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Current Events - 11/13/2000

Election aftermath: Both houses of congress remain in Republican control, though by even smaller margins, and the banking industry lost some key figures. Gone are: 20-year member of the House Banking Committee Bill McCollum, housing subcommittee chairman Rick Lazio and member Tom Campbell, Senate Banking Committee members Rod Grams, Connie Mack and Richard Bryan, and Senate Finance Committee Chairman William Roth. Senator Phil Gramm will be back as chairman of Senate Banking, and the top House Banking leaders will be returning, with Rep. Marge Roukema and Rep. Richard Baker expected to vie for the leadership post. Chairman Jim Leach was reelected but is required by Republican party term limits to relinquish chairmanship. 

Despite these changes, most of the banking- related bills still pending before congress adjourned are not likely to see life during the remainder of the congressional session. Little can be done to overcome President Clinton’s threat to veto the bankruptcy bill, and even if Bush wins the presidency, bankruptcy reform advocates may give up on the present efforts under the hope of a better bill next congress. The tax bill that included interest on corporate checking and retirement savings incentives, which offered the potential for bragging rights, is even less likely to pass now that the elections are over.

At the state level, the election results have further strengthened the Democrats’ control of the legislative process and the reapportionment of legislative districts in the near future. They now enjoy a 50-30 advantage in the Assembly and a 26-14 advantage in the State Senate. They also picked up four congressional seats to increase their margin in the California delegation to 32-20. CBA does not expect these changes to have any material impact on the issues we will be handling in Sacramento. As has been the case for several years, the large influx of new members from both parties caused by the term limits turnstile presents a much larger educational challenge for the industry than any modest changes in the relative strength of the two parties. Please make an appointment to meet new members of the Legislature and Congress in your area at the earliest opportunity. Contact Mary Maybie in our CBA Government Relations Office if you need information about your new elected representatives (phone: (916) 441-7377 Ext. 207; e-mail: mmaybie@calbankers.com).

Subprime and predatory lending. A bit of good news comes from the Federal Financial Institutions Examination Council, which decided to delete the requirement to disclose subprime loans in the call reports. The reason is the difficulty of defining “subprime.” Earlier, the FDIC proposed to require additional capital against subprime loans, but encountered the same definitional problem and withdrew its proposal. Still, we can expect these and other agencies to generate additional guidance on subprime lending. Efforts to stop its insidious variant, predatory lending, are coming from all sides, most recently in California from the cities of Oakland and, now, the city of Sacramento. What these cities purport to do is to ensure that any financial institution doing business with them are not engaging in predatory lending, however defined. CBA is actively monitoring developments to ensure whatever definitions and restrictions are applied are narrowly tailored to actual perpetrators.

Compensation & Benefits Survey 2000 — Salaries for bank CEOs increased by 4.2%; chief operating officers by 11.1%, CFOs  5.0%; and chief credit officers 9.3%. These are findings from CBA’s Compensation & Benefits Survey 2000. The most popular incentives — bonuses — were delivered at 99 out of 138 banks responding to the survey. Stock options continue to be popular, primarily at senior executive levels, according to CBA Vice President and Controller Elinor Heller.

Directors’ compensation increased from $14,505 to $16,901 annually, and board chairman fees rose to $1,200 per meeting from $1,000 last year.