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Advocacy Alert- 02/17/2003

Gregory O. Wilhelm

Gregory Otis Wilhelm, CBA Director of Government Relations for more than 13 years, succumbed to the fatal effects of Lou Gehrig's disease (amytrophic lateral sclerosis) early Sunday morning, February 9, 2003. Although no details have been finalized at the date of this writing, it is anticipated that a memorial service will be conducted in the Bay Area later this month. CBA will disseminate that information to all members as soon as it becomes available to us. Greg was an accomplished lawyer and respected advocate who made the world a better place because he inhabited it. He will be greatly missed.

National Teach Children to Save Day

Every year, the American Bankers Association encourages its members to participate in National Teach Children to Save Day - an educational program that provides schoolchildren (K-12) with materials on how to save money, how interest works and the concept of budgeting. Included in this issue of Monday Courier, is the press release from the ABA offering more information and those to contact if your institution wants to participate. If you would like to participate, but would rather have CBA coordinate your participation, please contact Anissa Yates at 916/441-7377 ext 208 or ayates@calbankers.com.

Administrative civil penalties update

CBA staff was joined by Kent Steinwert, CBA State Government Relations Committee chair, in a drafting session with the Department of Financial Institutions legal and legislative staff regarding the proposed legislation relating to administrative civil penalties. CBA staff extends their thanks to Bill Wade and Mike Mallow of the Kilpatrick and Lockhart LLP law firm for the invaluable legal research they provided. No consensus has yet been reached on the need for legislation but it was agreed among the parties to conduct a further meeting with DFI staff on the issue.

Key SBA bill passes Congress

The House this week passed a bill previously passed by the Senate that should pave the way for the reinstatement of the $1 million loan ceiling under the popular Sec. 7(a) Small Business Loan Program. The legislation that passed this week requires OMB to change its methodology for estimating losses under the program. As a result, subsidy dollars will fund nearly twice as many loans as was the case before the legislation.

This legislation has been a major priority for CBA. Late last year, California Reps Darrell Issa (R) and Lucille Roybal-Allard spearheaded a California Member letter pointing out the impact of the crisis in California to Speaker Hastart, and CBA worked along with them asking the entire delegation to sign the letter; 35 of them did so. In fact, Rep. Roybal-Allard credited CBA in a statement commemorating passage of the bill. "I was pleased to work with Rep. Issa and the California Bankers Association in organizing a letter to Speaker Hastert pointing out the…severe impact it would have on California's small businesses." Rep. Issa issuedthe following in a statement: "The subsidy rate for the 7(a) program has not accurately reflected the actual performance of these loan portfolios since the passage of the Credit Reform Act in 1990." Congress is also expected to "reprogram" funds not spent under the "Star" program for Sec. 7 (a) loans. That provision is contained in the omnibus spending package that may be passed by the end of the week (see separate story).

House, Senate negotiators ponder omnibus spending package; Realtors may succeed in obtaining six month moratorium on brokerage powers

As Congress attempts to wind up its agenda before breaking for the President's Day break, negotiations are under way on a massive spending package that would fund the government for the balance of the fiscal year. There were reports of a tentative agreement to include a moratorium that would deny authority to the Treasury Department to finalize a proposal authorizing national banks to engage in real estate brokerage. Such a moratorium would not change the Gramm-Leach-Bliley Act but it would send a chilling message to both Treasury and the Federal Reserve. There were furious lobbying efforts by the entire financial community, including CBA, aimed at convincing negotiators to remove the moratorium. There was no guarantee that there would be an overall spending agreement before the adjournment. Thus it is possible that the government will be funded by a series of continuing resolutions for the balance of the fiscal year in which case the realtors would lose their vehicle.

Privacy pre-emption and deposit reform on congressional agenda

Privacy and the federal pre-emption issue made headway in Washington this past week with the announcement from Rep. Spencer Bachus that he would introduce privacy legislation containing a federal pre-emption. He called it the most important issue on the agenda of the Financial Institutions Subcommittee which he chairs. Bachus also sponsored the legislation that was introduced late last week on deposit insurance reform.

As important was the announcement from the Senate Banking Committee chaired by Sen. Richard Shelby that hearings would be scheduled soon on both the deposit reform and the expiration of the pre-emption provisions under the Fair Credit Reporting Act which expire at the end of 2003. These pre-emptions forbid any state from passing any law or regulation that interferes with the flow of information to or from credit reporting agencies. If the pre-emptions are to be extended, federal privacy standards will be tightened. Federal preemption of state and local privacy laws is a major legislative objective of the CBA.

Legislation to expand sub-S being circulated

Legislation that would expand subchapter S (titled the "Small Business and Financial Institutions Tax Relief Act of 2003") was being circulated this week among Ways and Means Committee members in search of co-sponsors. California's Rep. Bob Matsui has been a leader of this effort in the past and is likely to be a co-sponsor of the measure being circulated by Colorado Republican Scott McGinnis, a member of the Ways and Means Committee. The bill would double the number of eligible shareholders from the present 75 to 150. It would grandfather IRA shareholders and provide relief to sub-S banks that earn passive investment income. It would also allow preferred stock to be issued and it makes other changes to make it easier for community banks to use subchapter S. CBA is working closely with California Members of the Ways and Means Committee.

The following meetings have been scheduled between CBA members and their elected officials. If you would like more information on these meetings, or would like to participate in any of the meetings, please contact Mary Boruff at (916) 441-7377, ext. 207. If you are not available, please consider sending an officer from your bank.

* Freshman legislator
** Meeting rescheduled – new time
*** Meeting rescheduled – new date/time