[Congressional Record Volume 143, Number 82 (Thursday, June 12, 1997)]
[Senate]
[Pages S5637-S5639]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 RIEGLE-NEAL CLARIFICATION ACT OF 1997

  Mr. SANTORUM. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 58, H.R. 1306.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       A bill (H.R. 1306) to amend the Federal Deposit Insurance 
     Act to clarify the applicability of host State laws to any 
     branch in such State of an out-of-State bank.

  The PRESIDING OFFICER. Is there objection to the immediate 
consideration of the bill?
  There being no objection, the Senate proceeded to consider the bill.


                  Amendments Nos. 372 and 373, En Bloc

  Mr. SANTORUM. Mr. President, Senators D'Amato and Sarbanes have an 
amendment at the desk, and Senator Feingold has an amendment at the 
desk, and I ask for their consideration en bloc.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report.
  The legislative clerk read as follows:

       The Senator from Pennsylvania [Mr. Santorum] proposes 
     amendments numbered 372 and 373, en bloc.

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


                           amendment no. 372

 (Purpose: To amend provisions relating to the applicability of State 
   and Federal law to interstate branching operations, and for other 
                               purposes)

       On page 1, beginning on line 4, strike ``Clarification'' 
     and insert ``Amendments''.
       On page 1, line 7, insert ``(a) Activities of Branches of 
     Out-of-State Banks.--'' before ``Subsection''.
       On page 2, strike line 22 and all that follows through page 
     3, line 2 and insert the following:
       ``(3) Savings provision.--No provision of this subsection 
     shall be construed as affecting the applicability of--
       ``(A) any State law of any home State under subsection (b), 
     (c), or (d) of section 44; or
       ``(B) Federal law to State banks and State bank branches in 
     the home State or the host State.
       On page 3, after line 5, add the following:
       (b) Law Applicable to Interstate Branching Operations.--
     Section 5155(f)(1) of the Revised Statutes (12 U.S.C. 
     36(f)(1)) is amended by adding at the end the following:
       ``(C) Review and report on actions by comptroller.--The 
     Comptroller of the Currency shall conduct an annual review of 
     the actions it has taken with regard to the applicability of 
     State law to national banks (or their branches) during the 
     preceding year, and shall include in its annual report 
     required under section 333 of the Revised Statutes (12 U.S.C. 
     14) the results of the review and the reasons for each such 
     action. The first such review and report after the date of 
     enactment of this subparagraph shall encompass all such 
     actions taken on or after January 1, 1992.''.
       Amend the title to read as follows: ``An Act to amend 
     Federal law to clarify the applicability of host State laws 
     to any branch in such State of an out-of-State bank, and for 
     other purposes.''.
                                  ____



                           amendment no. 373

       (Purpose: Maintaining Right of a State to opt out of DIDA)

       At the appropriate place, insert the following:
       ``Nothing in this act alters the right of states under 
     section 525 of Public Law 96-221.''

  Mr. D'AMATO. Mr. President, the trigger date for nationwide 
interstate branching has passed--June 1, 1997. This important 
legislation will preserve the benefits of the dual banking system and 
keep the State banking charter competitive in an interstate 
environment. It is critical that the Senate now consider and pass H.R. 
1306, the Riegle-Neal Clarification Act of 1997.
  The dual banking system has served this country well for over 100 
years. The State banking system has been the source of major advances 
in the banking industry for the past 70 years.
  Mr. President, the dual banking system is under attack. The bill is 
necessary to preserve confidence in a State banking charter for banks 
with such a charter that wish to operate in more than one State. In 
addition, it will curtail incentives for unnecessary Federal preemption 
of State laws. Finally, the bill will restore balance to the dual 
banking system by ensuring that neither charter operates at an unfair 
advantage in this new interstate environment.
  Mr. President, the importance of this bill to my State has been 
communicated by Governor Pataki and the superintendent of banking. New 
York has more than 90 state-chartered banks with a total of more than 
half a trillion dollars in assets. These institutions play a vital role 
in the economic wellbeing of the State of New York. Without this 
legislation, the largest of these institutions may be tempted to 
convert to a national charter in order to operate in more than one 
State. The local bond with these institutions could be broken. New York 
State bank examiners would be no longer be examining these institutions 
for compliance with our State community reinvestment and consumer 
protection laws.
  H.R. 1306 will help prevent this alarming scenario. It protects the 
dual banking system.
  Mr. President, the problem cured by this bill can be simply 
described. The current law may be unclear as to whether consistent 
rules are used to determine what laws and powers apply to the out-of-
State branches of State and federally chartered banks. To the extent it 
remains uncertain that current law establishes rough parity between 
charters in this regard, some banks may conclude that the national bank 
charter is the preferable option. This is not a hypothetical concern; 
Key Corp., one of the largest State-chartered banks in New York, 
converted to a national bank because of this uncertainty. H.R. 1306 
would resolve any such ambiguity.
  First, it would establish that a host State's law would apply to the 
out-of-State branches of a State-chartered bank only to the same extent 
that those laws apply to the branches of out-of-State national banks 
located in the host State. Second, it would make clear that host State 
branches would be allowed to exercise powers granted by their home 
State if such powers are permissible for either banks chartered by the 
host State or for national bank branches in that host State.

  Enactment of H.R. 1306 also would bolster efforts in New York and 
other States to make sure that the State-chartered banks have the 
powers they need to compete efficiently and effectively in an 
interstate environment.
  Mr. President, this bill is especially important now because of the 
efforts of the Comptroller of the Currency to preempt State laws and 
promote the national bank charter at the expense of the States and 
other Federal regulators. At a recent oversight hearing, I presented 
documentation, prepared by the OCC, that confirms that the OCC has 
mounted an unprecedented, aggressive marketing effort to convince State 
chartered banks to flip to a national charter.
  I am pleased that our colleagues in the House, particularly Chairman 
Leach and Representative Roukema, were able to expeditiously guide this 
bill through the House, where the bill passed on the suspension 
calendar. I also want to thank my Senate colleagues for their 
cooperation, especially Senator Sarbanes.
  Mr. President, Senator Sarbanes has reviewed and analyzed carefully 
the House bill and he has identified the need for a technical 
clarification to the House-passed bill contained in the amendment we 
have developed. The amendment would modify the title of the bill, 
provide a technical clarification to ensure that a national statute 
that applies to a State-chartered bank in its home State will also 
apply to a branch of the bank in a host State; and, finally, require 
the OCC to report to Congress on its preemption decisions since January 
1, 1992, and annually thereafter.
  The information yielded by this preemption reporting requirement on 
the OCC's preemption of State law in numerous areas will assist 
oversight of the Comptroller's use of preemptive authority. In my 
judgment, in recent years the OCC has used his authority over national 
banks to thwart traditional areas of State regulation--such

[[Page S5638]]

as regulation of insurance and consumer protection. With the benefit of 
the information and analysis the amendment will require, Congress will 
be in a better position to determine whether current law regarding 
preemption is too broad or its administrative interpretation and 
applications have been too expansive.
  Mr. President, again I thank my distinguished ranking minority 
member, Senator Sarbanes, and I urge my colleagues to support the 
amendment and the bill.
  Mr. SARBANES. Mr. President, the amendment that I have offered 
together with Chairman D'Amato to H.R. 1306 would make three changes in 
the legislation.
  First, it would make the title of the legislation the Riegle-Neal 
Amendments Act of 1997. This reflects the fact that this legislation 
makes significant substantive changes to current law, and is not merely 
a clarification or technical change.
  Second, the amendment requires that no provision of subsection 24(j) 
of the Federal Deposit Insurance Act, as amended by H.R. 1306, shall be 
construed as affecting the applicability of Federal law to State banks 
and State bank branches in the home State or the host State. There was 
a concern that subsection 24(j)(1), as amended by H.R. 1306, could have 
the unintended result of Federal law not applying to a branch in a host 
State of an out-of-State State bank that would apply to the bank in its 
home State.
  Third, the amendment would require the Comptroller of the Currency to 
conduct an annual review of the actions it has taken with regard to the 
applicability of State law to national banks or their branches during 
the preceding year, and include in its annual report to Congress the 
results of the review and the reasons for each action. The first such 
review and report after the enactment of this legislation shall 
encompass all such actions taken on or after January 1, 1992.
  There are a couple of reasons for the inclusion of this reporting 
requirement in this amendment. First, under current law, actions by the 
Comptroller preempting State law only benefit branches of national 
banks in the affected State. H.R. 1306 would expand the applicability 
of those preemption decisions to branches of out-of-State State banks. 
Given this significant expansion of the consequences of the 
Comptroller's preemption decisions, it seems reasonable and important 
to require the Comptroller to include in its annual report to Congress 
a review and explanation of these decisions.
  In addition, when Congress enacted the Riegle-Neal Interstate Banking 
and Branching Efficiency Act in 1994, it specifically provided that 
State laws regarding consumer protection, community reinvestment, fair 
lending, and intrastate branching apply to the branches of State and 
national banks. The act provided that this set of State laws would not 
apply if Federal law preempts the application of such State laws to a 
national bank, or if the Comptroller of the Currency determines that 
the application of such State laws would have a discriminatory effect 
on the branch in comparison with the effect the application of such 
State laws would have with respect to branches of a bank chartered by 
the host State.
  Concerns have been raised by consumer groups, both before and since 
the enactment of Riegle-Neal, that the Comptroller has undertaken 
preemptive actions which were unnecessarily expansive. The conference 
report which accompanied the enactment of the Riegle-Neal Act 
specifically addressed this point. The report stated:

       The Conferees have been made aware of certain circumstances 
     in which the Federal banking agencies have applied 
     traditional preemption principles in a manner the Conferees 
     believe is inappropriately aggressive, resulting in 
     preemption of state law in situations which the federal 
     interest did not warrant that result. One illustration is OCC 
     Interpretive letter No. 572, dated January 15, 1992, from the 
     OCC to Robert M. Jaworski, Assistant Commissioner, State of 
     New Jersey Department of Banking, concluding that national 
     banks in New Jersey are not required to comply with the New 
     Jersey Consumer Checking Account. It is of utmost concern to 
     the Conferees that the agencies issue opinion letters and 
     interpretive rules concluding that Federal law preempts state 
     law regarding community reinvestment, consumer protection, 
     fair lending, or establishment of intrastate branches only 
     when the agency has determined that the Federal policy 
     interest in preemption is clear. In the case of Interpretive 
     Letter No. 572, it is the sense of the Conferees that the 
     fact the Congress has acknowledged the benefits of more 
     widespread use of lifeline accounts through the enactment of 
     the Bank Enterprise Act did not indicate that Congress 
     intended to override State basic banking laws, or occupy the 
     area of basic banking services to such an extent as to 
     displace State laws, or that the existence of State basic 
     banking laws frustrated the purpose of the Congress.

  The ruling referred to in the conference report has been under review 
by the OCC but has not been changed. Other actions have been taken by 
the Comptroller since the enactment of Riegle-Neal which have raised 
similar concerns. For example, in 1996 the OCC finalized a regulation 
exempting national banks from State laws protecting consumers from high 
credit card fees.
  Given these concerns, and the more expansive application the OCC's 
rulings will have as a result of H.R. 1306, it is important for the 
Comptroller to report to the Congress annually on its preemption 
actions, if any, and the rationale for the preemptions.
  Mr. FEINGOLD. Mr. President, let me thank the chairman of the Banking 
Committee, Mr. D'Amato, and the distinguished ranking member, Mr. 
Sarbanes, for accepting this modification to H.R. 1306, which preserves 
the right of States to opt out of Federal preemption under provisions 
of the 1980 Depository Institutions Deregulation and Monetary Control 
Act [DIDA]. With this amendment, the measure retains a key distinction 
between DIDA and the National Bank Act by continuing to allow States 
the right to regulate, except as to national banks, both interest rates 
and noninterest rate terms, such as late charges, over the limit fees, 
and not-sufficient fund fees, and I am pleased to offer this 
modification.
  As the former chairman of the Wisconsin Senate Banking Committee, I 
know the important role of State in this area, and of the contribution 
State regulation makes to the entire banking system. As the interstate 
banking and branching laws are implemented, it is critical that States 
retain that vital role.
  Ms. MOSELEY-BRAUN. Mr. President, I am pleased that the Banking 
Committee, on which I serve, has come to an agreement on the Riegle-
Neal clarifications bill. This legislation provides legal certainty for 
banks and bank supervisors regarding the Riegle-Neal interstate banking 
law passed in 1994. The Congress passed the Interstate banking law to 
end the patchwork of laws that had arisen in this area, and to provide 
for an efficient system for banks to operate in more than one State. It 
was legislation that was badly needed and long overdue, given the huge 
changes that have been ongoing in our economy generally, and in the 
financial services area, specifically.
  However, some confusion remains regarding the application of home 
State law versus the application of host State law to a State-chartered 
bank that branches outside its home State. Although the 1994 law 
clearly reserved the areas of intrastate branching, community 
reinvestment, consumer protection, and fair lending for host State 
jurisdiction, the extent to which other host State laws applied to an 
out-of-state state chartered bank remained ambiguous. State-chartered 
banks wanting to expand across State lines have faced legal uncertainty 
about what law governs their powers outside their home State, and many 
were contemplating switching to a national charter in order to gain 
that certainty. This bill, the Riegle-Neal Clarification Act of 1997, 
eliminates that ambiguity, ensuring the viability of our dual banking 
system by clearly stating that host State law applies to branches of 
State-chartered banks only to the extent that it applies to national 
bank branches.
  This bill levels the playing field between State-chartered banks and 
national chartered banks that branch across State lines. It is 
important to the preservation of a strong, State-chartered banking 
system, which benefits the safety and soundness of the banking system 
as a whole. I wish to commend my colleagues on the Senate Banking 
Committee who have worked hard on this agreement and I urge swift 
passage of the bill.

[[Page S5639]]

  Mr. SANTORUM. Mr. President, I ask unanimous consent that the 
amendments be agreed to en bloc.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 372 and 373) were agreed to.
  Mr. SANTORUM. Mr. President, I ask unanimous consent that the bill be 
considered read a third time and passed, as amended; that the motion to 
reconsider be laid upon the table; that the title amendment be agreed 
to; and that any statements relating to the bill be placed at the 
appropriate place in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (H. R. 1306), as amended, was deemed read the third time and 
passed.
  The title was amended so as to read:

       ``An Act to amend Federal law to clarify the applicability 
     of host State laws to any branch in such State of an out-of-
     State bank, and for other purposes.''.

                          ____________________