Executive briefing

Northwestern Financial Review, Feb 20, 1999

Committee Conducts Reform Hearings

Lawmakers will target March 4 for financial reform committee debate, said House Banking Committee Chairman James Leach (R-Iowa), and ranking minority member John LaFalce (D-N.Y.). After three days of hearings, congressmen and regulators still have a ways to go on agreement. Two bills are being considered; Leach's offering has the support of Federal Reserve Board Chairman Alan Greenspan; and a bill by LaFalce has the Treasury Department's backing. Leach's bill would lift the barriers between financial services industries, and give the Fed more power over new financial activities. LaFalce's compromise bill allows bank operating subsidiaries to conduct securities underwriting and merchant banking. However, insurance underwriting and real estate investment would be carried out in bank holding company units. Greenspan rejected the compromise, saying that risky operations shouldn't be placed within banks, but under their holding companies, thus protecting taxpayers from bank bailouts.

Credit Union Bill Debated Key House Banking Committee members used a Feb. 3 hearing to threaten to block a new policy designed to ease credit union membership limits. Among those to criticize regulators for violating the intent of Congress on the National Credit Union Administration's (NCUA) expanded membership rules were Rep. Marge Roukema, (R-N.J.), the House Banking's financial institutions subcommittee chairwoman; Rep. Douglas Bereuter, (R-Neb.) and Rep. John LaFalce, (D-N.Y.). The field-of-membership rule allows occupation-based credit unions to expand by accepting members from unrelated companies. Bankers testifying before the subcommittee included Harley Bergmeyer, Saline State Bank, Wilber, Neb., for the American Bankers Association, and Leland Stenehjem, First International Bank, Fargo, N.D., for the Independent Bankers Association of America. Also, a Feb. 23 hearing has been set in the lawsuit filed by the ABA against the NCUA.

Know Your Customer Revisions Sought

House Banking Committee Chairman James Leach, (R-Iowa) has written to four federal banking regulators urging revisions to the proposed "Know Your Customer" regulations. Leach recommended that the regulation be reviewed "to limit the regulatory burden it would impose upon financial institutions - particularly small banks and thrifts - and reviewed to give greater weight to the privacy rights of customers of financial institutions." Also, Senate Banking Committee Chairman Phil Gramm of Texas and Sen. Bob Bennett of Utah on Feb. 10 asked regulators to withdraw the Know Your Customer proposal. The two Republicans said the proposed rule would violate citizen's privacy rights. The rule is designed to help curb money laundering and illicit activities by bank customers.

IBAA Asks For More Farm Aid

Farmers should receive more conqressional aid including several billion dollars in payments and improved crop insurance laws, according to a letter from the Independent Bankers Association of America to Rep. Larry Combest, (R-Tex.), chairman of the House Agriculture Committee. Anticipating that crop prices will remain low due to surpluses, the IBAA asked Congress to increase funding for the Farm Service Agency programs, which guarantee farm real estate loans and lines of credit. The Department of Agriculture's budget for this fiscal year is about $54.3 billion.