[Congressional Record Volume 140, Number 127 (Tuesday, September 13, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 13, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
  INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994--CONFERENCE 
                                 REPORT


                           Motion to Proceed

  Mr. RIEGLE. I thank the Presiding Officer.
  Mr. President, we are now about to begin work on the conference 
report to H.R. 3841, which has been named the Riegle-Neal Interstate 
Banking and Branching Efficiency Act of 1994. The Banking Committee 
passed a substantially similar bill by a vote of 19 to 0 on February 23 
of this year, and that bill then later passed the Senate by a voice 
vote on April 26, again earlier this year.
  This conference report was passed by the House on August 4 by a voice 
vote to, I think, show the broad base of support that exists for this 
legislation, and that is so because it is very important legislation. 
There is a strong bipartisan consensus in favor of it, and I urge its 
swift passage today.
  This bill removes current restrictions on interstate banking after 1 
year and on interstate bank branching by the date of June 1997. There 
are a number of provisions in this bill to ensure branching takes place 
in a manner that preserves the interests of individual States, 
including that they can apply their consumer protection laws to the 
branches that come into the State.
  It also gives States the right to opt out of interstate branching. 
Over the past 14 years, each of the previous four administrations has 
advocated removing these barriers to interstate banking. The Carter 
administration told Congress back in a 1981 report that restrictions on 
interstate banking caused ``inequities and inefficiencies'' and that 
removing such restrictions would, in their view, serve ``the public 
interest.''
  Then in April 1983, Treasury Secretary Donald Regan testified on 
behalf of the then Reagan administration, also before the Banking 
Committee, and in that testimony in which that administration endorsed 
congressional efforts to eliminate restrictions on interstate banking, 
then Secretary Regan noted, and I quote:

       Most such restrictions serve only anticompetitive purposes 
     to the detriment of consumer service and convenience.

  Then former Treasury Secretary Brady also advocated removing 
restrictions on interstate banking and branching. On February 26, 1991, 
he also 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, AL. 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, our current Treasury Secretary, Secretary Bentsen, 
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.

  So 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 that are now in place make this kind of 
diversification much more difficult. This tends to leave banks more 
vulnerable to downturns in local economies where they do their 
business.
  Acting Federal Deposit Insurance Corporation Chairman Hove made this 
point in his October 5, 1993, testimony before the Banking Committee 
when he said to us:

       During the 1980's, more than 80 percent of failed-bank 
     assets were in just four States: Texas, Illinois, New York 
     and Oklahoma. Perhaps if there 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.

  The bill also provides for interstate branching within a State. 
Removing our current restrictions on interstate branching will help 
promote efficiency in the banking system and again 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. Permitting expanded bank 
branching will also increase consumer convenience and reduce banking 
charges to consumers by increasing the competition. Bank customers will 
also be better served if they can deal with branches of their home bank 
when they are out in different States across the country.

  Consumers will be rid of the headache of not being able to deposit 
funds or cash checks from State to State as they commute to work, in 
many cases across the country, or travel on work purposes, or, for that 
matter, for recreational purposes as well.
  The bill also amends the Community Reinvestment Act to ensure that 
banks moving across State lines will still serve all the communities in 
which they operate.
  I think we also need to be mindful of making our U.S. banks stronger 
global competitors around this world economy so that they in turn can 
help U.S. exporters, meaning that we can put more Americans to work 
here in the United States making and producing goods and services that 
can then be sold overseas to foreign buyers. It is interesting that the 
United States is the only industrial country that restricts bank 
branching. The globalization of the bank industry means that U.S. banks 
often cannot afford to continue to base their success on a limited 
geographic area. 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 and services 
abroad, in foreign markets.
  Now, let me briefly say what this bill does. One year after the date 
of enactment, adequately capitalized and managed bank holding companies 
would be permitted to acquire control of a bank in any State. Now, 
States would be permitted to retain provisions setting the minimum age 
of target banks so long as they require no more than a 5-year age 
period. Any provisions beyond 5 years would be read as 5 years. Any 
acquisitions would be subject to a nationwide 10-percent deposit limit 
and a 30-percent statewide limit except that a State could waive the 
30-percent deposit limit or impose a more restrictive limit. The 
appropriate banking agency with jurisdiction over the transaction would 
also need to consider the community reinvestment ratings of the insured 
banks and the views of the State regulators concerning their compliance 
with applicable State CRA laws.
  Beginning then on June 1, 1997, interstate branching would be 
permitted as banks would be allowed to merge with one another across 
State lines, creating a main bank with branches. Any merger would be 
subject to certain concentration, capital, and CRA requirements and 
would also require regulatory approval. A State could authorize such 
mergers earlier than June 1, 1997; in contrast, a State could also 
choose to prohibit branching by mergers by passing legislation to opt 
out of that arrangement. States may also permit de novo branching into 
their borders if they adopt legislation to allow it; that is, if they 
opt in to de novo branching.
  This bill also contains important provisions intended to reduce the 
competitive advantage that foreign banks now enjoy in the U.S. market 
relative to U.S. banks. This is an issue in which Senator Ford of 
Kentucky has been particularly interested, and I very much appreciate 
the help he gave us in reaching a compromise with the House on this 
matter.
  Concerns about foreign bank competitive advantages stem primarily 
from the fact that the wholesale branches of foreign banks do not pay 
deposit insurance premiums, nor are they subject to the CRA 
requirements. To reduce these and other competitive advantages, the 
conferees adopted several provisions.
  A new section of the International Banking Act limits the activities 
of Cayman Island and other offshore agencies and branches managed from 
a foreign bank's U.S. offices. It limits offshore activities to only 
ones that U.S. banks are permitted to manage in their offshore 
operations.
  Another section deals with the types of deposits that may be accepted 
by the wholesale direct branches of foreign banks. Presently, 
regulations issued by the FDIC and OCC govern the types of deposits 
such wholesale branches may accept. Concerns have been expressed that 
current regulations permit foreign banks to engage in retail deposit 
taking in their wholesale branches. Since these wholesale branches are 
not subject to the CRA nor to deposit insurance premiums, this gives 
foreign banks a cost advantage. The bill directs the OCC and the FDIC 
to revise these regulations to tighten the types of deposits that 
wholesale branches can take so they do not receive a competitive 
advantage over U.S. banking organizations.
  Third, the bill amends the International Banking Act to place CRA 
requirements on interstate branches of foreign banks established 
through the acquisition of any existing banks or branches which were 
subject to the CRA at the time of acquisition. This is a very important 
provision. This will ensure that foreign banks which expand their U.S. 
market presence by buying existing banks in this country will not have 
a competitive advantage over U.S. banks that are subject to the CRA. It 
will also ensure that U.S. banks that are now subject to the CRA will 
remain subject to the CRA even if they are acquired by a foreign bank 
for use as a wholesale bank. A related provision prohibits the 
establishment of branches and offices primarily for the purpose of 
deposit production. This prohibition against deposit siphoning from the 
community applies equally to foreign and domestic banks.
  So I might just say parenthetically, as I go through some of these 
provisions, while they are technical in nature, they are very important 
and they are constructed to provide a very careful balance here to make 
sure that this bill works in a positive way and that we both foresee 
and deal with and prevent negative, unintended consequences.

  This bill contains also a number of other provisions, including the 
Texas State homestead provision. Under the Texas Constitution, a lender 
may not require a home owner to put up his or her homestead as security 
for a loan unless it is for the purchase of the homestead, to pay taxes 
on the homestead, or to improve it. The provision reverses an OTS 
regulation that preempted that part of the Texas State Constitution.
  This conference report also contains a number of coin bills including 
the 1995 Special Olympics World Games Commemorative Coin Act, which 
authorizes the issuance of 800,000 $1 silver coins to commemorate the 
1995 Special Olympics World Games which will be held in New Haven, CT, 
on July 5 of next year.
  Another provision in the conference report permits the FDIC and the 
RTC as conservator or receiver of a failed depository institution to 
revive tort claims that had expired under a State statute of 
limitations.
  I might say this bill enjoys very broad support. In addition to 
support from the administration, this bill also enjoys the strong 
backing of all the bank regulators, including the Federal Reserve 
Board, the Federal Deposit Insurance Corporation, and the Comptroller 
of the Currency. It also enjoys the strong support of, among others, 
the American Bankers Association and the Bankers Roundtable.
  Now, passage of this bill will streamline the interstate banking 
process and remove laws that burden that process. It will increase the 
safety and soundness of our banking industry and reduce risks to our 
deposit insurance fund and, of course, reduce the risk then to the 
American taxpayers who ultimately back that fund.
  I believe it will permit banks to operate more efficiently and to 
serve their customers better and, I think over time, help drive down 
the cost of banking services to the customers of banking institutions.
  Before closing, I wish to thank Senator Dodd for his longstanding 
leadership on efforts to pass interstate banking and branching 
legislation. I wish to also express my appreciation to Senator D'Amato, 
the ranking member of the Banking Committee, whose bipartisan support 
has helped make passage in this instance of this legislation a near 
reality, and I believe soon to be a reality in this Congress.
  In addition, I want to express my appreciation to all the members of 
the Senate Banking Committee for helping to shape this important 
bipartisan legislation and for reporting it out of the committee by a 
vote of 19 to nothing.
  I know from time to time there are issues here that divide the 
Congress and divide us along partisan lines. I have tried very hard 
over the last 6 years as chairman of the Banking Committee to avoid 
that and to work on a bipartisan basis.
  I think one measure of that--along with many others, we have moved a 
vast amount of legislation through on a bipartisan basis--is this issue 
which came out of the Banking Committee by a vote of 19 to 0. It meant 
all Members--all Democrats, all Republicans --were voting in favor of 
the legislation. That, to me, is bipartisanship. That is the way we 
ought to try to make the Government work. I think the public wants to 
see that as well.
  Finally, I also want to thank my very good friend and colleague, 
Senator Sarbanes, who served on the conference committee, for moving 
that this important legislation be named after Congressman Neal and, 
very graciously, also myself. I greatly appreciate the honor that my 
colleagues in both Houses have extended to me in adopting this 
suggestion.
  I would say that this meets the test of being what I consider to be a 
historic piece of legislation. It finally makes a very needed change in 
the banking law landscape. I hope we can pass it today and send it on 
to the President for his signature.
  I yield the floor.
  Ms. MOSELEY-BRAUN. Mr. President, I am a strong supporter of 
community banks. I believe community-oriented, locally owned banks play 
an important role in the communities they serve. Community banks know 
their communities; they know their customers.
  That knowledge oftentimes makes them better bankers, and that 
knowledge helps them meet their communities' financial needs more 
effectively. It is therefore important to note at the outset that the 
conference report now before the Senate does nothing to impair the 
ability of well-run community banks to meet the needs of their 
communities, and that it does nothing to impair their competitiveness.
  At the same time, it is clear that the financial services industry in 
general, and the banking industry in particular, are in a period of 
major change. Changes in our economy, changes in technology, new 
competition, new products, and new needs, are just some of the factors 
driving the changes in our banking industry.
  The Riegle-Neal Interstate Banking and Branching Efficiency Act of 
1994 is one important step Congress is taking to enable the banking 
industry to respond to the forces of change, and to respond in a way 
that enhances the ability of the banking industry to meet the financial 
needs of consumers, of farmers, of businesses, all the other interests 
that depend on it.
  Consumers increasingly deal with mutual fund companies that operate 
nationwide. Mortgages are now increasingly turned into securities that 
trade on Wall Street. The competitors of banks are increasingly not 
other banks, but other, usually less regulated, financial services 
companies that can do much of what a bank can do--and oftentimes more. 
And these competitors do not face the limitations banks face when 
trying to enter new markets.
  This conference report opens up new opportunities and new choices for 
banks. It will help some banks who want and need to compete through a 
large network of offices to do so more efficiently and at less cost, 
while at the same time protecting the interests of local communities 
across our Nation.
  This legislation passed the Senate by voice vote earlier this year, 
and passed the House of Representatives by voice vote on its Suspension 
Calendar. Last month, the House acted on the conference report by voice 
vote. These voice votes demonstrate the broad support this bill enjoys, 
and are a clear indication that interstate banking and branching is an 
idea whose time has come.
  I want to take this opportunity, Mr. President, to congratulate the 
distinguished chairman of the Banking Committee, Senator Riegle--whose 
name is on this bill--for his skill and his leadership in putting this 
bill together, and in bringing it to this final step in the legislative 
process.

  As my colleagues know, Chairman Riegle is retiring at the end of this 
Congress. I will speak more extensively about the chairman's fine 
record on another, more appropriate occasion. At this time, however, I 
would like to commend him for being an active chairman, active in 
promoting the interests of consumers, and of communities, and active in 
protecting the interests of the American public. And I want to commend 
Senator Riegle, Mr. President, not just for his leadership on this 
bill, but also for his leadership on other major initiatives, like the 
Community Development Banking and Financial Institutions Act, which the 
President will soon sign into law, and on numerous other banking, 
housings, consumer protection, and securities bills that he was 
instrumental enacting during his 6 years as chairman of the Banking 
Committee.
  I also want to thank him for all of the friendship and the courtesies 
he has shown me during the last 2 years as a new member of the Banking 
Committee.
  Mr. President, I want to make only two other brief points before I 
conclude. First, I want to comment on the thrift statute of limitations 
issue that I know is of great concern to my good friend from Ohio, 
Senator Metzenbaum. As my colleague know, I was a supporter of the 
broader extension that originally passed the Senate, and I continue to 
support that kind of broad extension of the statute of limitations. I 
think the scope and extent of the savings and loan crisis demands that 
we give the RTC and the Department of Justice--and through them, the 
American people--every possible chance to recover the maximum amount 
possible from those whose activities caused the crisis that cost the 
American taxpayer over $100 billion. I want to make it clear that I 
would support an amendment broadening the statute of limitations 
extension as the original Senate bill did on another bill.
  Second, I want to note that the conference report contains a 
provision based on an amendment of mine that will result in a 
comprehensive review of Federal financial services policies. I think 
that such a review will help provide us with a framework that will be 
very helpful as the Banking Committee considers additional financial 
reforms, and as the committee faces new issues.
  I think it is critical that we review our financial system from the 
viewpoint of how it is meeting the needs of the users of the system--
the individuals, the communities, the businesses, the exporters, the 
farmers, and all those who need and depend on our finance system. We 
live in capital-scarce times, and that means it is imperative that our 
financial system provides capital to those who need it in the most 
cost-effective manner possible. We can no longer tolerate 
inefficiencies due to outmoded regulation.
  I am a relative newcomer to the Senate, but it is already clear to me 
that we need to take a very hard look at the Federal policies and 
regulations governing our financial services industry generally, and 
the banking industry in particular. I think Congress needs to consider 
which of these policies still make sense, and which are no longer 
appropriate in this new and rapidly changing environment.
  I want to conclude, Mr. President, by again commending the 
distinguished Senator from Michigan, Chairman Riegle, for his 
leadership in bringing this consensus, bipartisan, legislation to the 
Senate, and to commend Senator Dodd, who has worked on this legislation 
for a long time, and Senator D'Amato for his leadership. It is time to 
pass this bill for the last time. It is time to send it to the 
President for signature. It is time to make this bill the law of the 
land.
  (At the request of Mr. Dole, the following statement was ordered 
printed at this point in the Record:)
 Mr. HATFIELD. Mr. President, I am pleased to announce my 
strong support for the Interstate Banking and Efficiency Act. While I 
am unable to cast my vote in person due to commitments that have kept 
me in the West today, I strongly urge my colleagues to support the 
motion to proceed on this measure.
  The legislation before us has strong bipartisan support. This 
legislation represents an important step forward in modernizing our 
banking laws and will create a stronger and safer banking system. 
Interstate branching will make banking services more convenient for 
millions of Americans, enable small businesses to find new sources of 
credit, and allow large corporation which operate across State lines to 
meet their banking and financial needs more efficiently.
  Removing obstacles to interstate branching by banks has already been 
addressed by State throughout our Nation and it is long overdue that 
the Congress continue that process by doing the same. I urge my 
colleagues to support consideration of this legislation.
  The PRESIDING OFFICER. Under the previous order, the question is on 
agreeing to the motion to proceed to the consideration of the 
conference report to accompany H.R. 3841, the Interstate Banking 
Efficiency Act. On this question, the yeas and nays have been ordered, 
and the clerk will call the roll.
  The legislative clerk called the roll.
  Mr. SIMPSON. I announce that the Senator from Rhode Island [Mr. 
Chafee] and the Senator from Oregon [Mr. Hatfield] are necessarily 
absent.
  I further announce that, if present and voting, the Senator from 
Oregon [Mr. Hatfield] would vote ``yea.''
  The result was announced--yeas 97, nays 1, as follows:

                      [Rollcall Vote No. 296 Leg.]

                                YEAS--97

     Akaka
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Bradley
     Breaux
     Brown
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Coats
     Cochran
     Cohen
     Conrad
     Coverdell
     Craig
     D'Amato
     Danforth
     Daschle
     DeConcini
     Dodd
     Dole
     Domenici
     Dorgan
     Durenberger
     Exon
     Faircloth
     Feingold
     Feinstein
     Ford
     Glenn
     Gorton
     Graham
     Gramm
     Grassley
     Gregg
     Harkin
     Hatch
     Heflin
     Helms
     Hollings
     Hutchison
     Inouye
     Jeffords
     Johnston
     Kassebaum
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     Mathews
     McCain
     McConnell
     Metzenbaum
     Mikulski
     Mitchell
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Nunn
     Packwood
     Pell
     Pressler
     Pryor
     Reid
     Riegle
     Robb
     Rockefeller
     Roth
     Sarbanes
     Sasser
     Shelby
     Simon
     Simpson
     Smith
     Specter
     Stevens
     Thurmond
     Wallop
     Warner
     Wellstone
     Wofford

                                NAYS--1

       
     Boren
       

                             NOT VOTING--2

     Chafee
     Hatfield
       
  So, the motion was agreed to.

                          ____________________