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Advocacy Alert- 02/18/2002

Bankers Take Capitol by Storm

One hundred and five California bankers turned out for CBA’s Bankers Legislative Conference on February 5 and 6, making it one of the most successful legislative events in CBA’s history.

In addition to the 105 CBA members who participated in legislative briefings and meetings with their elected officials, CBA’s Bankers Legislative Conference drew 37 members of the California State Legislature. Countless other legislators were represented by their senior staff members at CBA’s reception and dinner events.

Attending from the California State Senate were Dick Ackerman (R-Irvine), Dede Alpert (D-Coronado), Jim Battin (R-La Quinta), Senate Privacy Committee member Joseph Dunn (D-Santa Ana), Sheila Kuehl (D-Santa Monica), chair of the Senate Banking, Commerce & International Trade Committee Mike Machado, (D-Linden), Tom McClintock (R-Thousand Oaks), Bruce McPherson (R-Santa Cruz), Senate Banking, Commerce & International Trade Committee member Dick Monteith (R-Modesto), Bill Morrow (R-Riverside), Rico Oller (R-San Andreas), Senate Privacy Committee member Chuck Poochigian (R-Fresno), and Jack Scott (D-Altadena). CBA’s members were also brief on the state’s budget situation by Senator Jim Brulte (R-Rancho Cucamonga), who heads the Republican Caucus.

Meeting with CBA’s members were 23 members of the California State Assembly, including Elaine Alquist (D-Santa Clara), Patricia Bates (R-Laguna Niguel), Russ Bogh (R-Yucaipa), Bill Campbell (R-Villa Park), John Campbell (R-Irvine), Rebecca Cohn (D-Saratoga), Lou Correa (D-Santa Ana), Dave Cox (R-Fair Oaks), Lynn Daucher (R-Brea), Sally Havice (D-Cerritos), Fred Keeley (D-Boulder Creek), Jay LaSuer (R-La Mesa), Alan Lowenthal (D-Long Beach), Abel Maldonado (R-Santa Maria), Gloria Negrete McLeod (D-Chino), Joe Nation (D-San Rafael), Robert Pacheco (R-Walnut), chair of the Assembly Banking & Finance Committee Lou Papan (R-Millbrae), Anthony Pescetti (R-Rancho Cordova), Helen Thomson (D-Davis), Juan Vargas (D-San Diego), member of the Assembly Banking & Finance Committee Patricia Wiggins (D-Santa Rosa), Mark Wyland (R-Escondido), Phil Wyman (R-Tehachapi) and Charlene Zettel (R-Poway).

Though each speaker and panelist offered a unique perspective on California’s priority issues and political climate, perhaps the most interesting was the presentation given by Assembly Member Joe Nation, who is drafting an alternative to SB 773. Key in Nation’s discussion was the distinction between “sensitive” and “non-sensitive” information, and the ways in which each could be used and shared and for what purpose. Also important in this discussion was the need for at least one opt-in component. Nation suggested that an appropriate opt-in would be one required for financial institutions sharing the information with a non-financial third party for marketing purposes.

CBA continues to work toward the defeat of SB 773 and looks forward to reviewing a draft of the Nation bill, AB 1775, as soon as it’s available. If you are interested in participating in CBA’s media efforts to defeat SB 773, please contact Anissa Yates at 916/441-7377 ext. 210. Also, please keep AB 1775 top-of-mind, as additional information will be provided to you as soon as possible.

Enron dominates congressional agenda

Perhaps the biggest business scandal ever, issues surrounding Enron could eventually involve more than a dozen different congressional committees. Congress will consider how better to protect employer controlled retirement savings plans, reforms of the accounting and investment banking industries, and what more the regulators (SEC) might have done to protect Enron employees and victimized investors.

The financial industry is at risk in being caught up in legislative solutions to Enron that go off in unanticipated directions. Just last week, the chairman of the powerful House Commerce Committee, Rep. Billy Tauzin (R-La.), raised questions about combinations of investment and commercial banking, asserting that large financial conglomerates had made investments in doomed Enron special partnerships in return for promises of investment banking business. Similar questions have been raised about large banks extending credit directly to Enron in exchange for such promises of underwriting business. Combining investment with commercial banking was the cornerstone of Gramm-Leach-Bliley. While the Commerce Committee no longer has jurisdiction over the securities industry, and the committee that does (Financial Services) has given no indication that it intends to pursue the issues raised by Tauzin, few would have thought that the underpinnings of GLB would have been shaken by the Enron scandal.

Deposit reform package introduced in House, companion expected in Senate

The House Financial Institutions Subcommittee is gearing up for the consideration of a deposit reform package with the introduction of H.R. 3717 – the bill authored by subcommittee chairman Rep. Spencer Bachus (R-Ala.) Full committee chairman Oxley has laid out an ambitious schedule of hearings, followed by subcommittee markup in March, and full committee markup in April. Key provisions of the Bachus bill would:

• Merge BIF and SAIF;
  
• Increase the general deposit insurance ceiling to $130,000, increase the ceiling for qualified retirement savings accounts to $260,000, and pool insurance for municipal deposits up to the amount of the total equity capital in an institution. Coverage would then be indexed for inflation, with the first adjustment in 2010 and every ten years thereafter;
  
• Eliminate the 1.25 percent cliff and replace it with a range of 1 to 1.5 percent to be set by FDIC pursuant to specific legislative criteria. FDIC would designate the target ratio prior to the beginning of a calendar year and would be required to take public comment before making it final;
  
• Re-institute (risk-based) premiums (thought to be in a range of 2 to 4 cents for most banks) that could be offset by credits to the extent that there is an excess reserve over 1.25 percent. An institution’s credit would be based on its proportionate share of total insured deposits as of December 31, 1996. The credits would, according to the Financial Services Committee, offset new premiums for “an average of three years”; and
  
• Authorize FDIC to rebate or provide credits to the industry if the target ratio exceeds 1.4 percent and mandate rebates of amounts in excess of 1.5 percent.

The Senate bill will be co-sponsored by Sens. Tim Johnson (D-S.D.), the chairman of the financial institutions subcommittee, and Chuck Hagel (R-Neb.). Senate staffers indicate that they are uncomfortable with the House provision on municipal deposits. One option under consideration would provide coverage on 80 percent of all municipal deposits and require collateralization on the remaining 20 percent. Other minor differences are likely.

The House hopes to pass a reform package this spring, but the outlook in the Senate is far less certain. There are still hurdles, even in the House. Ranking Democrat LaFalce (D-N.Y.) called the Bachus bill “seriously flawed” and did not co-sponsor it. Some large banks are still highly skeptical of any legislation that re-imposes premiums. But backers of the legislation received help from an unlikely source, the OMB, which forecast in the President’s budget message that owing to projections of bank failures in 2002, premiums may need to be levied on BIF-insured institutions in 2003 in order to maintain the 1.25 percent DRR. Prospects of 23 basis point premiums might turn some opponents into advocates, but others will be wondering what happened to prompt corrective action.

Johnson abruptly schedules hearings on realtor bill; 30+ Californians are co-sponsors

As an indication of the intensity of realtor pressure on members of Congress, Sen. Tim Johnson, who has not signed on as a co-sponsor of the Senate version of the realtor bill, has been cajoled into scheduling (date not yet announced) a hearing on the subject. Realtors blanketed South Dakota with newspaper advertisements pointing out how many Members of Congress had signed on to what realtors call “The Community Choice” bill and that Johnson, who faces a very stiff re-election challenge, was doing nothing to allow the bill to advance in the Senate (where there are only seven co-sponsors presently). Not anxious to deal with any negative publicity, Johnson will hold a subcommittee hearing pitting a bank witness against a realtor witness, and perhaps no other witnesses.

Meanwhile, the realtors continue to make massive headway in the House, where the co-sponsor list is now up to 140 including some 34 members of the California delegation. CBA is now focusing on the 18 Californians who have not yet signed on as co-sponsors. They are: Reps. Gary Miller, George Miller, Pelosi, Tauscher, Stark, Honda, Dooley, Thomas, Dreier, Waxman, Becerra, Royball-Allard, Royce, Lewis, Rohrabacher, Cox, Issa and Davis. Bankers who know any of these members are urged to contact their district offices over the Presidents Day recess asking that they not co-sponsor the realtor bill, H.R. 3424.