Executive briefing

Northwestern Financial Review, Sep 18, 1999

S.900's Future Uncertain

Little progress has been made to solve differences in the Senate and House financial reform bills, said Phil Gramm, Senate Banking Chairman on Sept. 9. Gramm said negotiations will go into next year, and that he was prepared to start over in the next Congress if a good bill doesn't emerge. Among the issues of concern are the Community Reinvestment Act, consumer privacy and operating subsidiaries.

Bankruptcy Reform Readied

A deal made between lawmakers, credit card companies and retailers should allow for bankruptcy reform to pass the Senate, said bill sponsor Sen. Chuck Grassley, R-Iowa. Under the Senate bill agreement, credit card issuers would have to display a "minimum payment warning" on the front of customers' monthly credit card statements. Meanwhile, a group of 82 university law professors said the bill would not stop abuses of the bankruptcy system. "The `means test' may not identify individuals with the ability to repay a substantial portion of their debts, while at the same time it may work considerable hardship on financially-strapped individuals and families filing bankruptcy petitions that are not abusive," the professors wrote.

Trade Groups End Merger Talks

Talks potentially leading to a merger between the American Bankers Association and America's Community Bankers were called off on Sept. 8 after the two groups could not agree upon board leadership. The two groups surprised many in late July when they announced merger plans, but differences scuttled the endeavor. Among the differences were the ABA wanting a majority of the seats on the new board and making its executive director, Don Ogilvie, leader of the combined groups. The Independent Community Bankers of America reported that it was not surprised by the news and noted that it is "increasingly difficult for financial trade associations to serve many masters."

Banks Tighten Lending Rules

Bankers have tightened business-lending terms over the past three months, but consumer-lending standards remained stable, according to a Federal Reserve survey of 56 big U.S. banks and 22 branches of foreign banks operating in the United States. About a fourth of the respondents said they clamped down on commercial and industrial loans by imposing higher risk premiums and greater loan rate spreads between what they charge borrowers and what they pay for funds to lend. Virtually no banks changed terms or standards for credit card and other types of consumer loans. Banks reported no increases in consumer loan and credit card delinquencies.

Montana will join the rest of the union next month in allowing its state-chartered banks to sell insurance. Under a new state law, a bank or subsidiary will be able to sell annuities, credit life and disability insurance, but not title insurance. Banks also can act as insurance adjusters, consultants or administrators.

FDIC Reserves Hit Record

The FDIC had nearly $40 billion in reserves-a record $4.5 billion more than required by law-as of June 30. The Bank Insurance Fund had $29.8 billion or $1.40 for every $100 in insured deposits, while the Savings Association Insurance Fund (SAIF) had $9.2 billion or $1.29/ $100. About $950 million was stripped from SAIF in January to create a secondary reserve. Congress mandated a reserve ratio of $1.25 percent in 1989, but hasn't provide the FDIC any means of refunding extra reserves.