[Congressional Record Volume 140, Number 29 (Wednesday, March 16, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 16, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
  COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS ACT OF 1993


                           Amendment No. 1528

    (Purpose: To authorize a study of the effects on small business 
 concerns in the forest products industry of designating the northern 
                  spotted owl as a threatened species)

  Mr. PACKWOOD. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. Would the Senator seek consent to set aside 
the pending amendment?
  Mr. PACKWOOD. I ask unanimous consent to set aside the pending 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The legislative clerk read as follows:

       The Senator from Oregon [Mr. Packwood] proposes an 
     amendment numbered 1528.

  Mr. PACKWOOD. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place in the bill, insert the following 
     new section:

     SEC.   . STUDY OF EFFECT OF THE NORTHERN SPOTTED OWL ON SMALL 
                   BUSINESS CONCERNS.

       (a) Definitions.--For purposes of this section--
       (1) the term ``Administrator'' means the Administrator of 
     the Small Business Administration; and
       (2) the term ``small business concerns'' has the same 
     meaning as in section 3 of the Small Business Act.
       (b) Findings.--The Congress finds that--
       (1) a critical and worsening timber supply shortage exists 
     within the social and economic area that generally 
     corresponds to the range of the Northern spotted owl, 
     including Western Oregon, Western Washington, and Northern 
     California, as a consequence of various actions by the 
     Federal Government aimed at stabilizing and recovering the 
     Northern spotted owl as well as other species thought to be 
     associated with old-growth forests; and
       (2) numerous small business concerns rely for their 
     livelihood on the adequate harvest of timber from Federal and 
     non-Federal lands within the range of the Northern spotted 
     owl and related species.
       (c) Business Study.--The Administrator shall conduct a 
     study that analyzes--
       (1) the nature and extent of economic losses to small 
     business concerns in the forest products industry that have 
     occurred subsequent to the designation of the Northern 
     spotted owl as a threatened species pursuant to section 4 of 
     the Endangered Species Act of 1973, or that are reasonably 
     likely to occur in the future as a result of present trends;
       (2) the ability of small business concerns to recoup the 
     fair market value of equipment and other property employed in 
     the harvest and processing of timber prior to the listing of 
     the Northern spotted owl as a threatened species; and
       (3) the ability of small business concerns in the affected 
     area to offer alternative products or services for which 
     there is a ready or likely suitable market.
       (d) Report.--
       (1) In general.--Not later than 6 months after the date of 
     enactment of this section, the Administrator shall submit a 
     report of the results of the study conducted under subsection 
     (c) to the President and to the relevant committees of the 
     Senate and the House of Representatives.
       (2) Options.--The report shall include options for Congress 
     and the President for compensating small business concerns 
     for economic losses and for promoting business transition and 
     diversification.
       (3) Consultation.--In preparing the report, the 
     Administrator shall consult with small business concerns in 
     the forest products industry, and shall solicit comments from 
     the public.

  Mr. PACKWOOD. Mr. President, this is a simple amendment and it calls 
for a study. It does not call for expenditure of any money other than 
what the study may cost.
  It is an amendment to require the Small Business Administration to 
conduct a study of the effects of the northern spotted owl on small 
business concerns.
  Numerous small business concerns rely for their livelihood on the 
adequate harvest of timber from Federal and private lands in the range 
of the northern spotted owl. This amendment will require the Small 
Business Administration to analyze the ability of small business 
concerns to recoup the fair market value of equipment used in the 
harvest and processing of timber prior to the listing of the northern 
spotted owl.
  The Small Business Administration will also analyze the ability of 
small business concerns to offer alternative products or services for 
which there is a ready or likely suitable market.
  Not later than 6 months after the enactment of this amendment, the 
Small Business Administration must submit a report of its findings.
  Mr. President, the market for used sawmill and logging equipment has 
become saturated since the spotted owl was listed as a threatened 
species.
  This equipment is selling for a fraction, a very small fraction of 
its fair market value at the time the spotted owl was listed as a 
threatened species.
  The Clinton administration proposes an economic and community 
assistance program that will provide modest assistance through the 
Rural Development Administration and Economic Development 
Administration. I support that.
  But, Mr. President, I am afraid that barely scratches the surface. 
That is why I am calling on my colleagues to support the amendment 
which directs the Small Business Administration to fully analyze the 
need for assistance and the adequacy of current and proposed Federal 
programs.
  It is my hunch that the Small Business Administration will find an 
enormous gap between what is needed and what may become available for 
the future.
  Let me use a couple examples if I might, Mr. President.
  Sawmills. You hardly think in terms of used equipment as a sawmill, 
but a used sawmill will sell now for about 5 percent of its former 
market value. There is no timber. A sawmill is of no use if there is no 
timber. The best you can do is scrap it and hopefully use the equipment 
that is in it at some other mill that may have access to timber 
someplace else in the country.
  Or you are an independent contracting log truck driver. You own your 
own truck--and this is very common. You own usually one truck. You 
repair it yourself; you work 8, 10, 12 hours a day hauling logs under 
contract. The log truck is not good for anything else. You do not use 
it to haul asphalt. You do not use it to deliver bread. You use it to 
haul logs.
  When the Federal Government, because of the Endangered Species Act 
and the spotted owl, stops the harvest of logs, you, through no fault 
of your own, have lost in essence all of the value of your truck.
  So all I am asking with this amendment is that the Small Business 
Administration do a study of these effects. I am not asking that money 
be appropriated. I am not asking that the Federal Government buy the 
trucks or buy the mills. I am simply asking that we have a study so 
that we might know the effect in, and they are usually rural areas--
small town areas, might know the effect of these Federal actions on 
these small businesses.
  I thank the Chair. I hope that the amendment would be adopted.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. PACKWOOD. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. PACKWOOD. Mr. President, I ask unanimous consent that Senator 
Gorton be added as a cosponsor of the pending amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                          TITLE I, SUBTITLE B

  Mr. D'AMATO. Our amendment includes language directing the Federal 
Reserve Board to prohibit acts or practices in connection with mortgage 
lending that it finds to be associated with abusive lending practices 
or otherwise not in the interest of the borrower. I believe it would be 
helpful if we took this time to elaborate on this provision and how we 
intend it to be applied by the Federal Reserve.
  Mr. RIEGLE. Certainly. I am extremely concerned about evidence that I 
have received indicating that lenders are repeatedly refinancing home 
equity loans, rolling the borrower from one loan into another. In the 
process, the lender extracts points and fees on each new loan while 
extending little in the way of new money.
  I am including for the Record a case that I have received from the 
National Consumer Law Center as an example. In this instance, an 
elderly Massachusetts couple wound up refinancing their loan 8 times in 
39 months. Each refinancing included a prepayment penalty of 6 months 
interest as well as other fees. They finally repaid the loan through 
yet another refinancing with a different lender. By the end of the 
process, they had received a total of $48,630. For use of that amount, 
they paid $85,410.
  In the version of subtitle B of title I of S. 1275 reported by the 
Banking Committee, we attempted to address this problem by preventing 
lenders who refinanced loans covered by the legislation from charging 
points or fees on any portion of the loan refinanced. The lender could 
only charge points on new money originated.
  This approach is problematic, however, as it eliminates the incentive 
for a lender to refinance even when the terms of the new loan are 
clearly more advantageous to the borrower. Even worse, it seemingly 
encourages refinancings that enlarge the outstanding balance in order 
to generate fee income.
  Given these problems, we have removed this restriction from the 
legislation and replaced it with a directive to the Federal Reserve 
Board. The directive instructs the Board to prohibit ``acts or 
practices with regard to refinancings of mortgages that the Board finds 
to be associated with abusive lending practices.''

  To illustrate such practices, I have included for the Record a flyer 
that was sent to the elderly Massachusetts couple to whom I have 
already referred. As I mentioned, this couple refinanced their loan 
eight times in 39 months, incurring prepayment penalties and fees each 
time. The flyer shows how the lender encouraged these transactions. In 
bold type, the solicitation offers to the borrower a ``$5,000 
guaranteed increase to your loan.'' What the borrower receives, 
however, is not a $5,000 increase, but a new loan that generates $5,000 
in new money. At the same time, the transaction generates prepayment 
penalties on the old loan, as well as origination fees on the new loan.
  The directive also instructs the Board to prohibit practices 
associated with refinancing that are ``otherwise not in the interest of 
the borrower.'' As you are aware, we gave considerable thought to 
preventing the charging of points and fees on any refinancing that is 
not in the interest of the borrower in this legislation. We abandoned 
this language for fear that a vague standard in this area would lead to 
endless litigation. I would expect, however, that the Board could 
identify standards that could be applied. Clearly, there are 
refinancings that are undoubtedly in the interest of the borrower. When 
a 15-percent mortgage is replaced with a 10-percent mortgage of similar 
term with no points and fees, the borrower is certainly better off.
  At the same time, however, there are also refinancings that clearly 
are not in the interest of the borrower. Lenders who convince borrowers 
to pay substantial prepayment penalties and origination fees in order 
to obtain new loans on substantially similar terms and without 
significant new money originated are simply rolling the borrower to 
generate fee income.
  These sorts of practices must be stopped. We have attempted to draw 
bright lines in this legislation in order to minimize any impact on the 
rest of the mortgage market. In areas that did not lend themselves to 
clear statutory tests, we instead have relied on the Board to address 
abusive lending practices. There should be no mistake about our 
intentions, however. These abusive lending practices are going on, and 
we want them stopped. I expect that the Board will act as we have and 
stop unscrupulous lenders from strip mining the equity out of 
borrowers' homes.
  Mr. D'AMATO. I have one other question. The bill provides for civil 
penalties for failure to comply with any requirement under section 129 
of truth in lending. Would a violation of a Federal Reserve Board 
regulation promulgated under section 129 constitute a violation for 
which civil liability may be found?
  Mr. RIEGLE. Absolutely, it is well established that a violation of a 
regulation promulgated under a statutory provision is a violation of a 
requirement under that provision.
  Mr. D'AMATO. I thank the chairman for his explanation. I agree with 
his analysis.
  Mr. RIEGLE. I ask unanimous consent that flyers and a case study of 
the Massachusetts couple to which I previously referred be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                       Case Study--Mr. and Mrs. H

       Mr. H is 77 years old and Mrs. H is 70. They have lived in 
     their home in Mattapan, Massachusetts for 25 years. In 
     September 1986, the H's entered into the first in a series of 
     seven high interest rate mortgage loans with Financial 
     Enterprises Corporation. The H's were referred to FEC by a 
     loan broker because they sought to consolidate their car loan 
     and a credit card bill. At the time, they owned their 
     $140,000 home free and clear of liens.
       The September 1986 mortgage was at an initial rate of 16.5% 
     and was purportedly for the amount of $20,650. Of the $20,650 
     proceeds of the loan, $800 was paid to Bernard Shuster as an 
     attorney fee and $700 was paid to the loan broker. Bernard 
     Shuster was president and chief operating officer of the 
     company. The loan note contained a penalty of six months 
     interest in the event of prepayment during the loan term.
       Almost immediately after the loan was made and at all times 
     during the course of dealing between the H's and FEC, FEC 
     sent the H's monthly notices informing them they were 
     eligible for guaranteed new loans for additional small 
     amounts of cash. The notices did not inform the H's that the 
     new loans would require a prepayment of their prior loan with 
     a resulting prepayment penalty. Copies of some of the 
     advertisements are attached.
       In response to the advertisements the H's went to FEC for 
     the following series of refinancings:
       a. On December 31, 1986, the H's obtained additional cash 
     in the amount of $1,553.21. In addition, the principal paid 
     in the new loan included a prepayment penalty of six months 
     interest and an attorney fee of $500 paid to Bernard Shuster 
     for a total new obligation of $23,000 at 16.5% interest.
       b. The H's went to FEC for refinancing on February 5, 1987 
     and obtained additional cash in the amount of $10,091.62. In 
     addition, the new loan included a prepayment penalty of six 
     months interest and an attorney fee of $250 payable to 
     Bernard Shuster for a total new obligation of $33,700 at 
     16.5% interest.
       c. The H's went to FEC for refinancing on September 1, 1987 
     and obtained additional cash in the amount of $5,083.68. In 
     addition, the new loan included a prepayment penalty of six 
     months interest and an attorney fee of $500 payable to 
     Bernard Shuster for a total new obligation of $39,400 at 
     16.5% interest.
       d. The H's went to FEC for refinancing on September 9, 1988 
     and obtained additional cash in the amount of $4,382.48. The 
     new loan included a prepayment penalty of six months interest 
     and an attorney fee of $500 payable to Bernard Shuster for a 
     total new obligation of $45,000. At the time of this 
     transaction, the initial interest rate for the loan increased 
     to 17% even though prevailing interest rates had decreased.
       e. The H's went to FEC for refinancing on March 16, 1989 
     and obtained additional cash in the amount of $3,296.45. The 
     new loan included a prepayment penalty of six months interest 
     and an attorney fee of $500 payable to Bernard Shuster for a 
     total new obligation of $50,000. At the time of this 
     transaction, the initial interest rate for the loan increased 
     to 18.5% even though prevailing interest rates had 
     decreased.
       f. The H's final loan with FEC for refinancing was made on 
     June 26, 1989. They obtained additional cash in the amount of 
     $5,072.53. The new loan included a prepayment penalty of six 
     months interest and an attorney fee of $850 payable to 
     Bernard Shuster and a $125 fee for document preparation for a 
     total new obligation of 57,800 at 18.5% interest.
       Copies of the loan disclosures for each transaction are 
     attached. Between each refinancing the H's made all payments 
     due on the loans as scheduled. Nevertheless, due to 
     prepayment penalties invoked by FEC, at the time of each and 
     every refinancing, the principal claimed due on the prior 
     loan was actually greater than the principal loaned by FEC to 
     the H's in that prior loan. For example, even though the H's 
     made 12 payments on the September 1, 1987 loan before 
     refinancing on September 9, 1988, FEC claimed that the 
     balance owed on the prior loan had increased from an initial 
     balance of $39,400 to $40,117.52, presumably because of 
     prepayment penalties. FEC repaid itself that amount in the 
     refinancing of September 9, 1988.
       By bifurcating the loan transaction into seven 
     transactions, FEC not only benefitted by invocation of hidden 
     prepayment penalties which consecutively ratcheted up the 
     principal of each loan, but also, FEC principal Bernard 
     Shuster collected $3,900 in attorney fees for work performed 
     which would not have been due in a single transaction.
       Sometime after June 26, 1989, FEC gave the H's name to a 
     loan broker without their authorization. The broker called 
     the H's out of the blue and offered to arrange a loan for 
     them at a lower rate than their loan with FEC. In November, 
     1989, that loan broker arranged a mortgage loan for the H's 
     with a third party lender. FEC, after invoking additional 
     prepayment penalties, was paid at least $64,800 from the 
     proceeds of that loan.
       Over a thirty-nine month period, FEC advanced the H's no 
     more than $48,629.97. Over that same period, FEC was repaid 
     at least $85,410.14. (By way of comparison that payback on a 
     39 month loan of that size would have an effective APR of 
     38%.) Each and every transaction between the H's and FEC was 
     fully secured by a mortgage taken by FEC on the H's 
     residence. The H's residence had a fair market value in 
     excess of $140,000. By June 26, 1989, FEC held seven open 
     mortgages. (Retention of open but paid mortgages has long 
     been used in the industry to scare off companies willing to 
     provide alternate financing at lower rates. See Bookhart v. 
     Mid-Penn Consumer Discount Co., 559 F. Supp. 208 (E.D. Pa 
     1983)). None of the abusive loan terms in the series of 
     transactions can be justified by market forces, because full 
     security based on the value of the H's residence meant that 
     FEC could obtain repayment by foreclosure if the H's couldn't 
     pay. (FEC, has in fact, commenced approximately 250 
     foreclosures in Massachusetts and has threatened many more.)
       Although the series of transactions started out with 
     relatively modest payments of $310.54, the final transaction 
     involved payments of more than $1,000, an amount which 
     exceeded 60% of the H's fixed income. Although the H's made 
     payments for several years on the last in the series of 
     transactions, (because Mr. H returned to manual labor), 
     payments could not be made after Mr. H became too disabled to 
     work. The third party lender which paid off FEC is now 
     foreclosing.
                                  ____


                             [Flyer No. 1]

       You Qualify for a $5,000 Guaranteed Increase in Your Loan

       Dear Valued Customer: Now that the Fall is approaching, we 
     are pleased to offer you a guaranteed addition to your 
     present loan--to use in any way you see fit.
       This is the ideal time to make those final improvements to 
     your home before the winter arrives. You may need to upgrade 
     your heating system, obtain a new roof, new siding, 
     insulation or replacement windows.
       Or . . . perhaps you would like to purchase a car, 
     consolidate your outstanding debts or pay for the coming 
     year's tuition costs . . . We will increase your present loan 
     for any worthwhile reason.
       This exceptional offer is valid only to you for 60 days 
     upon receipt of this letter. If you would like to take 
     advantage of this offer please call Steve Burns at our toll 
     free number 1-800-538-6900.
       If you satisfy some basic conditions, we can have the money 
     in your hands in days.
           Sincerely,
                                                      Steve Burns,
                                            Financial Enterprises.
                                  ____


                             [Flyer No. 2]

       You Qualify for a $7,500 Guaranteed Increase in Your Loan

       Dear Valued Customer: Now that the Spring is approaching, 
     we are pleased to offer you a guaranteed addition to your 
     present loan--to use any way you see fit.
       This is an excellent opportunity to get additional cash 
     that can make your life better . . . major home improvements, 
     remodeling, vacation or almost any personal or business 
     reason where extra cash can help. And best of all, you can 
     receive additional funds in three business days!!!
       Or . . . perhaps you would like to purchase a car, 
     consolidate your outstanding debts or pay for the coming 
     year's tuition costs. We will increase your present loan for 
     any worthwhile reason.
       This exceptional offer is valid only to you for 60 days 
     upon receipt of this letter. If you would like to take 
     advantage of this offer please call Steve Burns on our toll-
     free number, 1-800-538-6900.
       If you satisfy some basic conditions, we can have the money 
     in your hands in days.
           Sincerely,
                                                      Steve Burns,
                                       Financial Enterprises Corp.

  Mr. WOFFORD. Mr. President, I support the Community Development 
Banking and Financial Institutions Act. I believe it will spur lending 
in underserved areas and I believe it will help the private sector to 
create jobs.
  The manager's amendment to S. 1275 includes an amendment, the Rural 
Capital Formation Amendment, that I and Senator Leahy have proposed. 
The purpose of this amendment is to make sure that the benefits of this 
legislation are felt in our rural communities. It will specifically 
give new and small rural community development banks more flexibility 
in meeting the matching requirements.
  I thank the committee chairman, the distinguished Senator from 
Michigan, and the ranking member, the distinguished Senator from New 
York for their assistance and cooperation.
  Mr. RIEGLE. Mr. President, I thank the distinguished Senator from 
Pennsylvania for his support and his attention to the capital needs of 
our Nation's rural communities. I am pleased to have worked with 
Senator Wofford and Senator Leahy in making this improvement to the 
legislation.
  Mr. PACKWOOD. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. Mr. President, I ask unanimous consent that I may be able 
to proceed as in morning business for 10 minutes.
  The PRESIDING OFFICER. Is there objection?
  Mr. PACKWOOD. Mr. President, I am not going to object. My amendment 
is pending.
  I ask unanimous consent to add Senator Hatfield as a cosponsor of my 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. PACKWOOD. I have no objection to the Senator speaking.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. I thank the Chair.
  (The remarks of Mr. Dodd pertaining to the introduction of S. 1939 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. DODD. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. PACKWOOD. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. PACKWOOD. Mr. President, I withdraw the amendment that I have 
previously offered.
  The PRESIDING OFFICER. The amendment is withdrawn.
  The amendment (No. 1528) was withdrawn.


                           Amendment No. 1529

    (Purpose: To authorize a study of the effects on small business 
 concerns in the forest products industry of designating the northern 
                  spotted owl as a threatened species)

  Mr. PACKWOOD. Mr. President, I send to the desk another amendment 
that may have the wrong number on it. I think it has the same number as 
the other amendment.
  The PRESIDING OFFICER. Without objection, the pending amendment will 
be set aside.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Oregon [Mr. Packwood] proposes an 
     amendment numbered 1529.

  Mr. PACKWOOD. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection it is so ordered.
  The amendment is as follows:
       At the appropriate place in the bill, insert the following 
     new section:

     SEC.   . STUDY OF EFFECT OF THE NORTHERN SPOTTED OWL ON SMALL 
                   BUSINESS CONCERNS.

       (a) Definitions.--For purposes of this section--
       (1) the term ``Administrator'' means the Administrator of 
     the Small Business Administration; and
       (2) the term ``small business concerns'' has the same 
     meaning as in section 3 of the Small Business Act.
       (c) Business Study.--The Administrator, in consultation 
     with the Secretary of the Interior, shall conduct a study 
     that analyzes--
       (1) the nature and extent of economic losses to small 
     business concerns in the forest products industry that have 
     occurred as a result of the designation of the Northern 
     spotted owl as a threatened species pursuant to section 4 of 
     the Endangered Species Act of 1973, or that are reasonably 
     likely to occur in the future;
       (2) the ability of small business concerns to recoup the 
     fair market value of equipment and other property employed in 
     the harvest and processing of timber prior to the listing of 
     the Northern spotted owl as a threatened species; and
       (3) the ability of small business concerns in the affected 
     area to offer alternative products or services for which 
     there is a ready or likely suitable market.
       (d) Report.--
       (1) In general.--Not later than 6 months after the date of 
     enactment of this section, the Administrator and the 
     Secretary of the Interior shall submit a report of the 
     results of the study conducted under subsection (c) to the 
     President and to the relevant committees of the Senate and 
     the House of Representatives.
       (2) Options.--The report shall include options for Congress 
     and the President for compensating small business concerns 
     for economic losses and for promoting business transition and 
     diversification.
       (3) Consultation.--In preparing the report, the 
     Administrator and the Secretary of the Interior shall consult 
     with small business concerns in the forest products industry, 
     and shall solicit comments from the public.

  Mr. PACKWOOD. Mr. President, there is a slight change. I am indebted 
to both Senator Baucus and Senator Chafee and their staffs for calling 
this to my attention. We made a slight change in the bill. The findings 
have been stricken out, and the findings, of course, are not critical 
to the bill. Then we have added the words, after ``Administrator,'' 
referring to the Small Business Administrator, in various places, ``in 
consultation with the Secretary of the Interior.''
  And on page 2 of the bill, line 25, the wording has been changed from 
``* * * forest products industry that have occurred subsequent to the 
designation''--that has been changed to ``* * * forest products 
industry that has occurred as a result of the designation.''
  And those are the only changes in the bill, other than other 
references to the Secretary of the Interior acting in conjunction with 
the Small Business Administrator.
  I am delighted Senator Baucus and Senator Chafee called this to my 
attention.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. RIEGLE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. RIEGLE. Mr. President, I ask unanimous consent that the pending 
amendment be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 1523, As Modified

  Mr. RIEGLE. Mr. President, I want to send an amendment to the desk 
that will address an earlier amendment, amendment No. 1523, which was 
previously agreed to.
  I now want to send an amendment to the desk that will modify 
amendment No. 1523.
  I might just say, by way of explanation, this is to conform to the 
changes that Senator Shelby and Senator Mack have sought and that we 
have worked out on a bipartisan basis within the committee.
  The PRESIDING OFFICER. Without objection, the amendment will be so 
modified.
  The modification is as follows:

       On page 20 of the Riegle amendment, No. 1523, strike out 
     lines 11 and 12 and insert between lines 17 and 18 the 
     following:
       (3) The appropriate Federal banking agency may require an 
     institution with total assets in excess of $9,000,000,000 to 
     comply with this section notwithstanding the exception 
     provided by this subsection, if it determines that such 
     exemption will create a significant risk to the affected 
     deposit insurance fund if applied to that institution.''.
       On page 25 of the Riegle amendment, No. 1523, strike lines 
     8-14 and insert the following:

     SEC. 337. INSIDER LENDING.

       (a) Loans To Executive Officers By Member Banks.--Section 
     22(g)(2) of the Federal Reserve Act (12 U.S.C. 375a(g)(2)) is 
     amended by striking ``With the specific prior approval of its 
     board of directors, a member'' and inserting ``A member''.
       (b) Extensions of Credit To Executive Officers, Directors, 
     and Principal Shareholders of Member Banks.--Section 22(h)(8) 
     of the Federal Reserve Act (12 U.S.C. 375b(h)(8)) is 
     amended--
       (1) by striking ``Member Bank.--For'' and inserting the 
     following: ``Member Bank.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     for''; and
       (2) by adding at the end the following:
       ``(B) Exception.--The Board shall have the authority by 
     regulation to suspend the applicability of any or all of this 
     subsection, except for the provisions of paragraph (2), with 
     respect to any individual who is a director or an executive 
     officer of a subsidiary of the company that controls the 
     member bank, if the Board finds that such individual does not 
     actually participate in major policymaking functions of the 
     member bank.''.
       On page 132 of the committee substitute strike lines 21 and 
     22 and insert the following:
       ``(2) in subparagraph (C), by striking ``and its composite 
     condition was found to be outstanding;'' and inserting ``and 
     its composite condition--
       ``(i) was found to be outstanding; or
       ``(ii) in the case of an insured depository institution 
     that has total assets of less than $175,000,000, was found to 
     be outstanding or good;''.

  Mr. RIEGLE. Mr. President, I urge the adoption of the amendment, as 
modified.
  The PRESIDING OFFICER. The Chair would rule that it is implicit 
within the consent. The Chair would rule that that action has taken 
place; that the modification has been agreed to.
  Mr. RIEGLE. All right. So that now we have perfected the underlying 
amendment with the change just sent to the desk.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. RIEGLE. I move to reconsider the vote by which the amendment, as 
modified, was agreed to.
  Mr. D'AMATO. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 1530

(Purpose: To improve reporting requirements on monetary instruments and 
                             transactions)

  Mr. RIEGLE. Mr. President, I now rise on behalf of Senator Bryan and 
Senator Bond to ask unanimous consent that the Anti-Money Laundering 
Act be included as an amendment to this bill. The language is modeled 
after S. 1664. I now send that amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Michigan [Mr. Riegle], for Mr. Bryan, for 
     himself, Mr. Bond, Mr. Riegle, and Mr. D'Amato proposes an 
     amendment numbered 1530.

  Mr. RIEGLE. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. RIEGLE. Mr. President, I urge the adoption of the amendment.
  Mr. BOND. Mr. President, I rise today in support of this amendment to 
add S. 1664, the Anti-Money Laundering Act of 1993, to S. 1275. This 
amendment will reduce the number of currency transaction reports which 
banks have to file under the Bank Secrecy Act. Senator Bryan, Chairman 
Riegle, and I introduced S. 1664 on November 17, 1993.
  I believe that this bill, added to S. 1275, the Community 
Development, Credit Enhancement and Regulatory Improvement Act of 1993, 
will help relieve bank regulatory burden improve compliance under the 
Bank Secrecy Act and better money laundering deterrence efforts.
  Action must be taken to relieve the banking industry of the burden of 
unreasonable regulatory requirements it now faces. The bank regulators 
currently require all kinds of burdensome compliance reports, 
activities and documents that cost significant amounts of time and 
resources. Consequently, banks, are generating too many reports and 
other paperwork of questionable value, instead of making loans.
  In particular, to help combat money laundering, banks have to file a 
Currency Transaction Report [CTR] for all currency transactions over 
$10,000. The American Bankers Association estimates that it cost banks 
almost $130 million to file 9.2 million CTR's with the Internal Revenue 
Service in 1992. The utility to the Government of this massive number 
of reports has yet to be proven.
  This amendment will help to reduce drastically the number of useless 
CTR's which are filed with the Government, thus reducing, in part, bank 
regulatory burden. The Anti-Money Laundering Act of 1993 would create 
mandatory exemptions for transactions between depository institutions, 
transactions with any U.S. Government or agency, and transactions with 
any business or category of business where CTR's have little or no 
value for law enforcement purposes. In addition, Treasury would have 
the discretion to exempt transactions between a depository institution 
and its qualified business customers who most frequently engage in 
transactions which are subject to reporting requirements under the Bank 
Secrecy At.
  I am well aware of the serious problem this situation has created for 
the banking industry and have been in consultation with my colleagues 
on the Senate Banking Committee to find solutions. Bank regulatory 
reform is one of my highest priorities. I also consider it a key to 
economic growth.
  A companion bill, H.R. 3235, has already been acted on in the House. 
I ask my colleagues for their support on this bipartisan measure to 
relieve bank regulatory burden.
  Mr. BRYAN. Mr. President, I want to acknowledge with respect to the 
pending amendment the work of several of my colleagues who have made 
this amendment possible.
  I ask unanimous consent that the chairman of the committee, Senator 
Riegle; the ranking member, Senator D'Amato; and my senior colleague, 
Senator Reid, be added as cosponsors to the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BRYAN. Mr. President, I appreciate that.


           statement on the anti-money laundering act of 1994

  Mr. President, Senator Bond, Senator Riegle, Senator D'Amato, and I 
are offering an amendment to S. 1275, the Community Development Credit 
Enhancement, and Regulatory Act of 1993 which will greatly improve our 
efforts to combat money laundering.
  This amendment will reduce the number of currency transaction reports 
banks are required to file, while making the process more effective at 
identifying suspicious customer transactions.
  This amendment is based on the text of S. 1664 and a House companion 
bill (H.R. 3235) introduced by Congressman Gonzalez.
  I want to commend Congressman Gonzalez for his leadership in this 
area.
  Yesterday, the Senate Banking, Housing, and Urban Affairs Committee 
held a hearing on this antimoney laundering legislation.
  The testimony gave compelling evidence as to why this measure is 
necessary.
  The Department of Treasury, General Accounting Office and various 
industry groups testified in favor of the legislation. The Bank Secrecy 
Act is widely viewed as an important part of the Federal Government's 
efforts against money laundering, particularly as it relates to the 
drug trade.
  In theory, Federal investigators use currency transaction reports 
[CTR's] to identify large cash transactions which are the results of 
illegal activity.
  While Federal antimoney laundering enforcement has had some 
successes, there are serious problems with the current system. One of 
the major problems investigators face is the sheer volume of CTR's 
filed--10 million annually--more than they could ever hope to have the 
resources to investigate fully.
  A study conducted on behalf of the Independent Bankers Association of 
America [IBAA] found that community bank employees spent over 2 million 
hours each year complying with the Bank Secrecy Act.
  The study calculated the compliance costs at nearly $60 million.
  The excessive number of reports filed, many of which clearly have no 
bearing on Federal money laundering enforcement, place a great strain 
on both Federal investigators and the business which must file the 
CTR's.
  Filing CTR's consumes many hours of valuable employee time and 
requires substantial investments in equipment and tracking systems.
  Generally, financial institutions and other businesses subject to the 
Bank Secrecy Act willingly absorb the expense of filing CTR's as part 
of the cost of doing business, and part of their responsibility in 
controlling money laundering.
  There is, however, a limit to the burden that these private 
businesses can be expected to bear.
  In addition, the Federal Government has a responsibility to ensure 
that the efforts of the businesses filing CTR's are not wasted, and 
that the requirements of the Bank Secrecy Act produce useful 
information which can lead to tangible results in money laundering 
enforcement.
  The amendment we are introducing today will both increase the 
effectiveness of the Bank Secrecy Act and reduce its burden on private 
businesses.
  Our amendment establishes a system of exemptions under which 
transactions that are clearly of no interest for law enforcement 
purposes, such as transactions between banks, or between a bank and a 
Government agency, do not trigger CTR's.
  It also provides institutions the option of developing a list of 
regular business customers who, with the approval of the Treasury 
Department, would also be exempt from CTR's.
  The amendment requires the Secretary to implement rule changes which 
will reduce the volume of CTR's filed by depository institutions by at 
least 30 percent, a goal which we believe could be easily met by 
careful implementation of the new system of exemptions.
  In addition to reducing the overall volume of unnecessary CTR's, the 
amendment closes a number of loopholes which launderers are using to 
get around the current detection system.
  Mr. President, the Bank Secrecy Act has a laudable goal: to fight 
money laundering.
  Unfortunately, the current regulations for reporting cash 
transactions are a bureaucratic maze, creating confusion and 
inefficiency in both financial institutions and law enforcement 
agencies.
  The reforms we are proposing in this measure will go a long way to 
both reducing unnecessary paperwork while, at the same time, expanding 
the effectiveness of our Federal money laundering enforcement efforts.
  Mr. President, this amendment accomplishes two purposes which we all 
can support. It deals with strengthening provisions in the antimoney-
laundering statutes to require that some areas which are currently 
exempted and have provided loopholes--which has been difficult for the 
law enforcement community--are added to the law; and the testimony from 
the Treasury Department and others expressing their support of those 
strengthening provisions to eliminate existing loopholes.
  In addition, Mr. President, also it addresses a concern with respect 
to the preparation of the currency transaction report. Under the 
current law with respect to financial institutions, currency 
transactions which exceed $10,000 generate under the law what is called 
a CTR, or currency transaction report.
  This enables law enforcement to monitor certain types of activity and 
to thereby ferret out money laundering. Unfortunately, this effort has 
been hampered because the generation of these CTR's has simply 
overwhelmed the ability of the law enforcement community to effectively 
monitor. Currently, some 10 million currency transaction reports are 
generated each year.
  The testimony is that about 40 percent of those reports deal with 
regular, well-established businesses that in no way address the concern 
that the bill in its original form, enacted some years ago, was 
designed to address. Nevertheless, there are many people that are 
required to generate these CTR's that contribute to this overwhelming 
volume.
  This amendment mandates the reduction in the volume of currency 
transaction reports by 30 percent within a period of 6 months after the 
law goes into effect. So that provides areas which are standard 
exemptions, all fully approved and supported by Treasury, and a 
category of discretionary exemptions, the effect of which enhances the 
law enforcement community to monitor those transactions, which may 
raise questions of possible illegal activity, and also to lighten the 
burden on the financial community which currently estimates the cost of 
preparing each one of these reports to be about $3 to $4 a copy.
  As I have indicated previously, this currently results in some 10 
million of these reports going into a data processing center in 
Detroit. That is simply beyond the ability of the law enforcement 
community to effectively and adequately monitor.
  I want to acknowledge again the support of the distinguished chairman 
of this committee, who appears as a cosponsor, and the distinguished 
ranking member, who also appears as a cosponsor, Senator Dodd, who was 
an original primary cosponsor with me.
  I am pleased that this amendment has been cleared on both sides of 
the aisle and will be adopted.
  I yield the floor.
  The PRESIDING OFFICER. Is there further debate? If not, the question 
is on agreeing to the amendment.
  The amendment (No. 1530) was agreed to.
  Mr. D'AMATO. Mr. President, I move to reconsider the vote by which 
the amendment was agreed to.
  Mr. RIEGLE. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. RIEGLE. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. RIEGLE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. RIEGLE. With no amendments or speakers present who want to 
continue this debate at this time, I will now ask unanimous consent to 
speak as if in morning business on a different subject for a period not 
to exceed 5 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________