Democrats alike. leagues, and particularly those who and clarifies the subchapter S provi- Let me simply say this because I feel have concerns about the application of sions applicable to financial institu- compelled to do so. I understand the CRA on the community banks. Let’s do tions. frustrations of many of my colleagues what is right. As Congress considers credit union as we debate the question of CRA and I yield the floor. legislation and financial modernization whether or not it should be a factor for Mr. BOND addressed the Chair. legislation, it is important that we ex- small banks, whether it should be con- The PRESIDING OFFICER. The Sen- plore ways in which we can ensure that tinued, or whether it should be mod- ator from Missouri. the tax and regulatory burden on our ernized. Indeed, I think we should take Mr. BOND. Mr. President, I ask unan- community banks remains reasonable. a closer look at this issue, as Senator imous consent to proceed 5 minutes as This S corporation legislation is reflec- ALLARD has in terms of coming forth if in morning business to introduce a tive of that desire, and we will now with his legislative proposal which ad- piece of legislation. begin working with the Senate Finance dresses tax relief. The PRESIDING OFFICER. Without Committee to see if we can get this The CRA amendment regarding small objection, it is so ordered. legislation in a bill this year. banks is a broad brush, shotgun ap- (The remarks of Mr. BOND pertaining Section 403 of this credit union bill proach for those who would support the to the introduction of S. 2354 are lo- will require the Secretary of the Treas- effort of dealing with this issue in the cated in today’s RECORD under ‘‘State- ury to submit a study to Congress context of a very important legislative ments on Introduced Bills and Joint within 1 year that will make legisla- matter. It beclouds the issue. Address- Resolutions.’’) tive recommendations on how Congress ing this important matter of CRA for Mr. D’AMATO. Mr. President, I can reduce and simplify the tax burden small banks now does not help in at- think, as much as we will be returning on small banks. I hope the Treasury tempting to see to it that we remove on Monday to resume debate and con- Department will be endorsing this S barriers from honest competition, bar- sideration of the credit union legisla- corporation legislation. riers that maybe should be removed tion, which is so important, and which It seems to me that it is one of the and that we should address. But, I re- I believe will be adopted overwhelm- better ways to reduce the tax burden peat, to bring it up in this form with ingly, I urge any of my colleagues who on small banks. In the last several the limited time that we have this Ses- might want to make statements that months, there has been considerable sion will be disruptive to the overall ef- we will be available to receive those conflict between banks and credit fort. statements at this point. If not, it unions. They both play a vital role in I ask all of my colleagues, my Repub- seems to me we will then be moving, at our communities. I hope that in the lican colleagues in particular, and even the request of the majority leader, to coming months we can produce legisla- those who have signed on and indicated adjourn until Monday. tion that will strengthen credit unions support of the effort of the Senator So I am going to suggest the absence as well as community banks, and I sup- from Alabama to help community of a quorum and hope if there are any port the bill. banks, not to undertake it at this time. of my colleagues who would like to I thank the members of the commit- It actually distracts from the merits of make their statements now, opening tee, particularly the chairman, for their argument. It will prevent consid- statements or observations, that they their support of H.R. 1151, and look for- ering their concerns carefully and ana- would do so within the next 5 to 10 ward to swift passage. I am particu- lyzing what can be done to ease these minutes. larly pleased to serve on this commit- burdens, to assess if they really are I suggest the absence of a quorum. tee because of the cooperation and sin- burdensome and if so, in what way. So The PRESIDING OFFICER. The cere desire in that committee to make I am going to appeal to my col- clerk will call the roll. sure that we have strong financial in- leagues—I appeal to them today; I will The bill clerk proceeded to call the stitutions and that we have competi- appeal to them on Monday—this is not roll. tion out there, which I think is the real the time to be going forward seeking Mr. SARBANES. Mr. President, I ask answer to a lot of our problems. relief that we will not have the oppor- unanimous consent that the order for I yield the floor, Mr. President. tunity to act on in any event. It will the quorum call be rescinded. Mr. D’AMATO addressed the Chair. fracture our efforts on the credit union The PRESIDING OFFICER. Without The PRESIDING OFFICER (Mr. bill. It will at the least, the very least, objection, it is so ordered. HAGEL). The Senator from New York. bog down this effort. The House of Rep- Mr. SARBANES. Mr. President, I will Mr. D’AMATO. Mr. President, let me resentatives will not accept the bill be very brief. I know we, in effect, have just take a brief moment because I with this amendment. If they do accept concluded the debate today with re- know the Senator from Missouri has it, then what will happen is that the spect to the credit union bill, but there been anxiously waiting to seek the bill will be a vetoed. Now what are we were some comments made earlier floor. accomplishing? Why do we want to about the CRA aspects of this legisla- I thank my colleague from Colorado, confuse whether or not we are really tion, and I want to put this in the a member of our Banking Committee, supporting credit unions with this at- RECORD. as well as the Presiding Officer, for tempt at dealing with another unre- First of all, let me make it very their support not only in this endeavor lated issue? That will only serve to clear, the CRA that is being applied to as it relates to the credit unions but hurt our efforts for credit unions. the credit unions is not the Commu- for our overall legislative efforts. In- This Senator intends to support the nity Reinvestment Act. It is a provi- deed, I believe that Senator ALLARD motion of Senator GRAMM of removing sion drafted especially for the credit has offered in a most constructive way the CRA provisions from this credit unions, and it is designed to ensure an opportunity to begin to give to the union bill. But my gosh, if we are going that they pay full attention to the field small business entrepreneur, and in to begin reaching far back through ex- of membership. I think it is a reason- this case the small community bank, isting laws, without doing so in a able provision. I hope it will stay in the an opportunity to create meaningful meaningful way, then what I suggest bill. competition, to allow retained earn- what we are doing is purely mischief I know that the Senator from Texas ings to be held to avoid double tax- making. We want to be loved by all. We is trying to strike it, but, of course, he ation, and to make a very positive im- want to make everyone happy. I under- is against any CRA, any version of CRA pact on financial modernization that stand that. That is the nature of those anywhere and at any time. I disagree will lead to greater competition and in in politics. But there comes a time very strongly with that. We will have S8980 CONGRESSIONAL RECORD — SENATE July 24, 1998 an extended debate on the effort to ex- National Rural Housing Coalition, and automatically reinvest in their local com- clude some banks from CRA. the Federation of Southern Coopera- munities. There is really a basic philosophical tives, in opposition to the small bank It is a strong view that CRA has real- difference. We see the CRA as bringing exemption for CRA. ly brought investment back into the people into the mainstream of eco- I ask unanimous consent that the communities and that this has nomic life and involving them in our letter be printed in the RECORD. redounded to everyone’s advantage, in- economic process. I have spoken to There being no objection, the letter cluding—including—the advantage of many bankers who support CRA. They was ordered to be printed in the the banks. think it has produced good results. RECORD, as follows: We think that CRA has been remark- Federal Reserve Chairman Greenspan JULY 23, 1998. ably effective in encouraging both has said: DEAR SENATOR, On behalf of the under- large and small banks to look closely signed organizations representing rural The essential purpose of the CRA is to try at market opportunities in all of the Americans, we are writing to express our to encourage institutions who are not in- areas which they serve and in building strong opposition to legislative efforts to volved in areas where their own self-interest weaken the coverage of the Community Re- a better relationship between the is involved, in doing so. If you are indicating investment Act (CRA). Our understanding is banks and the community. The result to an institution that there is a forgone busi- that Senator Shelby plans to offer an amend- has been billions of dollars in market- ness opportunity in an area X or loan prod- ment to H.R. 1151, the credit union legisla- rate profitable loans in urban and rural uct Y, that is not credit allocation. That, in- tion, that is scheduled for floor action. In ad- communities that historically have deed, is enhancing the market. dition, Senator Gramm plans to offer an had difficulty in gaining access to cred- That is Chairman Greenspan. amendment that strikes provisions in H.R. it. It is being portrayed by its opponents 1151 that would ensure that credit unions That is the basic, bottom-line mes- as sort of a mandatory credit alloca- provide services to all individuals of modest sage, and it is a very good message. It means within their field of membership. tion. It certainly is not that. It is an is a very good message for the country. effort to ensure a reasonable amount of The Shelby amendment would exempt banks under $250 million in assets from CRA I very much hope that as my col- money goes back into the community. coverage. This affects over 85% of banks na- leagues think through this issue, they A number of banks have issued state- tionally. For citizens in Iowa, Kansas, Min- will appreciate the benefits that flow ments in support of CRA. They say it nesota, Montana, Nebraska, and Oklahoma, from CRA and reject the Shelby has increased their focus on their lend- 95% of the banks would be exempt. amendment, which would exclude ing performance. In fact, the Bank of Rural Americans need the tools of the banks under $250 million in assets— America said: Community Reinvestment Act to ensure ac- countability of their local lending institu- which, as I indicated, are the over- Over the past several years, Bank of Amer- tions. It is needed to prevent rural banks whelming number of banks in the coun- ica, in partnership with community organi- from abandoning their commitment to serve try—and reject the Gramm amendment zations, has developed CRA lending into a the millions of Americans living in smaller which seeks to eliminate a modest pro- profitable mainstream business. low and moderate-income communities. Un- vision in the credit union bill that And that is really what we are trying fortunately, small commercial banks do not would require the credit unions to take to achieve—a profitable mainstream automatically reinvest in their local com- a look at how they are serving their business.’’ These institutions receive munities. This is documented by national field of membership in their commu- data on reinvestment trends and loan to deposit insurance, and I earlier indi- nity, a provision which, I might note, cated the importance of that to the asset ratios for banks across the country. 50% of small banks have a loan-to-deposit the credit unions have indicated they workings of the industry and the fact ratio below 70%, with 25% of these having accept. In fact, their stated position to we had to produce hundreds of billions levels less than 58%. The data for 1997 re- us is that they support this bill as re- of dollars in the S&L crisis in order to veals that banks under $100 million in assets ported from the committee. deliver on that promise. received 82% of the substantial non-compli- Mr. President, I yield the floor. There was a problem with CRA over ance ratings. Mr. D’AMATO addressed the Chair. bookkeeping, recordkeeping, and so We strongly urge you to oppose these The PRESIDING OFFICER. The Sen- forth. Secretary Rubin led a major ef- amendments to H.R. 1151. The Shelby amend- ment ignores the important regulatory ator from New York. fort to revise the Federal regulations. changes since 1995 that have significantly re- Mr. D’AMATO. Mr. President, I must This extended over a 12- to 18-month duced the paperwork and reporting issues for say that in the areas in which my period. All groups were involved—the small banks. The Gramm amendment will ranking member, friend and colleague, bankers, the community groups, aca- strike an important provision from the bill Senator SARBANES and I have worked demics, the administration. In effect, that for the first time would require credit on in the Banking Committee, we have Members of the Congress were drawn unions to meet the financial services needs shared rather similar positions on— into the process, and, in the end, very, of their entire field of membership. well, just about 80 or 90 percent of the A vote against these amendments will help very significant changes were made. As meet the credit demand of millions of family issues we have addressed, whether it be a consequence, I think many of the de- farmers, rural residents, and local busi- on housing issues or mass transpor- fects that earlier were argued against nesses. Thank you for considering our con- tation issues or issues regarding finan- CRA were taken care of. Much of the cerns. cial services. Indeed, I almost reluc- regulatory overburden I think was re- Sincerely, tantly come to the conclusion that this moved. Center for Community Change, Center is not the appropriate time to under- The argument was made that these for Rural Affairs, Federation of South- take expanding CRA activities by pre- small banks hold only a fraction of the ern Cooperatives, Housing Assistance scribing them for credit unions. And Council, Intertribal Agriculture Coun- assets. The fact is that in 30 States, cil, Iowa Citizens for Community Im- just as I have cautioned my colleagues over 80 percent of the banks would be provement, National Catholic Rural and friends—most of them on the Re- affected by the Shelby amendment. In Life Conference, National Family publican side—that if we are to look at other words, it would exclude 80 per- Farm Coalition, National Farmers the benefits, and maybe some of the ef- cent of the banks; in 6 States, over 95 Union, National Rural Housing Coali- fects that are not beneficial which percent; in 9 other States, over 90 per- tion, Rural Coalition and the United could be the unintended consequences cent; and the remainder, the other 15 methodist Church, General Board of of a well-intentioned law—and I have States, over 80 percent. Church and Society. no doubt it is well-intentioned—it is Most of these are rural States, and Mr. SARBANES. Mr. President, I will my opinion, overall, that CRA has been there seems to be a perception that quote a portion of this letter: beneficial in attempting to ensure that CRA benefits only the urban areas of Rural Americans need the tools of the financial institutions that accept de- our country. However, rural areas, no Community Reinvestment Act to ensure ac- posits from a particular area or com- less than urban areas, are affected by countability of their local lending institu- tions. It is needed to prevent rural banks munity, direct some of those financial it. We received a letter from a coali- from abandoning their commitment to serve activities back into that community. tion of rural and farm groups, includ- the millions of Americans living in smaller Now, let us not kid ourselves. I think ing the National Farmers Union, the low- or moderate-income communities. Un- we are disingenuous if we would sug- National Family Farm Coalition, the fortunately, small commercial banks do not gest that all institutions are sure to July 24, 1998 CONGRESSIONAL RECORD — SENATE S8981 meet both a financial and moral com- Having said that, I am arguing on I think there are a couple other areas mitment and balance both. Some of one side why we should not at this where I could suggest that my col- these financial institutions have to be time be looking to simply wipe out leagues address this issue of relief for conscious of their stockholders and CRA legislation affecting community small banks, if they really want to see conscious of doing business in our very banks. I am willing to discuss this mat- this legislation enacted. And it would competitive society. And I think that ter, willing to hold hearings and will- be appropriate to undertake that, but we would be less than candid if we were ing to go forward and examine, What not here, and not on this credit union not to recognize that there have been alternative solutions can ease burdens bill. institutions over the years that have that may exist? But by the same I see the distinguished chairman of directed their investment activities token, regarding CRA-like implica- the Finance Committee is here, and I with almost a singular purpose—to tions for credit unions, I just believe it know he wants to speak to this bill. bring to the bottom line the greatest is wrong. We are talking about groups I yield the floor. profits that they can possibly derive, of people, cooperatives, who come to- Mr. ROTH addressed the Chair. without attempting to help a commu- gether by their very nature. The PRESIDING OFFICER. The Sen- nity, to derive an investment strategy When we look at this matter more ator from Delaware. or portfolio that would only give them closely—Monday, I intend to look at Mr. ROTH. I thank the distinguished the highest possible return. the profile of the credit union member. Senator from New York for yielding to I think it was as a result of looking I have to tell you, they meet the de- me. I congratulate him and his col- at activities where communities and scription when we try to encourage league, Senator SARBANES, for bringing banks were gathering deposits from making available moneys and re- this legislation before us. communities and giving little, if any, sources and to see to it, whether it be I want to take this opportunity to re- back and, indeed, engaged in the prac- the community banks or all the finan- state my support for Delaware’s credit tice of redlining—and there have been cial institutions, that they become in- unions. As we all know, months ago, a studies, these practices are docu- volved. And that is why they have Supreme Court decision placed the via- mented. The Federal Reserve Bank of come together. Their very profile, ab- bility and future of credit unions in Boston conducted a study that docu- solutely in terms of demographics, in limbo. For that reason, I am particu- mented redlining practices in Boston, terms of per capita income, meets the larly pleased that the Senate will be Massachusetts. And that is unfortu- voting next week on H.R. 1151, a bill to nate, it is an outrage. But those are the needs that we have tried to establish ensure credit unions will be able to add facts. overall through CRA. new member groups. Consequently, Congress came forth I believe it is absolutely counter- Mr. President, I support credit and passed legislation—and it is the productive to say to the very people of unions because I know how vital they law of the land—that directs credit al- these cooperatives—nonprofit institu- are to the financial health of thousands location to these areas that heretofore tions, have moneys that go right back were not receiving it, whether they be into that institution; it is their cap- of Delaware families and businesses. the rural areas or whether they be in ital, not the individual who earns These nonprofit member-run institu- the inner cities. But let us not kid our- more, or takes out more, or a stock- tions are unique. Their sole purpose is selves. Redlining was taking place, and holder—that we then place this re- to provide financial services to their it is, again, disingenuous for any of our quirement on them when it has never members at the best rates and under colleagues to suggest that it was not. been demonstrated to be necessary. In- the most favorable conditions possible. Maybe we should provide an oppor- deed a letter from the NCUA attests to Savvy consumers know that credit tunity for some of the smaller institu- that fact. I will just read part of this unions are often a great option. Their tions that have an exemplary record— letter. It was written to Phil Bechtel, ATM fees are reasonable or nonexist- and indeed I am very conscious of the chief counsel for the Senate Banking ent; single-digit credit card interest statements made in the 1997 Federal Committee, June 1, 1998, signed by rates are common at credit unions; and Reserve report, that there were only Robert Loftus, director of Public Con- your child’s first savings account won’t nine—only nine out of the thousands of gressional Affairs. face a monthly low-balance fee. I don’t community banks that were cited for It says, ‘‘Our investigations have not think I mentioned, I say to my distin- inadequate investment, not meeting produced any evidence’’—any evi- guished Senator from New York, you the goals of CRA. That is a great, great dence—‘‘that credit unions are guilty can also set up a Roth IRA. record. Maybe we could find a solution of redlining or other discriminatory All Senators have undoubtedly heard where there is a less frequent account- practices.’’ from the thousands of credit union ing or reporting process that would Given that history, let us move for- members in their States. Their mes- ease the burden, particularly for insti- ward—I support this legislation, but I sage is one of self-sufficiency and of tutions that have demonstrated that believe that the Senator from Texas is low-cost, low-fee consumer-based fi- they do care, that they have a concern, right in moving to strike this provi- nancial services. Credit unions are and that they meet their social respon- sion. I also strongly believe that, to good for families, good for businesses, sibility. That is why CRA came about— those of my colleagues who want to and they are good for Delaware. to see to it that it was not just to get give regulatory relief to the small H.R. 1115 is necessary for these valu- the highest yield every time, because banks and community banks, as well able institutions to thrive. Congress said, ‘‘We insure these, and intentioned as they are, their efforts Again, I want to thank the chairman we think there should be some effort will absolutely do nothing but delay, of the Banking Committee and the made at allocating credit, yes, in com- bring about more confusion, and the ranking member for their role in bring- munities that might not otherwise be charges that in their attempt to do ing this legislation to this point. I look as attractive for investment purposes.’’ provide relief to small banks, what forward to voting for this legislation That is what we are talking about. they are really doing is trying to de- next Monday. That is how CRA came about. So while feat this legislation. I think whether it Mr. D’AMATO. Mr. President, let me I am sympathetic to the unintended is an unintended consequence or not, thank the distinguished chairman of burdens that may have been created, I that is exactly how it is going to be the Finance Committee for his help also am appreciative of the fact that portrayed. And I will say on the floor and his work. Indeed, he and his staff there have been billions of dollars as a to my colleagues: Recognize what you are working on important legislation result of this program that have been are doing, recognize that you want to with Senator ALLARD, and I believe the invested in rural areas, in rural Amer- be loved by all. Presiding Officer and others have ica, and in urban centers that may not I think that the point can be made. I signed on to give some tax relief to the have otherwise benefitted from invest- think we can fight for regulatory re- small community banks. ment. This practice has, in turn, cre- lief. There are times and places to do The Senator and his staff have been ated profits, jobs, opportunity and hope it. But this is not the time nor the most cooperative in helping to move it for Americans that otherwise wouldn’t place. If this was the last boat going forward. I hope we would even have an be. out of town, then fine, we would do it. opportunity to do something this year. S8982 CONGRESSIONAL RECORD — SENATE July 24, 1998 Mr. ROBERTS. Mr. President, not- long history of success. Since 1992, it Rights. Reject the Republican leader- withstanding all the advice we have re- has helped banks to extend over $800 ship plan; it leaves out too many criti- ceived from Senator SARBANES and billion in loans for housing, small busi- cal protections and it leaves out too Senator D’AMATO in regard to how nesses, economic development and many patients. Even the protections it world banks make their loans or don’t, local communities across the Nation. claims to offer are full of loopholes. It and what is in the minds of country As many have said, there is no cap- is a program to protect industry prof- bankers all throughout the Nation, and italism without capital. We should op- its, not patients. without CRA we simply wouldn’t have pose any effort to reduce access to One of the most critical issues that ever made a loan in rural America, I credit which families need in order to needs to be addressed in legislation is suggest the absence of a quorum. buy a home, to start or expand a busi- the right of people with serious ill- The PRESIDING OFFICER. The ness, and send their children to college. nesses, like cancer, to get the high- clerk will call the roll. The Community Reinvestment Act is quality specialty care they need. If the The assistant legislative clerk pro- not charity. It creates a positive obli- conventional treatments fail, they ceeded to call the roll. gation for banks to reinvest in commu- should have the opportunity to partici- Mr. KENNEDY. Mr. President, I ask nities from which they receive depos- pate in clinical trials that offer them unanimous consent that the order for its. It is good business and it helps hope for improvement or a cure, and the quorum call be rescinded. communities, businesses, and families that can contribute to finding a better The PRESIDING OFFICER (Mr. ROB- nationwide; requiring similar invest- treatment for future patients. Our leg- ERTS). Without objection, it is so or- ments by credit unions is good policy. islation provides for these rights; the dered. I urge my colleagues to pass this im- Republican plan does not. Mr. KENNEDY. Mr. President, I sup- portant piece of legislation and to op- port H.R. 1151, the Credit Union Mem- Yesterday, we heard from Dr. pose these two amendments. It hurts Casimir, a distinguished Texas bership Access Act, but I strongly op- all those who want a better future for pose the amendments being offered by oncologist. Dr. Casimir talked about themselves and their families, and it some heartbreaking stories of cancer Senator GRAMM and Senator SHELBY. hurts our inner cities and rural com- patients whose HMOs delay and deny Credit unions have a distinguished his- munities who are rebuilding. Most of tory of providing affordable financial access to specialty care, often until it all, they reverse 20 years of successful is too late. She said that when she gets services to America’s low- and mod- reimbursement in our neighborhoods, erate-income communities. This legis- a patient whose cancer progressed sub- and it deserves to be defeated. stantially from the initial diagnosis to lation will help them continue to do f that. the time they are allowed to receive It is ironic that we are now debating MORNING BUSINESS specialty care, she often flips to the the issue of whether banks and credit Mr. D’AMATO. Mr. President, I ask front of the chart, and 9 times out of unions should serve low- and moderate- unanimous consent there now be a pe- 10, the insurer is an HMO. Every centi- income communities and to reinvest in riod for the transaction of routine meter a cancer grows can mean the dif- the communities in which they receive morning business with Senators per- ference between a good chance at life deposits. Massachusetts has 317 credit mitted to speak for up to 10 minutes and the likelihood of death. Every cen- unions, at 1.7 million members. They each. timeter represents potentially dev- have had community reinvestment ob- The PRESIDING OFFICER. Without astating and avoidable pain, suffering ligations for many years, and they objection, it is so ordered. and sometimes the death of a patient. have done an excellent job of meeting Mr. KENNEDY. I ask unanimous con- Dr. Casimir’s message was clear: Pass needs of consumers at all income lev- sent to be able to proceed for 15 min- the Patients’ Bill of Rights so that els. Massachusetts credit unions are a utes. more patients will not die needlessly. model for the Nation. The vast major- The PRESIDING OFFICER. Without Today, we heard from Dr. Bruce ity of banks take their community re- objection, it is so ordered. Chabner, a distinguished clinical investment obligation seriously in Mr. KENNEDY. I ask the Chair to let oncologist and cancer researcher. This meeting these obligations. me know when I have 3 minutes re- is what the doctor had to say: The Massachusetts Bankers Associa- maining. My name is Bruce Chabner and I am a med- tions, whose member banks are doing f ical oncologist and cancer researcher. I am excellent work in community reinvest- here to support the Patients’ Bill of Rights ment, does not support the Shelby PATIENTS’ BILL OF RIGHTS that would require HMOs and insurance com- amendment. Institutions which have Mr. KENNEDY. Mr. President, since panies to support clinical research. I would received outstanding ratings, like the Republican leadership plan on the like to explain briefly the role of insurance Patients’ Bill of Rights was introduced coverage in research. Most of the costs in Bank of Boston and Citizens Bank, are clinical research are associated with the cost using the Community Reinvestment a week ago, we have been holding of discovery. Laboratory experiments in the Act to provide profitable lines of busi- meetings and forums with doctors and development of new treatments are sup- ness. nurses and patients to explore the crit- ported by the Government grants, by indus- Senator SHELBY’s amendment to ical issues that must be addressed if a try, and by institutional commitments by eliminate the Community Reinvest- Patients’ Bill of Rights is to be worthy hospitals and medical schools. ment Act for 85 percent of the banks of the name. These contributions provide the hundreds would eliminate an important source of In each case, the message has been of millions of dollars that lead to new treat- affordable credit and financial services the same. The problems created by ments and new hope to millions of our pa- from low- and moderate-income fami- HMOs and managed care are pervasive tients with cancer. However, the clinical in our health system. Every doctor and treatment of these patients requires support lies who are bankable. Massachusetts for the routine care associated with these banks do not support this amendment, patient knows that. Too often, man- clinical trials. The only source of such sup- and I urge my colleagues to oppose it. aged care is mismanaged care. Every port for routine care costs is health insur- Senator GRAMM’s amendment would doctor and patient knows that medical ance and HMO contributions. say to credit unions who are being decisions that should be made by doc- This is the final step in proving that a new granted expanded power, they have no tors and patients are being made by in- treatment or a new device actually works in obligation to serve members of modest surance company accountants, and people. Without this step, research is mean- means. Both these amendments are bad every doctor and patient knows that ingless and has no impact on people, nor does policy. profits, not patients’ care, have become it save lives. We are not asking the insur- In this period of sustained economic the priority of too many health insur- ance companies and HMOs to support the growth, it is vital that all families ance companies. vast effort to discover new treatments or to bring them to the clinics. We are not asking have the opportunity to obtain credit And at each of the forums we have for support for the cost of analyzing data and in order to buy a home, start a small held, the message from doctors and support during the clinical trials. We are business, or send a child to college. The nurses and patients has been the same: only asking them to continue support for the Community Reinvestment Act has a Pass the bipartisan Patients’ Bill of patients’ care costs.