[Congressional Record Volume 140, Number 46 (Monday, April 25, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: April 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
INTERSTATE BANKING AND BRANCHING ACT OF 1994
The Senate continued with the consideration of the bill.
Mr. RIEGLE. Madam President, let me now move to the discussion of the
bill we are presenting today.
Madam President, I rise to introduce S. 1963, the Interstate Banking
and Branching Act of 1994, and to urge its swift passage. This bill was
reported out of the Senate Banking Committee February 23 by a unanimous
vote and is similar to legislation passed by the House March 22 on a
voice vote.
Over the last 14 years, each of the past four administrations has
advocated removing barriers to interstate banking. The Carter
administration told Congress in a 1980 report that restrictions on
interstate banking caused inequities and inefficiencies and removing
such restrictions would serve the public interest.
In April 1983, Treasury Secretary Donald Regan testified on behalf of
the Reagan administration before the Banking Committee. In that
testimony, in which the administration endorsed congressional efforts
to eliminate restrictions on interstate banking, Secretary Regan
stated, ``Most such restrictions serve only anticompetitive purposes to
the detriment of consumer service and convenience.''
Treasury Secretary Brady, speaking for the Bush administration, also
advocated removing restrictions on interstate banking and branching. On
February 26, 1991, he told the Banking Committee:
We have left antiquated laws on the books that prohibit
banks from * * * branching across State lines. Banks in
California, Michigan, and Utah can open branches in
Birmingham, England, but not in Birmingham, Alabama. These
laws--mainly enacted in the 1920's and 1930's--are wholly out
of touch with reality, and impose unnecessary costs on banks
and consumers.
Most recently, Treasury Secretary Bentsen has stated:
We currently have a de facto system of interstate banking.
But it's a patchwork system, and it's clumsy * * * permitting
a true interstate banking system can translate into increased
lending, a safer and stronger banking system, and more
competitive services for all consumers in all communities.
In addition to support from the administration, this bill also enjoys
the strong support of the Federal Reserve Board, the Federal Deposit
Insurance Corporation, and the Comptroller of the Currency. It also
enjoys the support of, among others, the American Bankers Association
and the Bankers Roundtable. It is similar to the interstate banking and
branching bill that passed the Senate in 1991.
Virtually all Senators serving on the Banking Committee were actively
involved in the drafting of this legislation. I want to particularly
acknowledge the contributions of our ranking member, Senator D'Amato,
and I also want to commend Senator Dodd for his leadership on this
issue, and again thank Senator Roth for being here today in the ranking
position. Let me now briefly describe this legislation and why I
believe it is needed.
summary of bill
The Interstate Banking and Branching Act of 1994 would remove current
restrictions on both interstate banking and branching over a 2-year
period.
The bill would eliminate remaining restrictions on interstate banking
after 1 year and would permit adequately capitalized and managed bank
holding companies to acquire existing banks in any State. Such
acquisitions would be subject to approval by the relevant Federal bank
regulatory agency. States could require that any bank acquired by an
out-of-state bank holding company have been in existence for up to 5
years. Also, any bank holding company could not acquire an out-of-state
bank if the acquisition would result in such company controlling over
25 percent of that State's insured deposits or over 10 percent of the
nation's insured deposits. Individual states could waive the 25 percent
cap.
With regard to interstate branching, the bill would permit, 2 years
after enactment, bank holding companies to convert bank subsidiaries in
various States into branches of the main bank of the holding company. A
host State would have the right to apply its banking laws to the
branches of out-of-state banks in the host state. Any State would also
have the right to opt out of interstate branching. The bill does not
permit banks to establish de novo branches in any State unless a State
specifically passes legislation authorizing de novo branching. Under
this bill, interstate branching will be permitted to take place in a
manner that preserves the interests of individual states.
This bill is not a radical innovation. Interstate banking is already
a fact of life in most states. Thirty-four State have already adopted
legislation permitting full interstate banking and fifteen of the
remaining 16 States permit interstate banking within States in their
regions. This bill will streamline the interstate banking process and
remove laws that burden that process.
Passage of this bill will increase the safety and soundness of our
banking industry and reduce risks to our bank deposit insurance fund
and the American taxpayers who back that fund. It will permit banks to
operate more efficiently and to serve their customers better. Let me
explain why.
interstate banking
Interstate banking presently takes place in this country only where
the States permit it. Congress, in the Bank Holding Company Act of
1956, specifically prohibited the Federal Reserve Board from approving
an application of a bank holding company located in one State from
acquiring a bank located in another state, unless the acquisition was
specifically authorized by the laws of the State in which the acquired
bank was located. During the 1980's, many states adopted banking laws
permitting bank holding companies within regions to purchase banks
across state lines--but these laws are not uniform and we do not yet
have nationwide interstate banking.
Eliminating the remaining restrictions on interstate banking will
permit banks to better diversify both their deposits and loans and
consequently provide greater protection to the deposit insurance fund.
Geographic restrictions now in place make such diversification
difficult. This tends to leave banks more vulnerable to downturns in
local economies where they do their business. According to acting FDIC
Chairman Hove:
The insurance funds have absorbed major losses in recent
years in rescuing large banking organizations with assets
concentrated in a few industries or a limited geographical
area. During the 1980s, for example, slightly more than 80
percent of failed-bank assets were in just four states:
Texas, Illinois, New York, and Oklahoma. Perhaps if they had
been more geographically diversified, banks in these states
might have been better able to weather the financial storms
that beset local and regional energy, agricultural, and real
estate markets.
Federal Reserve Governor La Ware testified:
. . . elimination of geographic restraints would provide an
important tool in diversifying individual bank risk,
providing for stability of the banking system, and improving
the flow of credit to local economies under duress.
Thus, reducing these restrictions will likely bolster the safety and
soundness of the banking industry and thereby lessen the vulnerability
of the bank insurance fund and risks to the American taxpayer. Phasing
out remaining restrictions to interstate banking is not, as I noted
above, a radical step.
interstate branching
Removing current restrictions on interstate branching will also help
promote efficiency in the banking system and permit banks to serve
consumers better. It will reduce administrative expenses for banks that
presently operate interstate through separately chartered subsidiary
banks of a bank holding company. The principle difference between
interstate banking and interstate branching is that interstate banking
requires banks acquired across state lines to remain as subsidiary
banks of the main bank holding company. A subsidiary bank must have
separate capital, a separate board of directors, and meet separate
regulatory requirements. Converting subisidary banks to branches will
eliminate such duplication, strengthen bank capital, and better protect
the deposit insurance fund.
Permitting expanded bank branching will also increase customer
convenience and reduce banking charges to consumers by increasing
competition. Bank customers will also be better served if they can deal
with branches of their home bank in different States. Many customers
have complained about interstate restrictions that prevent them from
depositing funds or cashing checks outside the state in which their
account is established. Literally, millions of Americans cross State
lines commuting to and from work, as well as in their business and
personal travel. Secretary Bentsen gave the following example:
The Washington area is a perfect case, and it isn't unique.
Down the street from my office is the branch of a banking
organization that hangs out its shingle in Maryland,
Washington, Virginia and a few other states. People who use
this branch but have their account at a branch in Maryland or
Virginia, can walk up and cash a check. They can draw
hundreds of dollars out of the ATM machine, or transfer
thousands of dollars between accounts. But they can't make a
deposit in that branch . . . not being able to make a deposit
at my own bank just because that branch is in another state
is like requiring that the space shuttle stay within the
school zone speed limit. We are the only country in the
industrialized world with this kind of artificial
restriction.
Indeed, the restrictions on interstate branching are an American
anomaly. The United States is the only industrial country that
restricts bank branching. The globalization of the bankiing industry
means that U.S. banks cannot afford to continue to base their success
on a limited geographical area. They cannot match their competitors
while burdened with costly subisidary structures and cannot be strong
global competitors without larger deposit bases in this country.
Removing the restrictions on bank branching will permit American banks
to become stronger global competitors with an enhanced capacity to help
U.S. companies sell their goods in markets abroad.
In short, removing existing restrictions on branching will increase
consumer convenience, industry efficiency and competitiveness. Greater
efficiency in the banking industry will reduce strains on the deposit
insurance fund and protect the taxpayers who back that fund.
Community bankers need not fear that new competition from regional or
money center banks will put them out of business. The experience of
States that allow statewide branching suggests that small banks do very
well in meeting new competition. Former Deputy Treasury Secretary
Robert Carswell recounted the State of New York's experience as
follows:
Before New York removed its geographic branching
restrictions and allowed any bank to branch anywhere in the
State, there were predictions that independent banks would be
driven to the wall and banking would be concentrated in the
hands of a few large banks that would then squeeze and drain
the local economies. It simply has not happened. Independent
banks have done fine--providing services to old and new
customers. The general level of services to consumers has
improved, and prices are more uniform across the State. Some
larger banks have been successful in establishing branches
upstate; others have not.
By the same token, communities need not fear that increasing
geographic opportunities for banks will deprive them of needed capital.
The bill amends the Community Reinvestment Act to require separate
evaluations of an interstate bank's record of performance in each State
or metropolitan area in which it has branches. In considering
acquisitions of banks, the Federal Reserve must review a bank holding
company's compliance with both Federal and State community reinvestment
laws. These provisions are designed to ensure that banks will not just
vacuum up deposits in some States and reinvest them in other States.
This bill also makes absolutely clear that host States can apply
their banking laws, including those that govern interstate branching,
consumer protection, fair lending, and community reinvestment to the
out-of-state bank branches that come into the State. It also provides
that Federal and State antitrust laws will continue to apply to
interstate banking and branching transactions. As an additional
safeguard against an overconcentrated banking system it contains both
statewide and national deposit caps.
So I can come today and urge my colleagues to support this
legislation, which is very similar to the interstate banking and
branching bill we passed in 1991 but could not get the other body, the
House, to accept in conference. This legislation is long overdue and
will serve our national interests well.
I reserve the remainder of my time.
Mr. D'AMATO. Madam President, I rise today in support of S. 1963, the
Interstate Banking and Branching Act of 1994.
This legislation is long overdue. Interstate banking and branching
will increase the safety and soundness of our financial system. It will
provide more convenience and services to consumers. It will save the
banking industry millions of dollars that are wasted in unnecessary
administrative expenses and overhead costs. Instead of administrative
costs, these funds could be used to supply credit to our businesses and
other consumers. This legislation has been supported by both Republican
and Democratic administrations, by the Federal banking agencies, by
academic experts, and industry representatives. It was reported out of
the Banking Committee unanimously. The Senate passed a similar bill in
1991, that was not accepted by the House. Now, however, the House has
acted first, and passed its version of interstate banking on March 22,
1994. Now it is time for the Senate to act.
Interstate branching promotes safety and soundness. According to
Federal Reserve Board Governor LaWare:
The elimination of geographic restraints will provide an
important tool in diversifying individual bank risk,
providing for stability of the banking system, and improving
the flow of credit to local economics under duress.
Acting FDIC Chairman Hove testified before the banking Committee that
full interstate banking will strengthen the Federal deposit insurance
funds. Citing the FDIC's experience with bank failures in the 1980's,
he noted that the failure of banks to diversify geographically creates
institutions that are particularly vulnerable to regional economic
downturns.
Likewise, the General Accounting Office found that 90 percent of the
banks that failed in 1987 were in States that allowed only unit banks
or limited branching. The GAO noted that ``when a bank's assets are not
geographically diversified, the quality of its balance sheet can be
severally affected by fluctuations in the local economy.'' Interstate
branching will permit banks to diversify their loan portfolio, thus
making our banking system less vulnerable to downturns in any
particular community or region.
The Congressional Budget Office also found that nationwide interstate
banking will enable banks to increase geographic and industry
diversification, thereby reducing the probability of bank failure and
lead to a healthier and more stable banking system.
Interstate branching will also eliminate unnecessary overhead costs,
and make banking more efficient. Under the current system of holding
companies, depository institutions must maintain a separate board of
directors, submit separate regulatory reports, undergo separate
examinations, submit separate financial reports, and maintain separate
support facilities for each of it's subsidiaries. This legislation will
allow banks to consolidate these separate subsidiaries into one bank
with several branches, thereby eliminating the unnecessary duplication
and overhead expenses of multiple banks. Some of the larger banking
companies have estimated that they could each save between $30 million
and $50 million per year if they were allowed to consolidate their
separate bank subsidiaries into branches. These savings could be used
to replenish bank capital, thus increasing the ability of the banking
industry to provide the credit essential for the continued growth of
our economy.
This legislation will also benefit consumers, the users of financial
services. In today's world, individuals often commute between States on
a daily basis. It is not unusual to live in New Jersey or Connecticut,
work in New York, and own a vacation home in West Virginia or Florida.
Yet, under our current banking system, an individual in these
circumstances would have to have three different bank accounts, in
three different banks, in order to have ready access to financial
services. This does not make sense for the consumer, and it does not
make sense for the banks.
This bill also takes into consideration the rights of the States with
respect to interstate banking and branching. Section 2 of the
legislation repeals a current provision, known as the Douglas
amendment, that restricts the ability of a bank holding company to
acquire a bank outside of its home State. Instead, the bill provides
that the Federal Reserve Board may approve an application by an
adequately capitalized and managed holding company to acquire a bank
outside of its home State. However, a State may insist that the out-of-
State bank holding company only acquire an existing bank in that State.
Further, the State may limit the banks that may be acquired to those
institutions that have been in existence for a given period of time, up
to 5 years. A State may also limit the size of the institution--based
on deposit share--that may be acquired, so long as this limitation does
not have a discriminatory effect against out-of-State bank holding
companies or banks.
The bill also respects States rights with respect to interstate
branching. Under section 3 of this legislation, 2 years after the date
of enactment, a bank holding company with banks located in two
different States may consolidate these institutions into one bank with
interstate branches. The resulting bank may establish additional
branches at any location where the former separate banks could have
branched under applicable Federal or State law. However, a State may
opt-out of this provision by passing a law, at any time after the date
of enactment, that specifically prohibits interstate combinations as
described above for all out-of-State institutions. Thus, the right of a
State to prohibit interstate branching, as authorized under this bill,
is fully protected, so long as the prohibition applies equally to all
out-of-State banking organizations.
The States' interests are also considered with respect to choice or
applicable law. Section 3 provides that State laws are made applicable
to interstate branches to the same extent that such laws are applicable
to branches of banks, of the same charter type, that has a main office
in that State. Thus, the States retain the same regulatory authority
over the interstate branch of a national bank that they have over a
branch of a national bank whose main office is located in that State.
Likewise, a State has the same regulatory authority over the interstate
branch of a State bank that it would have over the branch of a bank
chartered by that State.
Further, State and Federal antitrust laws that do not have a
discriminatory effect on out-of-State banks and bank holding companies
are specifically safeguarded. This is in addition to new concentration
limits adopted by the bill. Under these limits, the Federal Reserve
Board may not approve an acquisition if the applicant controls, or
after the acquisition would control, 10 percent or more of the total
deposits of insured depository institutions in the United States. The
Federal Reserve Board is also prohibited from approving an acquisition
if the applicant controls, or after the acquisition would control, 25
percent or more of total deposits held by insured depository
institutions in that State. However, the State may waive the
applicability of this latter restriction.
The legislation also protects the authority of the States to tax
interstate branches in the manner that they determine appropriate,
provided of course that the tax does not contravene other Federal
statutes or the U.S. Constitution.
Section 4 of this legislation provides that State bank supervisors
from two or more States may enter into cooperative agreements to
facilitate State regulatory supervision of interstate State chartered
banks.
Finally, section 6 of this bill amends the Community Reinvestment Act
with respect to financial institutions with interstate branches. The
regulatory agencies would be required, under this amendment, to prepare
a written evaluation of such institution's CRA performance in each
State in which it has a branch. If an institution maintains a branch in
a multistate metrolitan area, the agency must prepare a separate
written evaluation for that multistate metropolitan area, and for the
nonmetropolitan areas of the State, if the institution has a branch in
the nonmetropolitan area of the State.
This legislation represents a balanced approach to interstate banking
and branching. It takes into consideration the historic role of the
States in regulating financial institutions, and the concerns of the
Federal Government to protect the safety and soundness of our banking
system and to avoid losses to the deposit insurance funds and the
taxpayer. This legislation will increase the safety of our financial
system, improve the efficiency and delivery of financial products. It
will ultimately result in a healthy and more competitive banking system
that will be able to serve the needs of our economy into the next
century. We should act, and act now to pass this legislation. I urge my
colleagues to vote for this bill.
privilege of the floor--S. 1963
Mr. RIEGLE. Madam President, I ask unanimous consent that during the
consideration of S. 1963, Kay Bondehagen be granted the privilege of
the floor.
The ACTING PRESIDING pro tempore. Without objection, it is so
ordered.
The Senator from Delaware.
Mr. ROTH. Madam President, S. 1963, the Interstate Banking and
Branching Act of 1994, is important legislation. The reason, however,
that the legislation has such widespread support in this body owes much
to the fact that it does much less than many less-informed believe. Let
me explain.
Interstate banking means that an out-of-State bank may acquire an in-
State bank. This is already happening today. This is already happening
today. It has been the practice for some States to narrow the
acquirer's eligibility to a particular region. The legislation, in
contrast, ensures that the acquirer can come from any State across the
Nation. This is no major change, in my opinion.
Interstate branching is more significant. However, the legislation
does not establish interstate branching. Interstate branching means
that an out-of-State bank that owns an in-State subsidiary may convert
it into a branch. This is, unlike interstate banking, something new.
But all that this legislation does is to create a choice for the
policymakers in each State--the Governor and the legislature--to make
for that State.
The efforts that I have expended on this legislation have been for
one and only one purpose: To craft an absolutely neutral proposition
for the States and the industry involved. Since that is the purpose of
the legislation, as I understand it, it makes little sense to burden
the legislation with extraneous provisions, whether they involve a
rollback of insurance powers or whether they involve increasing the
regulatory burden on banks. We have worked for far to avoid imposing
such conditions and I hope that we can continue that effort
successfully.
In striving for neutrality, we have made clear that certain current
practices of the banking industry, such as extending credit across
State lines, are not adversely affected by the legislation. Moreover,
we have sought to assure the States that the choice that each makes
under the legislation is without bias: The right of each State to opt
in or opt out of interstate branching at any time is specifically
preserved in this legislation. Unlike other versions, our bill sets no
lobster traps for the States. They may enter or exit freely, as the
policymakers in each State decide. And, I repeat, they may do so at any
time.
Suppose a State's policymakers fail to act either way? Is a State in
or out? S. 1963 is clear that if a State does not act within 2 years of
the bill's enactment, the State is in and interstate branching may take
place within the State. Because there are so many factors that each
State's policymakers must take into account in formulating a decision,
not the least of which is the revenue consequences, the Governors and
the State legislatures have requested that they be given 3 years
instead of 2 years to make their initial choices. I would think that
they are the experts on how much time they need and that as
Representatives of the States in the Congress we particularly should
be deferential on such a matter. However, I do not believe that the
chairman agrees with me. In committee, I had pressed for 3 years and
was pleased that the bill which at the time provided only 1 year to
decide was amended to 2 years. So from my perspective, I still see room
for improvement on this question.
As I noted, there is probably no issue that makes the States more
nervous than the impact of interstate branching on their collection of
tax revenues. Now there is no way that we can guarantee a State that if
it collected a certain amount of revenue from banks last year that it
will collect the same amount with or without this legislation. For if
the States do not opt-out of interstate branching, branching will
occur, and the facts will have changed. So when the facts change, there
may be different results. Maybe better, maybe worse. All we can do is
to guarantee that the States will remain able to collect the same
amount of revenues. One of my contributions to the managers' amendment
makes clear that the authority of the States to tax as they are taxing
remains undiminished by this legislation. We cannot do any more or any
less for the States. The Congress has no proper role in this context in
structuring the States on State tax policy. We cannot and do not solve
their tax problems in this legislation. It is true, no question, that
every State will have to assess the State tax consequences of this
legislation and adjust its particular tax laws to the changing
circumstances while deciding whether to allow interstate branching
within its State.
Many believe that this is a fair question to put to the States in
view of the purported benefits to the banking industry and to the
consumer that flow from the efficiencies produced by interstate
branching. However, I repeat, it is a little much to ask each State to
resolve its internal policy question in 2 years, which for a dozen or
so States is really only a few months as a practical matter.
In summary, Madam President, we have worked diligently on this
legislation to be fair to all concerned. We have striven to produce a
neutral vehicle for posing a very important question to the States. We
are making excellent progress. It is my hope that when we conclude our
efforts in this body, we will have reached the goal.
Thank you, Madam President. I yield the floor, and I suggest the
absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. RIEGLE. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Amendment No. 1658
(Purpose: To provide for national banks that are not part of a bank
holding company to merge and consolidate on an interstate basis and to
make other technical amendments)
Mr. RIEGLE. Madam President, let me now present the managers'
amendment to S. 1963. This amendment has been developed with Senator
D'Amato and with Senator Roth. I appreciate the support of both. It
enjoys the support of the Clinton administration.
In general, the amendment further refines the provisions contained in
the reported bill with technical, conforming and clarifying amendments,
including properly cross-referencing the definition of adequately
capitalized throughout the bill, facilitating the consolidation of
banks that are not owned by bank holding companies and clarifying that
institutions that undertake interstate combinations do not need to be
unwound if at any subsequent time the relevant State law prohibits any
such future interstate combinations.
Also, the amendment clarifies that the bill is not intended to affect
State tax authority over banking institutions.
Additionally, the amendment, at the request of the FDIC, makes a
technical change to allow the FDIC to override State and Federal law
restrictions on concentration and age of institution requirements in
all failing bank situations, as was the committee's intention.
Finally, the amendment allows making a portion of the bank's assets
available for call by a State-sponsored housing entity to remain in
force after passage of this bill.
Let me now send it to the desk. After Senator Roth has been heard, I
am going to urge the adoption of the managers' amendment.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Michigan [Mr. Riegle], for himself, Mr.
D'Amato and Mr. Roth, proposes an amendment numbered 1658.
Mr. RIEGLE. Madam President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The amendment is as follows:
On page 3, line 4, strike ``(2) and (3)'' and insert ``(2),
(4), and (6)''.
On page 4, between lines 17 and 18, insert the following:
``(3) Exception.--The Board may approve an application
under paragraph (1)(A), notwithstanding any provision of
paragraph (2), if such application involves the acquisition
of one or more banks in default or in danger of default or
with respect to which the Federal Deposit Insurance
Corporation provides assistance under section 13(c) of the
Federal Deposit Insurance Act.
On page 4, line 18, strike ``(3)'' and insert ``(4)''.
Beginning with page 4, line 23, strike all through page 5,
line 2, and insert the following:
``(5) No effect on state tax authority.--No provision of
this Act shall be construed as affecting the authority of any
State or political subdivision of any State to adopt, apply,
and administer any tax or method of taxation to any bank,
bank holding company, or foreign bank or to any affiliate of
any bank, bank holding company, or foreign bank to the extent
that such tax or tax method is otherwise permissible by or
under the Constitution of the United States or other Federal
law.
``(6) Affect on state contingency laws.--Nothing in this
subsection affects the applicability of a State law that
makes an acquisition of a bank contingent upon a requirement
to hold a portion of such bank's assets available for call by
a State-sponsored housing entity established pursuant to
State law, if--
``(A) the State law does not have the effect of
discriminating against out-of-State banks, out-of-State bank
holding companies, or subsidiaries thereof;
``(B) that State law was in effect as of the date of
enactment of the Interstate Banking and Branching Act of
1994;
``(C) the Federal Deposit Insurance Corporation has not
determined that compliance with such State law would result
in an unacceptable risk to the appropriate deposit insurance
fund; and
``(D) the appropriate Federal banking agency for such
institution has not found that compliance with such State law
would place the institution in an unsafe or unsound
condition.''.
On page 5, line 9, insert `` `in default', `in danger of
default','' before ``and''.
On page 5, line 18, strike ``and''.
On page 5, line 23, strike all of the punctuation at the
end and insert ``; and''.
On page 5, after line 23, insert the following:
``(3) a bank holding company is `adequately capitalized' if
it meets or exceeds all applicable Federal regulatory capital
standards.''.
On page 8, strike lines 14 through 16 and insert ``host
states.--If any branch of an out-of-''.
On page 8, line 23, strike ``based upon'' and all that
follows through page 9, line 6, and insert the following:
``that imposes such tax based upon a method adopted by the
host State, which could include allocation and
apportionment.''.
On page 11, line 19, insert ``or paragraph (8)'' before
``shall have''.
On page 13, between lines 23 and 24, insert the following:
``(11) No effect on state tax authority.--No provision of
this Act shall be construed as affecting the authority of any
State or political subdivision of any State to adopt, apply,
and administer any tax or method of taxation to any bank,
bank holding company, or foreign bank or to any affiliate of
any bank, bank holding company, or foreign bank to the extent
that such tax or tax method is otherwise permissible by or
under the Constitution of the United States or other Federal
law.
On page 13, line 24, strike ``(11)'' and insert ``(12)''.
On page 15, line 14, strike ``paragraph'' and insert
``paragraphs''.
On page 15, beginning on line 17, strike ``A State bank
supervisor'' and insert ``The appropriate State official''.
On page 17, line 2, insert ``or to take any enforcement
actions or proceedings against'' after ``examine''.
On page 17, strike lines 7 through 10, and insert ``agency
determines that the States have reached an agreement under
subparagraph (C) that adequately protects the deposit
insurance funds, the appro-''.
On page 17, line 11, strike ``shall not'' and insert
``may''.
On page 17, line 13, strike the quotation marks and the
final period.
On page 17, between lines 13 and 14, insert the following:
``(4) No effect on state tax authority.--No provision of
this Act shall be construed as affecting the authority of any
State or political subdivision of any State to adopt, apply,
and administer any tax or method of taxation to any bank,
bank holding company, or foreign bank or to any affiliate of
any bank, bank holding company, or foreign bank to the extent
that such tax or tax method is otherwise permissible by or
under the Constitution of the United States or other Federal
law.''.
Beginning with page 17, line 14, strike all through page
19, line 22, and insert the following:
(b) National Banking Associations.--The Act entitled ``An
Act to provide for the consolidation of national banking
associations'', approved November 7, 1918 (12 U.S.C. 215 et
seq.) is amended--
(1) in the first sentence of subsection (a) of the first
section, by inserting ``, or in any State in which a bank is
authorized to engage in an interstate consolidation pursuant
to section 3(h) of the Bank Holding Company Act of 1956,''
after ``located in the same State'';
(2) by inserting before the period at the end of subsection
(d) of the first section ``, except that the applicability of
State law to an interstate consolidation undertaken in
accordance with section 3(h) of the Bank Holding Company Act
of 1956 is determined in accordance with the provisions of
that section'';
(3) by adding at the end of the first section the following
new subsection:
``(h) An interstate consolidation--
``(1) shall be undertaken under this section pursuant to
the procedures, restrictions, and requirements--
``(A) set forth in section 3(h) of the Bank Holding Company
Act of 1956 as if such interstate consolidation were a
combination under that section; and
``(B) set forth in this section, to the extent that such
procedures, restrictions, and requirements are not
inconsistent with those of section 3(h) of the Bank Holding
Company Act of 1956; and
``(2) involving banks that are not affiliated (as such term
is defined in section 2 of the Bank Holding Company Act of
1956) shall meet the requirements of section 3(d) of the Bank
Holding Company Act of 1956, as determined by the Comptroller
of the Currency, as if such consolidation were an acquisition
under that section 3(d).'';
(4) in the first sentence of section 2(a)--
(A) by striking ``under an agreement not inconsistent with
this Act,''; and
(B) by inserting ``or within any State in which a bank is
authorized to engage in an interstate merger pursuant to
section 3(h) of the Bank Holding Company Act of 1956,'' after
``located within the same State,'';
(5) in the sixth sentence of section 2(d) by inserting
before the period ``, except that the applicability of State
law to a merger undertaken in accordance with section 3(h) of
the Bank Holding Company Act of 1956 is determined in
accordance with the provisions of that section'';
(6) in section 2, by adding at the end the following new
subsection:
``(h)(1) An interstate merger--
``(A) shall be undertaken under this section pursuant to
the procedures, restrictions, and requirements--
``(i) set forth in section 3(h) of the Bank Holding Company
Act of 1956 as if such merger were a combination under that
section; and
``(ii) set forth in this section, to the extent that such
procedures, restrictions, and requirements are not
inconsistent with those of section 3(h) of the Bank Holding
Company Act of 1956; and
``(B) involving banks that are not affiliated (as such term
is defined in section 2 of the Bank Holding Company Act of
1956) shall meet the requirements of section 3(d) of the Bank
Holding Company Act of 1956, as determined by the Comptroller
of the Currency, as if such merger were an acquisition under
that section 3(d).
``(2) Paragraph (1) shall apply to a State member bank
involved in an interstate merger on the same terms and
conditions and subject to the same procedures, restrictions,
and requirements as are applicable to the consolidation of
branches by a national banking association involved in an
interstate merger.''; and
(7) in paragraph (4) of section 3, by inserting ``or within
any State in which a bank is authorized to engage in an
interstate consolidation, merger, or other transaction
pursuant to section 3(h) of the Bank Holding Company Act of
1956,'' after ``within the same State,''.
On page 21, line 5, strike ``approval'' and insert
``consent''.
On page 21, line 13, strike ``and''.
On page 21, line 20, strike all of the punctuation at the
end and insert ``; and''.
On page 21, between lines 20 and 21, insert the following:
``(C) the term `adequately capitalized' has the same
meaning as in section 38.''.
Mr. ROTH. Madam President, I am pleased to join with the chairman of
the Banking Committee in offering the managers' amendment.
I am particularly pleased that the amendment contains the House
provision on tax neutrality. This House provision makes clear that the
current authority of the States, except as limited by the Constitution
or other Federal law, to tax any bank, bank holding company or foreign
bank, or any affiliate of any bank, bank holding company or foreign
bank is not affected by this legislation.
The inclusion of such an assurance is very important to my State as
well as to other States. It assures them that their current ability to
tax, and their current tax methods, remain legally unaffected by the
legislation.
The House provision, which the managers' amendment tracks, is
salutary because of its precision in identifying the various banking
entities whose tax treatment is not affected by the legislation.
I am also pleased that we have been able to rewrite the bankshares
tax provision so that Congress is not instructing any State on what
particular tax or tax method it should adopt, apply, or administer.
Before the committee markup on the legislation, I submitted written
questions to Comptroller of the Currency Ludwig and Treasury Under
Secretary Newman on State tax issues. They said they do not believe
that the Federal Government should solve the tax problems of the
States, and they advised that we not ``resolve on the Federal level a
problem that can best be resolved at the State level.'' And concluding
that ``it would be better to be silent about State tax rules.''
Thus, the Treasury Department does not oppose a declaration of tax
neutrality but does oppose Federal solutions for State tax problems.
The bankshares tax provision in the reported bill grossly violates
Treasury's advice, and I am encouraged that the managers' amendment
makes this provision less offensive to principles of federalism which
the Department and I share. The new language does not direct any State
to follow any particular tax method, nor does it obviate the need for
the policymakers of the State to take responsibility for adopting a tax
and a tax method of their choice. While the result is not quite the
silence recommended by the department, it is now a tolerable whisper.
Finally, I wish to make clear that this provision is appropriately
deferential to the rights and responsibilities of the affected States.
In this provision the Congress neither instructs nor commands any
State. Under the provision, any covered State must adjust to the new
circumstances of interstate branching by adopting a new tax method
between now and the time interstate branching begins in that State.
This further illustrates the need for 3 years' time for the States to
make their multifaceted decision on interstate banking.
I thank the distinguished chairman for incorporating my suggestions
in the tax area and am pleased to support the adoption of the managers'
amendment.
The ACTING PRESIDENT pro tempore. Is there further debate?
Mr. RIEGLE. Madam President, I urge adoption of the managers'
amendment.
Mr. ROTH. Madam President, I would agree with the adoption of the
amendment.
The ACTING PRESIDENT pro tempore. The question now is on agreeing to
the adoption of amendment No. 1658.
The amendment (No. 1658) was agreed to.
Mr. RIEGLE. Madam President, I move to reconsider the vote.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. RIEGLE. I thank the Chair.
Madam President, we are now at a point, I would like to just say to
colleagues and staff members who are following this on television and
would not necessarily be present in the Chamber at this time, this
would be an excellent opportunity for anyone who has remarks to deliver
on the subject to see this as a time to come and do that, or if anybody
has an amendment--I am not inviting amendments, but if anybody has an
amendment this would be a good time to come and present it because we
will have now a period in which we can handle those without any other
indication of others coming forward at this time. So let me make that
general suggestion to those who would have an interest in doing so.
If other speakers do not arrive, and if we do not have other Members
who come over to speak or offer amendments, then at some point later in
the afternoon I am going to suggest we not just remain in a quorum call
if we are not getting work done. I would hope that we could be getting
some work done.
In any event, having said that, I want to make just two other
personal comments. One is that I think to those following this debate,
whether in the Chamber here as visitors, or out across the country
watching television, it all sounds very technical because it is quite
technical.
Banking law, as the occupant of the Presiding Officer's Chair, the
Senator from Washington, knows--she serves on the Banking Committee--
the banking laws are by their very nature technical and complicated. So
when we present them, it is very hard to follow necessarily what we are
saying because each phrase and each explanation has a technical
implication in terms of laying down the foundation of the law that we
will be passing here.
And all of this debate that takes place on the Senate floor, of
course, takes the form of what is called legislative history. So if
there is ever a question later on down the line as to how a bill is
actually supposed to work, if the written law from the legislation
itself is not completely clear, oftentimes the reference will then come
back to the debate here on the Senate floor to see precisely what it is
the Senator from Delaware may have said or the Senator from Michigan
may have said or someone else, to really clarify exactly what the
legislative intent is.
So with respect to banking law changes and because of the importance
that they be presented in the correct form, these discussions tend to
sound more technical and harder to follow than perhaps some of the
other things we take up in the Senate.
The other point I wanted to make is this. I am very pleased to share
this duty today with my colleague from Delaware. Senator Roth and I
came to the Congress 28 years ago as newly-elected House Members in the
election of 1966. At that time, I sat on that side of the aisle as a
Republican. In 1973, I changed my party affiliation and crossed over
the center aisle to become a Democrat and have been a Democrat now for
21 years since.
But we have retained our good friendship during that intervening
period, and I was struck by a news item that I saw the other day, I say
to the Senator from Delaware, that is, of the rather large group of
nearly 50 or so freshmen Republicans that were elected, as we were,
back in 1966, a group that included George Bush among others, who made
his debut on the national scene in that election. To my knowledge, of
our large group, only three remain now serving in the Congress--the
Senator from Delaware, myself, and I saw the other day where one of our
colleagues on the House side, John Myers, was in a complicated primary
election out in the State of Indiana; he won the primary, and now he
has a general election to face, as I know the Senator does as well.
So our class of some 49 or 50 members has now been reduced year by
year and circumstance by circumstance to some 3 of us who are
remaining. Of course, I will be leaving at the end of this year myself.
So whatever happens to John Myers, the Senator from Delaware may be the
last of the Mohicans here at the time the dust settles at the end of
this year.
But it has been a particular pleasure for me to serve with the
Senator from Delaware over that period of time. I must say, despite the
fact we now serve in different parties, that really has no bearing
whatsoever on our relationship and our friendship and our opportunity
to work constructively together as we have many times over the years,
and I am privileged again to do so today.
Mr. ROTH. Will the distinguished chairman yield?
Mr. RIEGLE. Yes, I would be happy to yield.
Mr. ROTH. Just let me say that it is with genuine regret that I read
the Senator's decision some time ago not to run again.
I remember, Madam President, many years ago when we were both elected
for the first time, I might say in a surprise upsweep for Republicans,
the Senator may recall that I organized a weekly group. We met once a
week to discuss the legislation that would come up in the House of
Representatives for the following week.
I always felt that was the beginning of our friendship and
understanding. Sometimes it is difficult for our friends back home to
understand how a Republican and Democrat can work together, but it is
important if we are not going to have gridlock.
The one particular situation I remember where we worked over a period
of months in close collaboration was in the bailout of Chrysler
Corporation.
That was a matter of great, great concern to the State of Michigan.
It was a matter of great concern to my State of Delaware. As I have
said many times, not many people realize that percentagewise, we had
more auto workers than even the State of Michigan. But I think recent
events that show Chrysler roaring back with success, beginning to
compete very successfully internationally, show how important that
cooperation across the aisle was.
I must say, I regret seeing the Senator leave. I also want to add, in
public as I did privately, how sorry I was to read about the Senator's
mother, the loss of his mother. We all know that no matter how well
prepared we are for it, it still is a blow. It is still the end of a
phase of life that is difficult to overcome.
I give my deepest sympathy to the Senator and to his family.
But again, may I congratulate the chairman and Senator D'Amato, the
ranking member, for bringing this really very important but somewhat
controversial piece of legislation. There are many different interests
at play that are concerned, and yet through the leadership of the
chairman and that of Senator D'Amato, the legislation has come here
with the unanimous support of the Banking Committee. That certainly is
in many ways the crowning victory of the many years of service of the
distinguished chairman.
I wish him well, and every success.
Mr. RIEGLE. Madam President, I thank the distinguished Senator from
Delaware very much.
Madam President, we will now await other speakers or amendments that
may come to the floor for a period of time. We invite those Members to
come for that purpose now, if they can.
I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Reid). Without objection, it is so
ordered.
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