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Advocacy Alert- 09/30/2002

Distinguished Banker of the Year nominations

CBA is in the process of securing nominations for its Distinguished Banker of the Year award, an annual award announced at the Bank Presidents seminar in January. You will find the nomination form included in this edition of Monday Courier. Please complete the form and return it to Tama Clare in CBA's San Francisco office by November 15. All nominations will be submitted to the CBA board of directors, which will in turn, decide which banker will receive the award. If you have any questions, please call Tama Clare at 415/284-6999 ext. 217.

Nominate state legislator for CBA honor

Included in this edition of Monday Courier, is a nomination form for CBA members to use to nominate state legislators for a special honor at the beginning of 2003. Those submitting nominations are asked only to quantify and qualify the legislative contributions of their nominee(s) and submit the form to Yvette Ernst in the Sacramento office no later than November 15. All nominations will be given to the State Government Relations Committee which will ultimately decide which nominee will be honored.

SBA says guaranteed loan limit will be $500K on October 1

Ratcheting up the continuing battle between SBA and the administration on one side and the Congress, the financial industry and the small business borrowing community on the other, SBA has refused to lower its subsidy rate to 50 basis points as it promised to do in earlier Congressional testimony.

Leaving the rate at 80 basis points, far in excess of any recent loan loss experience, the agency now says it will be necessary to cut the maximum Sec. 7(a) guaranteed loan amount from $1 million to $500,000. The same agency inexplicably says it is considering opening up the program to credit unions as well. Since the agency has not used the full amount of its Congressional subsidies for several years, Congress cut guarantee fees last year. The SBA now asserts the lower fee schedule as another reason for the cut in loan amounts. Meanwhile efforts are underway in Congress to require the agency to use the lower subsidy rate and restore prior loan amounts. The CBA board this week voted unanimously to contact the California Congressional delegation urging Congressional intervention to resolve the matter.

Action on deposit insurance reform grows less likely as Congress running out of time

The long odds against deposit reform legislation being enacted this year are getting longer. Despite an overture from House Chairman Oxley that he would be willing to drop the controversial provision raising the general insurance ceiling by $30,000, time is running out. Senate Chairman Sarbanes has not indicated any interest in moving the bill this year.

Treasury Undersecretary Peter Fisher told a financial club he addressed last week in Washington that the Administration wants to enact legislation now but he then proceeded to excoriate the Independent Community Bankers of America for insisting on a ceiling increase. When he spoke, the rug had not yet been pulled from under the ICBA by Oxley. For his part, FDIC Chairman Don Powell claims there is a 75 percent likelihood that BIF-insured banks will pay premiums next January, unless, of course, the legislation is able to advance this year. Even Powell's "threat" may ring hollow because the BIF ratio is now above 1.25 percent because insured deposits actually declined slightly during the second quarter. The growth, of late, has not been in insured deposits.

There are other differences between industry groups in addition to the ceiling issue that Congress needs to resolve if the legislation is to proceed this year or next. CBA and ACB want FDIC to be authorized to assess free riders of the future…and Undersecretary Fisher concurs. ABA is focusing on assuring limits on the size of future premiums. Still, if a ceiling increase really is off the table, an agreement could be reached early next year on the rest of the package.

Price for federal privacy pre-emption will be very high

The Senate Banking Committee held a hearing last week on the subject of financial privacy. It featured several witnesses who support much stronger privacy laws and only one representing the industry. Worse yet was the support from the committee's ranking Republican, Alabama conservative Richard Shelby who praised Chairman Sarbanes and called his GLB amendment authorizing states to enact more stringent privacy amendments "the most important provision in the bill."

Privacy advocates were particularly critical of the length of opt -out statements, calling them incomprehensible. They advocate much stronger protections, some believing that all information sharing, even between affiliates, should be on an opt-in basis only. Sarbanes said the issue would not go away next year. Because either he or Shelby will be the chairman next year, it seemed a safe prediction. An industry witness called for federal pre-emption, stating that the financial community could not function with a series of conflicting state laws. Consumer advocates and two state attorneys general seemed unmoved by industry concerns calling the opportunity for states to act the great hope for innovation in protecting privacy.

OTS angers some by removing pre-emption of prepayment and late fees

Some in the thrift industry were upset that OTS has finalized its plans to revoke Parity Act pre-emptions that enabled state-chartered lenders to ignore state limitations on late charges, prepayment penalties and other similar fees. California thrifts, which are only federally chartered did not oppose the OTS decision.

La Falce bill would authorize new credit union powers

Rep. John LaFalce, the ranking Democrat on Financial Services who is retiring from the Congress after this session, stunned bankers and thrift executives this week when he announced to a credit union audience he would introduce a bill expanding their geographic reach and their operating powers before stepping down. He said his bill would provide expanded small business lending powers, and make it more difficult for credit unions to convert to mutual savings bank charters which some have done. From a Congressman who has championed freedom of charter choice, this latter provision is inexplicable. Rep. Barney Frank, who will succeed LaFalce as ranking Democrat on the panel, did not promise new powers but he did assure an approving audience that no one would tax them.

New Credit Card Committee

CBA is organizing a new Credit Card Committee for members because the credit card portion of the banking business has increasingly been the focus of problematic state legislation. Membership has expressed an interest in developing a policy committee dedicated to address credit card related issues that are often complex and controversial.

If your institution is interested in participating on the new credit card committee please contact Pat Zenzola at pzenzola@calbankers.com or by calling Pat at 916-441-7377, ext 210. In the communication please provide feedback regarding bank individuals that can participate on the committee and provide any necessary contact information. The committee will most likely include two face-to-face meetings annually and will include monthly conference calls during legislative session.

CBA's IRA Compliance Committee

The Retirement Benefit Plans Committee of the Western League has become a new committee under the CBA and is now called the IRA Compliance Committee.

The committee is comprised of retirement plan compliance or regulatory officers, operation managers and business analysts from retirement or trust departments of various banking institutions. The committee meets throughout the year dependant upon new legislation that would impact retirement plans and operations. The next meeting
will be held in Newport Beach, California on October 18, 2002. Discussion topics include: compliance with the final RMD regulations, new net income calculation rules, new amendment plan compliance and voting for new Chair and Vice chairpersons.

All the CBA member bank retirement plan or trust department personnel are invited to this committee meeting. If you are interested please contact Gretchen Brosius of CBA's Banker Benefits at 800-208-0222, X5010 or gbrosius@bankerben.com. For questions regarding the committee, its mission and purpose, please call James Martini at (661) 267-5818 or via e-mail at james.martini@wamu.net.