Current Events - 05/5/2003

Legislative Alert: Financial privacy (SB 1)

Senator Speier’s financial privacy legislation, SB 1, has been set for hearing in the Assembly Banking and Finance Committee on Monday, May 12^th.  Attached to this edition of the Monday Courier is information detailing the banking industry’s opposition to the bill.  Our position is to oppose SB 1 unless it is amended.  This is a substantial change from our previous position.  We are willing to accept a bill, but only if it is workable and reasonable.  The critical issues that must be addressed if we are to have a workable and reasonable bill are listed below. 

Please call or write your legislator today.  Also send a letter to the Assembly Banking and Finance Committee (see roster in the attachment).  If we do not fervently oppose this bill, there is little chance that the bill will be amended in a form that you can live with.  While we would rather see legislation pass instead of an initiative, we would rather fight an initiative than accept bad legislation.  In communicating with your legislator and the members of the Assembly Banking and Finance Committee, please stress the points contained in the attachment.  If you can add your own unique perspective to any of these points, it will personalize your communication and make it all the more effective.  Ask them to vote NO unless the bill is amended to address our concerns.

Are registered warrants in our future?

The California budget crisis may trigger the need to issue registered warrants by the state for payment of legislative staff salaries, products and services rendered to the state and/or senior administrative staff salaries.  There is no certainty as to whether or not registered warrants will be issued, but if the budget battles continue without resolution, it is anticipated that the cash flow for the state will be seriously impaired by early June of this year. 

Each institution should begin to consider whether or not it will accept registered warrants and on what terms.  It will be important for each institution to give due consideration to what is financially prudent, what is in the best interest of the institution’s customers, what is best for the State of California and what constraints exist in the competitive marketplace. The importance of each factor may vary significantly from one institution to another so individual institutional assessments are key. 

CBA will function as an information resource on an on-going basis to provide information as it is made available.  But it is important to consider the possibilities today so our members are prepared should the need arise.

Capitol Corner: What have we done for you lately?

The policy committees of the State Legislature have been operating in full gear to hear and vote upon the 2500+ bills introduced this year.  Your CBA Sacramento office has been aggressively lobbying a multitude of key issues to date with great success.

 Bills stopped

CBA already has stopped two bills on our “Oppose - Priority One” list, AB 1175 (Koretz) Consumer Credit and SB 505 (Perata) Payments: Postmarks.  CBA also worked to prevent several bills from moving forward including two bills on predatory lending: AB 832 (Montanez) and AB 485 (Ridley-Thomas); a bill on foreign language advertising: SB 584 (Alarcon); and an agricultural lending issue regarding producer liens: SB 658 (Florez). CBA lobbyists joined other business groups to oppose corporate governance bills AB 664 and AB 665 (both authored by Assembly Member Lou Correa), SB 466 (Escutia) Protective Order: Limitations and AB 1000 (Dutra) Corporations: Disclosure Statements.  As a result of our joint efforts, these bills will not be heard or voted upon this year. 

Seeking amendments

In addition, CBA has been negotiating amendments to several measures including a key credit reporting bill, AB 800 (Kehoe) and AB 1705 Trustee Liability which are top priority issues for the association.  We have successfully amended, and have commitments for further amendments from the Department of Financial Institutions (DFI) to limit the application of the DFI’s Administrative Civil Penalties bill, AB 1355 (Wiggins) to be consistent with the direction provided by our Community Banker Advisory Committee. 

Credit union bill

Our record, however, is not perfect. We suffered a set-back in seeking passage of our credit union study bill, AB 1226 (Montanez), when it was heard in Assembly Banking Committee last week.  The credit unions packed the hearing room and provided five letters of opposition to the measure for each letter our bankers wrote to their legislator or phone call our bankers made.  The member response to our Calls to Action and Legislative Alerts was not as high as we had hoped. 

Fortunately, we do not need a bill to request that the study is conducted of the anti-competitive effects of credit unions with non-traditional membership bases and expanded products and services.  Our bill’s author, Assembly Member Cindy Montanez, has agreed to request that the Legislative Analyst’s Office conduct the study of these credit unions to determine whether or not there is need to adopt stricter regulatory controls such as express capitalization rates, stricter loans to one borrower rules and insider loan controls. 

In addition, the study will examine whether or not non-traditional credit unions should be subject to state taxation and should assume community reinvestment obligations.   Further, CBA has assembled a Credit Union Advisory Committee composed of CBA members to develop and adopt a state and federal strategy to address the anti-competitive effects of credit unions and strengthen membership involvement in the implementation of the strategy.  

Our legislative efforts on AB 1226 were not in vain as we now have focused legislative attention on the issue of the non-traditional credit unions.  It will be up to us to retain and intensify that focus for the long term with a well-defined strategy that enlists all aspects of federal and state action and a fully involved membership action plan.

Fla. Tax study has credit unions on ‘Orange Alert’

The following is an excerpt of a recent article from American Banker:

A study conducted by the nonpartisan group Florida TaxWatch and paid for by the Florida Bankers Association says that the state’s credit union tax exemption has become “harder to justify” as credit unions have grown and begun offering many of the same services as their tax-paying competitors.

With less than 10 working days left in the state’s legislative session, Mark Ivester, a spokesman for the Florida Credit Union League, says that it is unlikely that the study will generate a bill this year to tax credit unions…According to the study, released last week, “large credit unions that compete directly with other financial institutions were not envisioned when the tax exemption was written into law.”  The exemption, which so far has saved Florida’s credit unions a total of $102 million per year on taxes, allows credit unions to pay higher deposit rates, charge lower loan rates, and build capital more quickly, the study said.

CBA Legal Awards Announced

During CBA's 36th Annual Bank Counsel Seminar on April 10 in Newport Beach, the CBA Almon McCallum Award was presented to the family of Ullar Vitsut on his behalf.  This award, named after the former CBA general counsel who established the Bank Counsel Seminar, recognizes in-house bank attorneys for distinguished and meritorious legal service to the California banking industry.  Mr. Vitsut, who passed away last year, was for many years the head of Bank of America's litigation group in Southern California.  His exceptional legal and interpersonal skills made him a prominent and respected litigator in the financial community.  Throughout his long career at Bank of America, Ullar was a mentor for numerous attorneys. 

The CBA Frandzel Award was presented to Stanley Farrar, a partner with the law firm of Sullivan & Cromwell.  The award is presented for superior and noteworthy legal assistance by an outside counsel to the California banking industry, and is named after Robert Frandzel, a prominent attorney and long-time friend to the California banking industry.  Mr. Farrar has represented numerous banks on mergers and acquisitions, and is a trusted advisor to bank boards on corporate governance matters.  Both awards are sponsored by the CBA Legal Affairs Committee.

 Legislative meetings update

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.

You are welcome to phone in to a grassroots conference call (888/903-2663) every Thursday afternoon (4:00 pm – State Legislature / 4:30 pm – House of Representatives) prior to a scheduled district office meeting(s) to discuss CBA’s priority issues and to answer any questions you may have regarding meeting with your legislator.

DATE	TIME	LEGISLATOR	LOCATION
May 14 ***	4:00 p.m.	Assembly Member Darrell Steinberg (CBA Facilitator: Doug White)	State Capitol Sacramento
May 16 ***	10:15 a.m.	Senator Roy Ashburn (CBA Facilitator: Bob Longatti)	Bakersfield
May 16	10:00 a.m.	Assembly Member Bob Dutton * (CBA Facilitator: Rich Jett)	Rancho Cucamonga
May 16 ***	1:00 p.m.	Assembly Member Tom Harman (CBA Facilitator: Rich Jett)	Huntington Beach
May 16	2:00 p.m.	Assembly Member Jay La Suer (CBA Facilitator: Doug White)	La Mesa
May 16 ***	10:00 a.m.	Assembly Member Keith Richman (CBA Facilitator: TBA)	Granada Hills
May 30	2:00 p.m.	Senator Dick Ackerman (CBA Facilitator: James Clark)	Tustin
May 30	3:00 p.m.	Assembly Member John Campbell (CBA Facilitator: James Clark)	Irvine
May 30	11:00 a.m.	Assembly Member Dario Frommer (CBA Facilitator: Ray Dumser, Verdugo Banking Company, Glendale)	Glendale
May 30 ***	2:00 p.m.	Senator Sheila Kuehl (CBA Facilitator: Don Robinson, Bank of the West, Los Angeles)	Los Angeles
May 30 ***	10:00 a.m.	Assembly Member Sarah Reyes (CBA Facilitator: Bob Longatti)	Fresno
June 6	11:00 a.m.	Assembly Member Jerome Horton (CBA Facilitator: Richard Proudfit, Gateway Business Bank, Cerritos)	Inglewood
June 6 ***	10:00 a.m.	Assembly Member Bob Pacheco (CBA Facilitator: Rich Jett)	City of Industry
June 13	10:00 a.m.	Assembly Member Ed Chavez (CBA Facilitator: Rich Jett)	City of Industry
June 13 ***	4:00 p.m.	Assembly Member Manny Diaz (CBA Facilitator: Bob Longatti)	San Jose
June 13	10:00 a.m.	Assembly Member Rick Keene (CBA Facilitator: Steve Johnson, Butte Community Bank, Chico)	Chico
June 13 ***	2:00 p.m.	Assembly Member Gloria Negrete McLeod (CBA Facilitator: Tim Walbridge, 1st Centennial Bank, Redlands)	Montclair
June 20 ***	10:00 a.m.	Assembly Member Christine Kehoe (CBA Facilitator: Mike Jones)	San Diego
June 20	10:00 a.m.	Assembly Member Carol Liu (CBA Facilitator: Rich Jett)	Pasadena
June 27 ***	2:30 p.m.	Assembly Member Paul Koretz (CBA Facilitator: Tom McCullough, First Regional City, Century City)	West Hollywood

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