[Congressional Record Volume 141, Number 65 (Friday, April 7, 1995)]
[Extensions of Remarks]
[Page E869]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


             THE LIMITED-PURPOSE BANK GROWTH CAP RELIEF ACT

                                 ______


                         HON. MICHAEL N. CASTLE

                              of delaware

                    in the house of representatives

                          Friday, April 7, 1995
  Mr. CASTLE. Mr. Speaker, today I am introducing legislation to lift 
an arbitrary, necessary and outdated regulatory burden from well-run 
financial services companies that provide much needed credit to 
American consumers. My colleague, Mr. LaFalce of New York and I are 
sponsoring this legislation to lift the 7-percent growth cap on the 
annual asset growth of limited-purpose banks. We are pleased to have 
Representatives Bill McCollum, Richard Baker, Barney Frank, Peter King, 
Ed Royce, Carolyn Maloney, Dick Chrysler, and Jon Fox join us as 
original cosponsors of the Limited-Purpose Bank Growth Cap Relief Act.
  Limited-purpose banks are specialized lenders--most of these banks 
are credit card lenders operating on a national basis. They make 
consumer credit more available to all Americans. The growth cap on 
these banks was imposed under the 1987 Competitive Equality Banking Act 
[CEBA]. At the time of CEBA's enactment, it was argued that because 
limited-purpose banks could be affiliated with firms whose businesses 
were not permissible for bank holding companies (securities, insurance 
and commerical enterprises) they had a competitive advantage over full-
service banks. The cap was intended only to be temporary, and Congress 
would lift it when interstate banking and branching and expanded bank 
activities were approved. Interstate banking and branching became law 
in 1994, Federal regulators have already greatly expanded approved bank 
financial activities, and Congress is providing regulatory relief to 
commercial banks. Limited-purpose banks are not a competitive threat to 
commercial banks. The growth cap has become an unprecedented 
restriction on a healthy, well-regulated industry and it no longer 
serves any useful purpose. The cap is actually forcing these banks to 
turn away customers.
  Will lifting the growth cap give these banks an unfair edge over 
their competitors? No, the CEBA banks are still subject to many other 
restrictions not applicable to commercial banks. For example, they 
cannot accept checking and demand deposits or engage in commercial 
lending; they can only accept savings or certificates of deposit of 
$100,000 or more; and, they cannot cross market financial services with 
their affiliates. We are not proposing to lift those restrictions, but 
simply to lift the growth cap for the 23 existing CEBA banks. The 
original fear was that a proliferation of limited-purpose banks would 
be a competitive threat to full service banks. This was addressed in 
CEBA by prohibiting the creation of new limited-purpose banks. Allowing 
the assets of the surviving CEBA banks to grow by more than 7-percent 
annually will not result in the creation of new banks, change the 
limitations to which the grandfathered banks are subject, or otherwise 
threaten full service banks.
  This legislation will simply allow limited-purpose banks to grow in 
response to their customers' needs. It will not undermine the safety or 
soundness of any institution or pose an unfair competitive threat to 
any other financial institution. If you believe in regulatory relief 
and allowing well-run companies to fully serve their customers, we hope 
our colleagues will join us in supporting this legislation to lift the 
7-percent asset growth cap form all limited-purpose banks.


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