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Advocacy Alert- 04/15/2002

After CBA holds legislative conference in Washington

California bankers were in Washington last week for a series of meetings with legislators, regulators and administration officials. CBA met with FDIC Chairman, Don Powell, Comptroller Jerry Hawke and Treasury Assistant Secretary Sheila Baer. The group also met with the chairs of the two financial institutions subcommittees with direct jurisdiction over deposit reform legislation, Sen. Tim Johnson (D-South Dakota) and Rep. Spencer Bachus (R –Ala.), and with more than half of the California Congressional delegation, taking the industry’s message on deposit insurance reform, the realtor bill, terrorism insurance and credit unions to these officials.

Key hearings scheduled in Sacramento

Hearings for two key pieces of legislation, AB 1775 (Nation) and SB 1877 (Johnson) will be heard in this week in Sacramento. AB 1775 by Assembly Member Joe Nation is the latest financial privacy proposal and is set to be heard by the Assembly Banking Committee on Monday, April 15. The second bill, CBA-sponsored SB 1877 (Johnson), would repeal the sunset on the provision of law that allows CBA’s health trust to negotiate with health insurers for reimbursement for administrative services provided. It will be heard by the Senate Insurance Committee on Tuesday, April 16.

FHFB hearing on capital plans

Upset about a condition that the Federal Housing Finance Board (FHFB) imposed when approving the Seattle Bank’s capital plan (in effect requiring System users to capitalize their transactions), three banks —Chicago, Cincinnati and Pittsburgh — persuaded the Board to hold a hearing on why they should be able to use excess capital contributed by others to capitalize mortgage purchase transactions.

The Board granted their request, and a hearing was scheduled for Thursday, April 10, but there is no indication the Board will back down from its position. These three banks do not have activity-based capital requirements for asset sales in the capital plans they have submitted, and will argue that they cannot compete with Fannie Mae and Freddie Mac which do not require customers to purchase stock as a condition to selling mortgages.

Much of the industry, however, believes that the cooperative nature of the System would be compromised if there were to be, in effect, a category of stockholders that do not transact much, if any business. ACB is a strong advocate for activity-based capital. ABA has taken no position. Those supporting the Board’s apparent decision to mandate activity-based capital also argue that the capital plans of the regional banks must have some overall “commonality” which, they contend would not be the case if three of the twelve did not require members to capitalize their own transactions.

House repasses bill authorizing interest on business checking and Fed reserves

Heeding a call from President Bush to pass interest on business checking, the House has passed the bill again, H.R. 1009, with but minor modifications to the earlier version, H.R. 974 that passed a year ago. The hope is to prod the Senate to act on the legislation which has been pending for many years, but there are few signs that the Senate will do so. The House measure would authorize banks and thrifts to pay interest on business checking accounts and would also authorize the Fed to pay interest on reserves. The legislation would lift the ban on interest payments two years after enactment and it would also expand the number of transfers from money market accounts into interest bearing accounts from six per month to 24.

Bush pushes Senate to act on terrorism insurance

President Bush also spoke out this week on terrorism insurance asking the Senate to pass the measure passed late last year by the House that would provide for Government backed terrorism insurance. California bankers in Washington this week for the annual legislative conference also took the message to Congress, pointing out, as the president had, that construction projects are going unfunded because building developers are unable to obtain adequate insurance.

Baker to introduce “balanced” realtor bill prohibiting realtors from making mortgages

Rep. Richard Baker (R - La.), the Chairman of the House Subcommittee on Capital Markets, Insurance and GSEs plans to introduce his own version of “the realtors bill” next week.  The Baker version would prohibit banks and their holding companies from engaging in real estate brokerage, but he would also prohibit realtors from engaging in any aspect of mortgage lending.   Baker will be looking for co-sponsors of his bill.   Many bankers might want to help him.