[Congressional Record Volume 144, Number 101 (Friday, July 24, 1998)]
[Senate]
[Pages S8956-S8982]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   CREDIT UNION MEMBERSHIP ACCESS ACT

  The PRESIDING OFFICER. Under the previous order, the Senate will 
proceed to the consideration of H.R. 1151, which the clerk will report.

       A bill (H.R. 1151) to amend the Federal Credit Union Act to 
     clarify existing law with regard to the field of membership 
     of Federal credit unions, to preserve the integrity and 
     purpose of Federal credit unions, to enhance supervisory 
     oversight of insured credit unions, and for other purposes.

  The Senate proceeded to consider the bill, which had been reported 
from the Committee on Banking, Housing, and Urban Affairs, with an 
amendment to strike all after the enacting clause and inserting in lieu 
thereof the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Credit 
     Union Membership Access Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.

                    TITLE I--CREDIT UNION MEMBERSHIP

Sec. 101. Fields of membership.
Sec. 102. Criteria for approval of expansion of membership of multiple 
              common-bond credit unions.
Sec. 103. Geographical guidelines for community credit unions.

                 TITLE II--REGULATION OF CREDIT UNIONS

Sec. 201. Financial statement and audit requirements.
Sec. 202. Conversion of insured credit unions.
Sec. 203. Limitation on member business loans.
Sec. 204. Serving persons of modest means within the field of 
              membership of credit unions.
Sec. 205. National Credit Union Administration Board membership.
Sec. 206. Report and congressional review requirement for certain 
              regulations.

        TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS

Sec. 301. Prompt corrective action.
Sec. 302. National credit union share insurance fund equity ratio, 
              available assets ratio, and standby premium charge.
Sec. 303. Access to liquidity.

                   TITLE IV--MISCELLANEOUS PROVISIONS

Sec. 401. Study and report on differing regulatory treatment.
Sec. 402. Review of regulations and paperwork reduction.
Sec. 403. Treasury report on reduced taxation and viability of small 
              banks.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) The American credit union movement began as a 
     cooperative effort to serve the productive and provident 
     credit needs of individuals of modest means.
       (2) Credit unions continue to fulfill this public purpose, 
     and current members and membership groups should not face 
     divestiture from the financial services institution of their 
     choice as a result of recent court action.
       (3) To promote thrift and credit extension, a meaningful 
     affinity and bond among members, manifested by a commonality 
     of routine interaction, shared and related work experiences, 
     interests, or activities, or the maintenance of an otherwise 
     well-understood sense of cohesion or identity is essential to 
     the fulfillment of the public mission of credit unions.
       (4) Credit unions, unlike many other participants in the 
     financial services market, are exempt from Federal and most 
     State taxes because they are member-owned, democratically 
     operated, not-for-profit organizations generally managed by 
     volunteer boards of directors and because they have the 
     specified mission of meeting the credit and savings needs of 
     consumers, especially persons of modest means.
       (5) Improved credit union safety and soundness provisions 
     will enhance the public benefit that citizens receive from 
     these cooperative financial services institutions.

     SEC. 3. DEFINITIONS.

       As used in this Act--
       (1) the term ``Administration'' means the National Credit 
     Union Administration;
       (2) the term ``Board'' means the National Credit Union 
     Administration Board;
       (3) the term ``Federal banking agencies'' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act;
       (4) the terms ``insured credit union'' and ``State-
     chartered insured credit union'' have the same meanings as in 
     section 101 of the Federal Credit Union Act; and
       (5) the term ``Secretary'' means the Secretary of the 
     Treasury.
                     TITLE I--CREDIT UNION MEMBERSHIP

     SEC. 101. FIELDS OF MEMBERSHIP.

       Section 109 of the Federal Credit Union Act (12 U.S.C. 
     1759) is amended--
       (1) in the first sentence--
       (A) by striking ``Federal credit union membership shall 
     consist of'' and inserting ``(a) In General.--Subject to 
     subsection (b), Federal credit union membership shall consist 
     of''; and
       (B) by striking ``, except that'' and all that follows 
     through ``rural district''; and
       (2) by adding at the end the following new subsections:
       ``(b) Membership Field.--Subject to the other provisions of 
     this section, the membership of any Federal credit union 
     shall be limited to the membership described in 1 of the 
     following categories:
       ``(1) Single common-bond credit union.--1 group that has a 
     common bond of occupation or association.
       ``(2) Multiple common-bond credit union.--More than 1 
     group--
       ``(A) each of which has (within the group) a common bond of 
     occupation or association; and
       ``(B) the number of members of each of which (at the time 
     the group is first included within the field of membership of 
     a credit union described in this paragraph) does not exceed 
     any numerical limitation applicable under subsection (d).
       ``(3) Community credit union.--Persons or organizations 
     within a well-defined local community, neighborhood, or rural 
     district.
       ``(c) Exceptions.--
       ``(1) Grandfathered members and groups.--
       ``(A) In general.--Notwithstanding subsection (b)--
       ``(i) any person or organization that is a member of any 
     Federal credit union as of the date of enactment of the 
     Credit Union Membership Access Act may remain a member of the 
     credit union after that date of enactment; and
       ``(ii) a member of any group whose members constituted a 
     portion of the membership of any Federal credit union as of 
     that date of enactment shall continue to be eligible to 
     become a member of that credit union, by virtue of membership 
     in that group, after that date of enactment.
       ``(B) Successors.--If the common bond of any group referred 
     to in subparagraph (A) is defined by any particular 
     organization or business entity, subparagraph (A) shall 
     continue to apply with respect to any successor to the 
     organization or entity.
       ``(2) Exception for underserved areas.--Notwithstanding 
     subsection (b), in the case of a Federal credit union, the 
     field of membership category of which is described in 
     subsection (b)(2), the Board may allow the membership of the 
     credit union to include any person or organization within a 
     local community, neighborhood, or rural district if--
       ``(A) the Board determines that the local community, 
     neighborhood, or rural district--
       ``(i) meets the requirements of paragraph (3) and 
     subparagraphs (A) and (B) of paragraph (4) of section 233(b) 
     of the Bank Enterprise Act of 1991, and such additional 
     requirements as the Board may impose; and
       ``(ii) is underserved, based on data of the Board and the 
     Federal banking agencies (as defined in section 3 of the 
     Federal Deposit Insurance Act), by other depository 
     institutions (as defined in section 19(b)(1)(A) of the 
     Federal Reserve Act); and

[[Page S8957]]

       ``(B) the credit union establishes and maintains an office 
     or facility in the local community, neighborhood, or rural 
     district at which credit union services are available.
       ``(d) Multiple Common-Bond Credit Union Group 
     Requirements.--
       ``(1) Numerical limitation.--Except as provided in 
     paragraph (2), only a group with fewer than 3,000 members 
     shall be eligible to be included in the field of membership 
     category of a credit union described in subsection (b)(2).
       ``(2) Exceptions.--In the case of any Federal credit union, 
     the field of membership category of which is described in 
     subsection (b)(2), the numerical limitation in paragraph (1) 
     of this subsection shall not apply with respect to--
       ``(A) any group that the Board determines, in writing and 
     in accordance with the guidelines and regulations issued 
     under paragraph (3), could not feasibly or reasonably 
     establish a new single common-bond credit union, the field of 
     membership category of which is described in subsection 
     (b)(1) because--
       ``(i) the group lacks sufficient volunteer and other 
     resources to support the efficient and effective operation of 
     a credit union;
       ``(ii) the group does not meet the criteria that the Board 
     has determined to be important for the likelihood of success 
     in establishing and managing a new credit union, including 
     demographic characteristics such as geographical location of 
     members, diversity of ages and income levels, and other 
     factors that may affect the financial viability and stability 
     of a credit union; or
       ``(iii) the group would be unlikely to operate a safe and 
     sound credit union;
       ``(B) any group transferred from another credit union--
       ``(i) in connection with a merger or consolidation 
     recommended by the Board or any appropriate State credit 
     union supervisor based on safety and soundness concerns with 
     respect to that other credit union; or
       ``(ii) by the Board in the Board's capacity as conservator 
     or liquidating agent with respect to that other credit union; 
     or
       ``(C) any group transferred in connection with a voluntary 
     merger, having received conditional approval by the 
     Administration of the merger application prior to October 25, 
     1996, but not having consummated the merger prior to October 
     25, 1996, if the merger is consummated not later than 180 
     days after the date of enactment of the Credit Union 
     Membership Access Act.
       ``(3) Regulations and guidelines.--The Board shall issue 
     guidelines or regulations, after notice and opportunity for 
     comment, setting forth the criteria that the Board will apply 
     in determining under this subsection whether or not an 
     additional group may be included within the field of 
     membership category of an existing credit union described in 
     subsection (b)(2).
       ``(e) Additional Membership Eligibility Provisions.--
       ``(1) Membership eligibility limited to immediate family or 
     household members.--No individual shall be eligible for 
     membership in a credit union on the basis of the relationship 
     of the individual to another person who is eligible for 
     membership in the credit union, unless the individual is a 
     member of the immediate family or household (as those terms 
     are defined by the Board, by regulation) of the other person.
       ``(2) Retention of membership.--Except as provided in 
     section 118, once a person becomes a member of a credit union 
     in accordance with this title, that person or organization 
     may remain a member of that credit union until the person or 
     organization chooses to withdraw from the membership of the 
     credit union.''.

     SEC. 102. CRITERIA FOR APPROVAL OF EXPANSION OF MEMBERSHIP OF 
                   MULTIPLE COMMON-BOND CREDIT UNIONS.

       Section 109 of the Federal Credit Union Act (12 U.S.C. 
     1759) is amended by adding at the end the following new 
     subsection:
       ``(f) Criteria for Approval of Expansion of Multiple 
     Common-Bond Credit Unions.--
       ``(1) In general.--The Board shall--
       ``(A) encourage the formation of separately chartered 
     credit unions instead of approving an application to include 
     an additional group within the field of membership of an 
     existing credit union whenever practicable and consistent 
     with reasonable standards for the safe and sound operation of 
     the credit union; and
       ``(B) if the formation of a separate credit union by the 
     group is not practicable or consistent with the standards 
     referred to in subparagraph (A), require the inclusion of the 
     group in the field of membership of a credit union that is 
     within reasonable proximity to the location of the group 
     whenever practicable and consistent with reasonable standards 
     for the safe and sound operation of the credit union.
       ``(2) Approval criteria.--The Board may not approve any 
     application by a Federal credit union, the field of 
     membership category of which is described in subsection 
     (b)(2) to include any additional group within the field of 
     membership of the credit union (or an application by a 
     Federal credit union described in subsection (b)(1) to 
     include an additional group and become a credit union 
     described in subsection (b)(2)), unless the Board determines, 
     in writing, that--
       ``(A) the credit union has not engaged in any unsafe or 
     unsound practice (as defined in section 206(b)) that is 
     material during the 1-year period preceding the date of 
     filing of the application;
       ``(B) the credit union is adequately capitalized;
       ``(C) the credit union has the administrative capability to 
     serve the proposed membership group and the financial 
     resources to meet the need for additional staff and assets to 
     serve the new membership group;
       ``(D) pursuant to the most recent evaluation of the credit 
     union under section 215, the credit union is satisfactorily 
     providing affordable credit union services to all individuals 
     of modest means within the field of membership of the credit 
     union;
       ``(E) any potential harm that the expansion of the field of 
     membership of the credit union may have on any other insured 
     credit union and its members is clearly outweighed in the 
     public interest by the probable beneficial effect of the 
     expansion in meeting the convenience and needs of the members 
     of the group proposed to be included in the field of 
     membership; and
       ``(F) the credit union has met such additional requirements 
     as the Board may prescribe, by regulation.''.

     SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT 
                   UNIONS.

       Section 109 of the Federal Credit Union Act (12 U.S.C. 
     1759) is amended by adding at the end the following new 
     subsection:
       ``(g) Regulations Required for Community Credit Unions.--
       ``(1) Definition of well-defined local community, 
     neighborhood, or rural district.--The Board shall prescribe, 
     by regulation, a definition for the term `well-defined local 
     community, neighborhood, or rural district' for purposes of--
       ``(A) making any determination with regard to the field of 
     membership of a credit union described in subsection (b)(3); 
     and
       ``(B) establishing the criteria applicable with respect to 
     any such determination.
       ``(2) Scope of application.--The definition prescribed by 
     the Board under paragraph (1) shall apply with respect to any 
     application to form a new credit union, or to alter or expand 
     the field of membership of an existing credit union, that is 
     filed with the Board after the date of enactment of the 
     Credit Union Membership Access Act.''.
                 TITLE II--REGULATION OF CREDIT UNIONS

     SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.

       (a) In General.--Section 202(a)(6) of the Federal Credit 
     Union Act (12 U.S.C. 1782(a)(6)) is amended by adding at the 
     end the following new subparagraphs:
       ``(C) Accounting principles.--
       ``(i) In general.--Accounting principles applicable to 
     reports or statements required to be filed with the Board by 
     each insured credit union shall be uniform and consistent 
     with generally accepted accounting principles.
       ``(ii) Board determination.--If the Board determines that 
     the application of any generally accepted accounting 
     principle to any insured credit union is not appropriate, the 
     Board may prescribe an accounting principle for application 
     to the credit union that is no less stringent than generally 
     accepted accounting principles.
       ``(iii) De minimus exception.--This subparagraph shall not 
     apply to any insured credit union, the total assets of which 
     are less than $10,000,000, unless prescribed by the Board or 
     an appropriate State credit union supervisor.
       ``(D) Large credit union audit requirement.--
       ``(i) In general.--Each insured credit union having total 
     assets of $500,000,000 or more shall have an annual 
     independent audit of the financial statements of the credit 
     union, performed in accordance with generally accepted 
     auditing standards by an independent certified public 
     accountant or public accountant licensed by the appropriate 
     State or jurisdiction to perform those services.
       ``(ii) Voluntary audits.--If a Federal credit union that is 
     not required to conduct an audit under clause (i), and that 
     has total assets of more than $10,000,000 conducts such an 
     audit for any purpose, using an independent auditor who is 
     compensated for his or her audit services with respect to 
     that audit, the audit shall be performed consistent with the 
     accountancy laws of the appropriate State or jurisdiction, 
     including licensing requirements.''.
       (b) Technical and Conforming Amendment.--Section 
     202(a)(6)(B) of the Federal Credit Union Act (12 U.S.C. 
     1782(a)(6)(B)) is amended by striking ``subparagraph (A)'' 
     and inserting ``subparagraph (A) or (D)''.

     SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.

       Section 205(b) of the Federal Credit Union Act (12 U.S.C. 
     1785(b)) is amended--
       (1) in paragraph (1), by striking ``Except with the prior 
     written approval of the Board, no insured credit union 
     shall'' and inserting ``Except as provided in paragraph (2), 
     no insured credit union shall, without the prior approval of 
     the Board'';
       (2) by redesignating paragraph (2) as paragraph (3); and
       (3) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Conversion of insured credit unions to mutual savings 
     banks.--
       ``(A) In general.--Notwithstanding paragraph (1), an 
     insured credit union may convert to a mutual savings bank or 
     savings association (if the savings association is in mutual 
     form), as those terms are defined in section 3 of the Federal 
     Deposit Insurance Act, without the prior approval of the 
     Board, subject to the requirements and procedures set forth 
     in the laws and regulations governing mutual savings banks 
     and savings associations.
       ``(B) Conversion proposal.--A proposal for a conversion 
     described in subparagraph (A) shall first be approved, and a 
     date set for a vote thereon by the members (either at a 
     meeting to be held on that date or by written ballot to be 
     filed on or before that date), by a majority of the directors 
     of the insured credit union. Approval of the proposal for 
     conversion shall be by the affirmative vote of a majority of 
     the members of the insured credit union who vote on the 
     proposal.
       ``(C) Notice of proposal to members.--An insured credit 
     union that proposes to convert to a mutual savings bank or 
     savings association under subparagraph (A) shall submit 
     notice to each of its members who is eligible to vote on the 
     matter of its intent to convert--

[[Page S8958]]

       ``(i) 90 days before the date of the member vote on the 
     conversion;
       ``(ii) 60 days before the date of the member vote on the 
     conversion; and
       ``(iii) 30 days before the date of the member vote on the 
     conversion.
       ``(D) Notice of proposal to board.--The Board may require 
     an insured credit union that proposes to convert to a mutual 
     savings bank or savings association under subparagraph (A) to 
     submit a notice to the Board of its intent to convert during 
     the 90-day period preceding the date of the completion of the 
     conversion.
       ``(E) Inapplicability of act upon conversion.--Upon 
     completion of a conversion described in subparagraph (A), the 
     credit union shall no longer be subject to any of the 
     provisions of this Act.
       ``(F) Limit on compensation of officials.--
       ``(i) In general.--No director or senior management 
     official of an insured credit union may receive any economic 
     benefit in connection with a conversion of the credit union 
     as described in subparagraph (A), other than--

       ``(I) director fees; and
       ``(II) compensation and other benefits paid to directors or 
     senior management officials of the converted institution in 
     the ordinary course of business.

       ``(ii) Senior management official.--For purposes of this 
     subparagraph, the term `senior management official' means a 
     chief executive officer, an assistant chief executive 
     officer, a chief financial officer, and any other senior 
     executive officer (as defined by the appropriate Federal 
     banking agency pursuant to section 32(f) of the Federal 
     Deposit Insurance Act).
       ``(G) Consistent rules.--
       ``(i) In general.--Not later than 6 months after the date 
     of enactment of the Credit Union Membership Access Act, the 
     Administration shall promulgate final rules applicable to 
     charter conversions described in this paragraph that are 
     consistent with rules promulgated by other financial 
     regulators, including the Office of Thrift Supervision and 
     the Office of the Comptroller of the Currency. The rules 
     required by this clause shall provide that charter conversion 
     by an insured credit union shall be subject to regulation 
     that is no more or less restrictive than that applicable to 
     charter conversions by other financial institutions.
       ``(ii) Oversight of member vote.--The member vote 
     concerning charter conversion under this paragraph shall be 
     administered by the Administration, and shall be verified by 
     the Federal or State regulatory agency that would have 
     jurisdiction over the institution after the conversion. If 
     either the Administration or that regulatory agency 
     disapproves of the methods by which the member vote was taken 
     or procedures applicable to the member vote, the member vote 
     shall be taken again, as directed by the Administration or 
     the agency.''.

     SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.

       The Federal Credit Union Act (12 U.S.C. 1701 et seq.) is 
     amended by inserting after section 107 the following new 
     section:

     ``SEC. 107A. LIMITATION ON MEMBER BUSINESS LOANS.

       ``(a) In General.--On and after the date of enactment of 
     this section, no insured credit union may make any member 
     business loan that would result in a total amount of such 
     loans outstanding at that credit union at any one time equal 
     to more than the lesser of--
       ``(1) 1.75 times the actual net worth of the credit union; 
     or
       ``(2) 1.75 times the minimum net worth required under 
     section 216(c)(1)(A) for a credit union to be well 
     capitalized.
       ``(b) Exceptions.--Subsection (a) does not apply in the 
     case of--
       ``(1) an insured credit union chartered for the purpose of 
     making, or that has a history of primarily making, member 
     business loans to its members, as determined by the Board; or
       ``(2) an insured credit union that--
       ``(A) serves predominantly low-income members, as defined 
     by the Board; or
       ``(B) is a community development financial institution, as 
     defined in section 103 of the Community Development Banking 
     and Financial Institutions Act of 1994.
       ``(c) Definitions.--As used in this section--
       ``(1) the term `member business loan'--
       ``(A) means any loan, line of credit, or letter of credit, 
     the proceeds of which will be used for a commercial, 
     corporate or other business investment property or venture, 
     or agricultural purpose; and
       ``(B) does not include an extension of credit--
       ``(i) that is fully secured by a lien on a 1- to 4-family 
     dwelling that is the primary residence of a member;
       ``(ii) that is fully secured by shares in the credit union 
     making the extension of credit or deposits in other financial 
     institutions;
       ``(iii) that is described in subparagraph (A), if it was 
     made to a borrower or an associated member that has a total 
     of all such extensions of credit in an amount equal to less 
     than $50,000;
       ``(iv) the repayment of which is fully insured or fully 
     guaranteed by, or where there is an advance commitment to 
     purchase in full by, any agency of the Federal Government or 
     of a State, or any political subdivision thereof; or
       ``(v) that is granted by a corporate credit union (as that 
     term is defined by the Board) to another credit union.
       ``(2) the term `net worth'--
       ``(A) with respect to any insured credit union, means the 
     credit union's retained earnings balance, as determined under 
     generally accepted accounting principles; and
       ``(B) with respect to a credit union that serves 
     predominantly low-income members, as defined by the Board, 
     includes secondary capital accounts that are--
       ``(i) uninsured; and
       ``(ii) subordinate to all other claims against the credit 
     union, including the claims of creditors, shareholders, and 
     the Fund; and
       ``(3) the term `associated member' means any member having 
     a shared ownership, investment, or other pecuniary interest 
     in a business or commercial endeavor with the borrower.
       ``(d) Effect on Existing Loans.--An insured credit union 
     that has, on the date of enactment of this section, a total 
     amount of outstanding member business loans that exceeds the 
     amount permitted under subsection (a) shall, not later than 3 
     years after that date of enactment, reduce the total amount 
     of outstanding member business loans to an amount that is not 
     greater than the amount permitted under subsection (a).''.

     SEC. 204. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD OF 
                   MEMBERSHIP OF CREDIT UNIONS.

       (a) In General.--Title II of the Federal Credit Union Act 
     (12 U.S.C. 1781 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 215. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD 
                   OF MEMBERSHIP OF CREDIT UNIONS.

       ``(a) Continuing and Affirmative Obligation.--The purpose 
     of this section is to reaffirm that insured credit unions 
     have a continuing and affirmative obligation to meet the 
     financial services needs of persons of modest means, 
     consistent with safe and sound operation.
       ``(b) Evaluation by the Board.--The Board shall, before the 
     end of the 12-month period beginning on the date of enactment 
     of the Credit Union Membership Access Act--
       ``(1) prescribe criteria for periodically reviewing the 
     record of each insured credit union in providing affordable 
     credit union services to all individuals of modest means 
     (including low- and moderate-income individuals) within the 
     field of membership of the credit union; and
       ``(2) provide for making the results of the reviews 
     publicly available.
       ``(c) Additional Criteria for Community Credit Unions 
     Required.--The Board shall, by regulation--
       ``(1) prescribe additional criteria for annually evaluating 
     the record of any insured credit union that is organized to 
     serve a well-defined local community, neighborhood, or rural 
     district in meeting the credit needs and credit union service 
     needs of the entire field of membership of the credit union; 
     and
       ``(2) prescribe procedures for remedying the failure of any 
     insured credit union described in paragraph (1) to meet the 
     criteria established pursuant to paragraph (1), including the 
     disapproval of any application by the credit union to expand 
     the field of membership of the credit union.
       ``(d) Emphasis on Performance, Not Paperwork.--In 
     evaluating any insured credit union under this section, the 
     Board--
       ``(1) shall focus on the actual performance of the insured 
     credit union; and
       ``(2) may not impose burdensome paperwork or recordkeeping 
     requirements.''.
       (b) Annual Reports.--With respect to each of the first 5 
     years that begin after the date of enactment of this Act, the 
     Board shall include in the annual report to the Congress 
     under section 102(d) of the Federal Credit Union Act, a 
     report on the progress of the Board in implementing section 
     215 of that Act (as added by subsection (a) of this section).

     SEC. 205. NATIONAL CREDIT UNION ADMINISTRATION BOARD 
                   MEMBERSHIP.

       Section 102(b) of the Federal Credit Union Act (12 U.S.C. 
     1752a(b)) is amended--
       (1) by striking ``(b) The Board'' and inserting ``(b) 
     Membership and Appointment of Board.--
       ``(1) In general.--The Board''; and
       (2) by adding at the end the following new paragraph:
       ``(2) Appointment criteria.--
       ``(A) Experience in financial services.--In considering 
     appointments to the Board under paragraph (1), the President 
     shall give consideration to individuals who, by virtue of 
     their education, training, or experience relating to a broad 
     range of financial services, financial services regulation, 
     or financial policy, are especially qualified to serve on the 
     Board.
       ``(B) Limit on appointment of credit union officers.--Not 
     more than 1 member of the Board may be appointed to the Board 
     from among individuals who, at the time of the appointment, 
     are, or have recently been, involved with any insured credit 
     union as a committee member, director, officer, employee, or 
     other institution-affiliated party.''.

     SEC. 206. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR 
                   CERTAIN REGULATIONS.

       A regulation prescribed by the Board shall be treated as a 
     major rule for purposes of chapter 8 of title 5, United 
     States Code, if the regulation defines, or amends the 
     definition of--
       (1) the term ``immediate family or household'' for purposes 
     of section 109(e)(1) of the Federal Credit Union Act (as 
     added by section 101 of this Act); or
       (2) the term ``well-defined local community, neighborhood, 
     or rural district'' for purposes of section 109(g) of the 
     Federal Credit Union Act (as added by section 103 of this 
     Act).
        TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS

     SEC. 301. PROMPT CORRECTIVE ACTION.

       (a) In General.--Title II of the Federal Credit Union Act 
     (12 U.S.C. 1781 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 216. PROMPT CORRECTIVE ACTION.

       ``(a) Resolving Problems To Protect Fund.--
       ``(1) Purpose.--The purpose of this section is to resolve 
     the problems of insured credit unions at the least possible 
     long-term loss to the Fund.
       ``(2) Prompt corrective action required.--The Board shall 
     carry out the purpose of this section by taking prompt 
     corrective action to resolve the problems of insured credit 
     unions.

[[Page S8959]]

       ``(b) Regulations Required.--
       ``(1) Insured credit unions.--
       ``(A) In general.--The Board shall, by regulation, 
     prescribe a system of prompt corrective action for insured 
     credit unions that is--
       ``(i) consistent with this section; and
       ``(ii) comparable to section 38 of the Federal Deposit 
     Insurance Act.
       ``(B) Cooperative character of credit unions.--The Board 
     shall design the system required under subparagraph (A) to 
     take into account that credit unions are not-for-profit 
     cooperatives that--
       ``(i) do not issue capital stock;
       ``(ii) must rely on retained earnings to build net worth; 
     and
       ``(iii) have boards of directors that consist primarily of 
     volunteers.
       ``(2) New credit unions.--
       ``(A) In general.--In addition to regulations under 
     paragraph (1), the Board shall, by regulation, prescribe a 
     system of prompt corrective action that shall apply to new 
     credit unions in lieu of this section and the regulations 
     prescribed under paragraph (1).
       ``(B) Criteria for alternative system.--The Board shall 
     design the system prescribed under subparagraph (A)--
       ``(i) to carry out the purpose of this section;
       ``(ii) to recognize that credit unions (as cooperatives 
     that do not issue capital stock) initially have no net worth, 
     and give new credit unions reasonable time to accumulate net 
     worth;
       ``(iii) to create adequate incentives for new credit unions 
     to become adequately capitalized by the time that they 
     either--

       ``(I) have been in operation for more than 10 years; or
       ``(II) have more than $10,000,000 in total assets;

       ``(iv) to impose appropriate restrictions and requirements 
     on new credit unions that do not make sufficient progress 
     toward becoming adequately capitalized; and
       ``(v) to prevent evasion of the purpose of this section.
       ``(c) Net Worth Categories.--
       ``(1) In general.--For purposes of this section the 
     following definitions shall apply:
       ``(A) Well capitalized.--An insured credit union is `well 
     capitalized' if--
       ``(i) it has a net worth ratio of not less than 7 percent; 
     and
       ``(ii) it meets any applicable risk-based net worth 
     requirement under subsection (d).
       ``(B) Adequately capitalized.--An insured credit union is 
     `adequately capitalized' if--
       ``(i) it has a net worth ratio of not less than 6 percent; 
     and
       ``(ii) it meets any applicable risk-based net worth 
     requirement under subsection (d).
       ``(C) Undercapitalized.--An insured credit union is 
     `undercapitalized' if--
       ``(i) it has a net worth ratio of less than 6 percent; or
       ``(ii) it fails to meet any applicable risk-based net worth 
     requirement under subsection (d).
       ``(D) Significantly undercapitalized.--An insured credit 
     union is `significantly undercapitalized'--
       ``(i) if it has a net worth ratio of less than 4 percent; 
     or
       ``(ii) if--

       ``(I) it has a net worth ratio of less than 5 percent; and
       ``(II) it--

       ``(aa) fails to submit an acceptable net worth restoration 
     plan within the time allowed under subsection (f); or
       ``(bb) materially fails to implement a net worth 
     restoration plan accepted by the Board.
       ``(E) Critically undercapitalized.--An insured credit union 
     is `critically undercapitalized' if it has a net worth ratio 
     of less than 2 percent (or such higher net worth ratio, not 
     to exceed 3 percent, as the Board may specify by regulation).
       ``(2) Adjusting net worth levels.--
       ``(A) In general.--If, for purposes of section 38(c) of the 
     Federal Deposit Insurance Act, the Federal banking agencies 
     increase or decrease the required minimum level for the 
     leverage limit (as those terms are used in that section 38), 
     the Board may, by regulation, and subject to subparagraph (B) 
     of this paragraph, correspondingly increase or decrease 1 or 
     more of the net worth ratios specified in subparagraphs (A) 
     through (D) of paragraph (1) of this subsection in an amount 
     that is equal to not more than the difference between the 
     required minimum level most recently established by the 
     Federal banking agencies and 4 percent of total assets (with 
     respect to institutions regulated by those agencies).
       ``(B) Determinations required.--The Board may increase or 
     decrease net worth ratios under subparagraph (A) only if the 
     Board--
       ``(i) determines, in consultation with the Federal banking 
     agencies, that the reason for the increase or decrease in the 
     required minimum level for the leverage limit also justifies 
     the adjustment in net worth ratios; and
       ``(ii) determines that the resulting net worth ratios are 
     sufficient to carry out the purpose of this section.
       ``(C) Transition period required.--If the Board increases 
     any net worth ratio under this paragraph, the Board shall 
     give insured credit unions a reasonable period of time to 
     meet the increased ratio.
       ``(d) Risk-Based Net Worth Requirement for Complex Credit 
     Unions.--
       ``(1) In general.--The regulations required under 
     subsection (b)(1) shall include a risk-based net worth 
     requirement for insured credit unions that are complex, as 
     defined by the Board based on the portfolios of assets and 
     liabilities of credit unions.
       ``(2) Standard.--The Board shall design the risk-based net 
     worth requirement to take account of any material risks 
     against which the net worth ratio required for an insured 
     credit union to be adequately capitalized may not provide 
     adequate protection.
       ``(e) Earnings-Retention Requirement Applicable to Credit 
     Unions That Are Not Well Capitalized.--
       ``(1) In general.--An insured credit union that is not well 
     capitalized shall annually set aside as net worth an amount 
     equal to not less than 0.4 percent of its total assets.
       ``(2) Board's authority to decrease earnings-retention 
     requirement.--
       ``(A) In general.--The Board may, by order, decrease the 
     0.4 percent requirement in paragraph (1) with respect to a 
     credit union to the extent that the Board determines that the 
     decrease--
       ``(i) is necessary to avoid a significant redemption of 
     shares; and
       ``(ii) would further the purpose of this section.
       ``(B) Periodic review required.--The Board shall 
     periodically review any order issued under subparagraph (A).
       ``(f) Net Worth Restoration Plan Required.--
       ``(1) In general.--Each insured credit union that is 
     undercapitalized shall submit an acceptable net worth 
     restoration plan to the Board within the time allowed under 
     this subsection.
       ``(2) Assistance to small credit unions.--The Board (or the 
     staff of the Board) shall, upon timely request by an insured 
     credit union with total assets of less than $10,000,000, and 
     subject to such regulations or guidelines as the Board may 
     prescribe, assist that credit union in preparing a net worth 
     restoration plan.
       ``(3) Deadlines for submission and review of plans.--The 
     Board shall, by regulation, establish deadlines for 
     submission of net worth restoration plans under this 
     subsection that--
       ``(A) provide insured credit unions with reasonable time to 
     submit net worth restoration plans; and
       ``(B) require the Board to act on net worth restoration 
     plans expeditiously.
       ``(4) Failure to submit acceptable plan within time 
     allowed.--
       ``(A) Failure to submit any plan.--If an insured credit 
     union fails to submit a net worth restoration plan within the 
     time allowed under paragraph (3), the Board shall--
       ``(i) promptly notify the credit union of that failure; and
       ``(ii) give the credit union a reasonable opportunity to 
     submit a net worth restoration plan.
       ``(B) Submission of unacceptable plan.--If an insured 
     credit union submits a net worth restoration plan within the 
     time allowed under paragraph (3) and the Board determines 
     that the plan is not acceptable, the Board shall--
       ``(i) promptly notify the credit union of why the plan is 
     not acceptable; and
       ``(ii) give the credit union a reasonable opportunity to 
     submit a revised plan.
       ``(5) Accepting plan.--The Board may accept a net worth 
     restoration plan only if the Board determines that the plan 
     is based on realistic assumptions and is likely to succeed in 
     restoring the net worth of the credit union.
       ``(g) Restrictions on Undercapitalized Credit Unions.--
       ``(1) Restriction on asset growth.--An insured credit union 
     that is undercapitalized shall not generally permit its 
     average total assets to increase, unless--
       ``(A) the Board has accepted the net worth restoration plan 
     of the credit union for that action;
       ``(B) any increase in total assets is consistent with the 
     net worth restoration plan; and
       ``(C) the net worth ratio of the credit union increases at 
     a rate that is consistent with the net worth restoration 
     plan.
       ``(2) Restriction on member business loans.--
     Notwithstanding section 107A(a), an insured credit union that 
     is undercapitalized may not make any increase in the total 
     amount of member business loans (as defined in section 
     107A(c)) outstanding at that credit union at any one time, 
     until such time as the credit union becomes adequately 
     capitalized.
       ``(h) More Stringent Treatment Based on Other Supervisory 
     Criteria.--With respect to the exercise of authority by the 
     Board under regulations comparable to section 38(g) of the 
     Federal Deposit Insurance Act--
       ``(1) the Board may not reclassify an insured credit union 
     into a lower net worth category, or treat an insured credit 
     union as if it were in a lower net worth category, for 
     reasons not pertaining to the safety and soundness of that 
     credit union; and
       ``(2) the Board may not delegate its authority to 
     reclassify an insured credit union into a lower net worth 
     category or to treat an insured credit union as if it were in 
     a lower net worth category.
       ``(i) Action Required Regarding Critically Undercapitalized 
     Credit Unions.--
       ``(1) In general.--The Board shall, not later than 90 days 
     after the date on which an insured credit union becomes 
     critically undercapitalized--
       ``(A) appoint a conservator or liquidating agent for the 
     credit union; or
       ``(B) take such other action as the Board determines would 
     better achieve the purpose of this section, after documenting 
     why the action would better achieve that purpose.
       ``(2) Periodic redeterminations required.--Any 
     determination by the Board under paragraph (1)(B) to take any 
     action with respect to an insured credit union in lieu of 
     appointing a conservator or liquidating agent shall cease to 
     be effective not later than the end of the 180-day period 
     beginning on the date on which the determination is made, and 
     a conservator or liquidating agent shall be appointed for 
     that credit union under paragraph (1)(A), unless the Board 
     makes a new determination under paragraph (1)(B) before the 
     end of the effective period of the prior determination.
       ``(3) Appointment of liquidating agent required if other 
     action fails to restore net worth.--

[[Page S8960]]

       ``(A) In general.--Notwithstanding paragraphs (1) and (2), 
     the Board shall appoint a liquidating agent for an insured 
     credit union if the credit union is critically 
     undercapitalized on average during the calendar quarter 
     beginning 18 months after the date on which the credit union 
     became critically undercapitalized.
       ``(B) Exception.--Notwithstanding subparagraph (A), the 
     Board may continue to take such other action as the Board 
     determines to be appropriate in lieu of appointment of a 
     liquidating agent if--
       ``(i) the Board determines that--

       ``(I) the insured credit union has been in substantial 
     compliance with an approved net worth restoration plan that 
     requires consistent improvement in the net worth of the 
     credit union since the date of the approval of the plan; and
       ``(II) the insured credit union has positive net income or 
     has an upward trend in earnings that the Board projects as 
     sustainable; and

       ``(ii) the Board certifies that the credit union is viable 
     and not expected to fail.
       ``(4) Nondelegation.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the Board may not delegate the authority of the Board under 
     this subsection.
       ``(B) Exception.--The Board may delegate the authority of 
     the Board under this subsection with respect to an insured 
     credit union that has less than $5,000,000 in total assets, 
     if the Board permits the credit union to appeal any adverse 
     action to the Board.
       ``(j) Review Required When Fund Incurs Material Loss.--For 
     purposes of determining whether the Fund has incurred a 
     material loss with respect to an insured credit union (such 
     that the inspector general of the Board must make a report), 
     a loss is material if it exceeds the sum of--
       ``(1) $10,000,000; and
       ``(2) an amount equal to 10 percent of the total assets of 
     the credit union at the time at which the Board initiated 
     assistance under section 208 or was appointed liquidating 
     agent.
       ``(k) Appeals Process.--Material supervisory 
     determinations, including decisions to require prompt 
     corrective action, made pursuant to this section by 
     Administration officials other than the Board may be appealed 
     to the Board pursuant to the independent appellate process 
     required by section 309 of the Riegle Community Development 
     and Regulatory Improvement Act of 1994 (or, if the Board so 
     specifies, pursuant to separate procedures prescribed by 
     regulation).
       ``(l) Consultation and Cooperation With State Credit Union 
     Supervisors.--
       ``(1) In general.--In implementing this section, the Board 
     shall consult and seek to work cooperatively with State 
     officials having jurisdiction over State-chartered insured 
     credit unions.
       ``(2) Evaluating net worth restoration plan.--In evaluating 
     any net worth restoration plan submitted by a State-chartered 
     insured credit union, the Board shall seek the views of the 
     State official having jurisdiction over the credit union.
       ``(3) Deciding whether to appoint conservator or 
     liquidating agent.--With respect to any decision by the Board 
     on whether to appoint a conservator or liquidating agent for 
     a State-chartered insured credit union--
       ``(A) the Board shall--
       ``(i) seek the views of the State official having 
     jurisdiction over the credit union; and
       ``(ii) give that official an opportunity to take the 
     proposed action;
       ``(B) the Board shall, upon timely request of an official 
     referred to in subparagraph (A), promptly provide the 
     official with--
       ``(i) a written statement of the reasons for the proposed 
     action; and
       ``(ii) reasonable time to respond to that statement;
       ``(C) if the official referred to in subparagraph (A) makes 
     a timely written response that disagrees with the proposed 
     action and gives reasons for that disagreement, the Board 
     shall not appoint a conservator or liquidating agent for the 
     credit union, unless the Board, after considering the views 
     of the official, has determined that--
       ``(i) the Fund faces a significant risk of loss with 
     respect to the credit union if a conservator or liquidating 
     agent is not appointed; and
       ``(ii) the appointment is necessary to reduce--

       ``(I) the risk that the Fund would incur a loss with 
     respect to the credit union; or
       (II) any loss that the Fund is expected to incur with 
     respect to the credit union; and

       ``(D) the Board may not delegate any determination under 
     subparagraph (C).
       ``(m) Corporate Credit Unions Exempted.--This section does 
     not apply to any insured credit union that--
       ``(1) operates primarily for the purpose of serving credit 
     unions; and
       ``(2) permits individuals to be members of the credit union 
     only to the extent that applicable law requires that such 
     persons own shares.
       ``(n) Other Authority Not Affected.--This section does not 
     limit any authority of the Board or a State to take action in 
     addition to (but not in derogation of) that required under 
     this section.
       ``(o) Definitions.--For purposes of this section the 
     following definitions shall apply:
       ``(1) Federal banking agency.--The term `Federal banking 
     agency' has the same meaning as in section 3 of the Federal 
     Deposit Insurance Act.
       ``(2) Net worth.--The term `net worth'--
       ``(A) with respect to any insured credit union, means 
     retained earnings balance of the credit union, as determined 
     under generally accepted accounting principles; and
       ``(B) with respect to a low-income credit union, includes 
     secondary capital accounts that are--
       ``(i) uninsured; and
       ``(ii) subordinate to all other claims against the credit 
     union, including the claims of creditors, shareholders, and 
     the Fund.
       ``(3) Net worth ratio.--The term `net worth ratio' means, 
     with respect to a credit union, the ratio of the net worth of 
     the credit union to the total assets of the credit union.
       ``(4) New credit union.--The term `new credit union' means 
     an insured credit union that--
       ``(A) has been in operation for less than 10 years; and
       ``(B) has not more than $10,000,000 in total assets.''.
       (b) Conservatorship and Liquidation Amendments To 
     Facilitate Prompt Corrective Action.--
       (1) Conservatorship.--Section 206(h) of the Federal Credit 
     Union Act (12 U.S.C. 1786(h)) is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (D), by striking ``or'' at the end;
       (ii) in subparagraph (E), by striking the period at the end 
     and inserting a semicolon; and
       (iii) by adding at the end the following new subparagraphs:
       ``(F) the credit union is significantly undercapitalized, 
     as defined in section 216, and has no reasonable prospect of 
     becoming adequately capitalized, as defined in section 216; 
     or
       ``(G) the credit union is critically undercapitalized, as 
     defined in section 216.''; and
       (B) in paragraph (2)--
       (i) in subparagraph (A), by striking ``In the case'' and 
     inserting ``Except as provided in subparagraph (C), in the 
     case''; and
       (ii) by adding at the end the following new subparagraph:
       ``(C) In the case of a State-chartered insured credit 
     union, the authority conferred by subparagraphs (F) and (G) 
     of paragraph (1) may not be exercised unless the Board has 
     complied with section 216(l).''.
       (2) Liquidation.--Section 207(a) of the Federal Credit 
     Union Act (12 U.S.C. 1787(a)) is amended--
       (A) in paragraph (1)(A), by striking ``himself'' and 
     inserting ``itself''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Liquidation to facilitate prompt corrective action.--
     The Board may close any credit union for liquidation, and 
     appoint itself or another (including, in the case of a State-
     chartered insured credit union, the State official having 
     jurisdiction over the credit union) as liquidating agent of 
     that credit union, if--
       ``(A) the Board determines that--
       ``(i) the credit union is significantly undercapitalized, 
     as defined in section 216, and has no reasonable prospect of 
     becoming adequately capitalized, as defined in section 216; 
     or
       ``(ii) the credit union is critically undercapitalized, as 
     defined in section 216; and
       ``(B) in the case of a State-chartered insured credit 
     union, the Board has complied with section 216(l).''.
       (c) Consultation Required.--In developing regulations to 
     implement section 216 of the Federal Credit Union Act (as 
     added by subsection (a) of this section), the Board shall 
     consult with the Secretary, the Federal banking agencies, and 
     the State officials having jurisdiction over State-chartered 
     insured credit unions.
       (d) Deadlines for Regulations.--
       (1) In general.--Except as provided in paragraph (2), the 
     Board shall--
       (A) publish in the Federal Register proposed regulations to 
     implement section 216 of the Federal Credit Union Act (as 
     added by subsection (a) of this section) not later than 270 
     days after the date of enactment of this Act; and
       (B) promulgate final regulations to implement that section 
     216 not later than 18 months after the date of enactment of 
     this Act.
       (2) Risk-based net worth requirement.--
       (A) Advance notice of proposed rulemaking.--Not later than 
     180 days after the date of enactment of this Act, the Board 
     shall publish in the Federal Register an advance notice of 
     proposed rulemaking, as required by section 216(d) of the 
     Federal Credit Union Act, as added by this Act.
       (B) Final regulations.--The Board shall promulgate final 
     regulations, as required by that section 216(d) not later 
     than 2 years after the date of enactment of this Act.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), 
     section 216 of the Federal Credit Union Act (as added by this 
     section) shall become effective 2 years after the date of 
     enactment of this Act.
       (2) Risk-based net worth requirement.--Section 216(d) of 
     the Federal Credit Union Act (as added by this section) shall 
     become effective on January 1, 2001.
       (f) Report to Congress Required.--When the Board publishes 
     proposed regulations pursuant to subsection (d)(1)(A), or 
     promulgates final regulations pursuant to subsection 
     (d)(1)(B), the Board shall submit to the Congress a report 
     that specifically explains--
       (1) how the regulations carry out section 216(b)(1)(B) of 
     the Federal Credit Union Act (as added by this section), 
     relating to the cooperative character of credit unions; and
       (2) how the regulations differ from section 38 of the 
     Federal Deposit Insurance Act, and the reasons for those 
     differences.
       (g) Conforming Amendments.--
       (1) Amendments relating to enforcement of prompt corrective 
     action.--Section 206(k) of the Federal Credit Union Act (12 
     U.S.C. 1786(k)) is amended--
       (A) in paragraph (1), by inserting ``or section 216'' after 
     ``this section'' each place it appears; and
       (B) in paragraph (2)(A)(ii), by inserting ``, or any final 
     order under section 216'' before the semicolon.
       (2) Conforming amendment regarding appointment of state 
     credit union supervisor as conservator.--Section 206(h)(1) of 
     the Federal Credit Union Act (12 U.S.C. 1786(h)(1)) is

[[Page S8961]]

     amended by inserting ``or another (including, in the case of 
     a State-chartered insured credit union, the State official 
     having jurisdiction over the credit union)'' after ``appoint 
     itself''.
       (3) Amendment repealing superseded provision.--Section 116 
     of the Federal Credit Union Act (12 U.S.C. 1762) is repealed.

     SEC. 302. NATIONAL CREDIT UNION SHARE INSURANCE FUND EQUITY 
                   RATIO, AVAILABLE ASSETS RATIO, AND STANDBY 
                   PREMIUM CHARGE.

       (a) In General.--Section 202 of the Federal Credit Union 
     Act (12 U.S.C. 1782) is amended--
       (1) by striking subsection (b) and inserting the following:
       ``(b) Certified Statement.--
       ``(1) Statement required.--
       ``(A) In general.--For each calendar year, in the case of 
     an insured credit union with total assets of not more than 
     $50,000,000, and for each semi-annual period in the case of 
     an insured credit union with total assets of $50,000,000 or 
     more, an insured credit union shall file with the Board, at 
     such time as the Board prescribes, a certified statement 
     showing the total amount of insured shares in the credit 
     union at the close of the relevant period and both the amount 
     of its deposit or adjustment of deposit and the amount of the 
     insurance charge due to the Fund for that period, both as 
     computed under subsection (c).
       ``(B) Exception for newly insured credit union.--
     Subparagraph (A) shall not apply with respect to a credit 
     union that became insured during the reporting period.
       ``(2) Form.--The certified statements required to be filed 
     with the Board pursuant to this subsection shall be in such 
     form and shall set forth such supporting information as the 
     Board shall require.
       ``(3) Certification.--The president of the credit union or 
     any officer designated by the board of directors shall 
     certify, with respect to each statement required to be filed 
     with the Board pursuant to this subsection, that to the best 
     of his or her knowledge and belief the statement is true, 
     correct, complete, and in accordance with this title and the 
     regulations issued under this title.'';
       (2) in subsection (c)(1)(A), by striking clause (iii) and 
     inserting the following:
       ``(iii) Periodic adjustment.--The amount of each insured 
     credit union's deposit shall be adjusted as follows, in 
     accordance with procedures determined by the Board, to 
     reflect changes in the credit union's insured shares:

       ``(I) annually, in the case of an insured credit union with 
     total assets of not more than $50,000,000; and
       ``(II) semi-annually, in the case of an insured credit 
     union with total assets of $50,000,000 or more.'';

       (3) in subsection (c), by striking paragraphs (2) and (3) 
     and inserting the following:
       ``(2) Insurance premium charges.--
       ``(A) In general.--Each insured credit union shall, at such 
     times as the Board prescribes (but not more than twice in any 
     calendar year), pay to the Fund a premium charge for 
     insurance in an amount stated as a percentage of insured 
     shares (which shall be the same for all insured credit 
     unions).
       ``(B) Relation of premium charge to equity ratio of fund.--
     The Board may assess a premium charge only if--
       ``(i) the Fund's equity ratio is less than 1.3 percent; and
       ``(ii) the premium charge does not exceed the amount 
     necessary to restore the equity ratio to 1.3 percent.
       ``(C) Premium charge required if equity ratio falls below 
     1.2 percent.--If the Fund's equity ratio is less than 1.2 
     percent, the Board shall, subject to subparagraph (B), assess 
     a premium charge in such an amount as the Board determines to 
     be necessary to restore the equity ratio to, and maintain 
     that ratio at, 1.2 percent.
       ``(3) Distributions from fund required.--
       ``(A) In general.--The Board shall effect a pro rata 
     distribution to insured credit unions after each calendar 
     year if, as of the end of that calendar year--
       ``(i) any loans to the Fund from the Federal Government, 
     and any interest on those loans, have been repaid;
       ``(ii) the Fund's equity ratio exceeds the normal operating 
     level; and
       ``(iii) the Fund's available assets ratio exceeds 1.0 
     percent.
       ``(B) Amount of distribution.--The Board shall distribute 
     under subparagraph (A) the maximum possible amount that--
       ``(i) does not reduce the Fund's equity ratio below the 
     normal operating level; and
       ``(ii) does not reduce the Fund's available assets ratio 
     below 1.0 percent.
       ``(C) Calculation based on certified statements.--In 
     calculating the Fund's equity ratio and available assets 
     ratio for purposes of this paragraph, the Board shall 
     determine the aggregate amount of the insured shares in all 
     insured credit unions from insured credit unions certified 
     statements under subsection (b) for the final reporting 
     period of the calendar year referred to in subparagraph 
     (A).'';
       (4) in subsection (c), by adding at the end the following 
     new paragraph:
       ``(4) Timeliness and accuracy of data.--In calculating the 
     available assets ratio and equity ratio of the Fund, the 
     Board shall use the most current and accurate data reasonably 
     available.''; and
       (5) by striking subsection (h) and inserting the following:
       ``(h) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Available assets ratio.--The term `available assets 
     ratio', when applied to the Fund, means the ratio of--
       ``(A) the amount determined by subtracting--
       ``(i) direct liabilities of the Fund and contingent 
     liabilities for which no provision for losses has been made, 
     from
       ``(ii) the sum of cash and the market value of unencumbered 
     investments authorized under section 203(c), to
       ``(B) the aggregate amount of the insured shares in all 
     insured credit unions.
       ``(2) Equity ratio.--The term `equity ratio', when applied 
     to the Fund, means the ratio of--
       ``(A) the amount of Fund capitalization, including insured 
     credit unions' 1 percent capitalization deposits and the 
     retained earnings balance of the Fund (net of direct 
     liabilities of the Fund and contingent liabilities for which 
     no provision for losses has been made); to
       ``(B) the aggregate amount of the insured shares in all 
     insured credit unions.
       ``(3) Insured shares.--The term `insured shares', when 
     applied to this section, includes share, share draft, share 
     certificate, and other similar accounts as determined by the 
     Board, but does not include amounts exceeding the insured 
     account limit set forth in section 207(c)(1).
       ``(4) Normal operating level.--The term `normal operating 
     level', when applied to the Fund, means an equity ratio 
     specified by the Board, which shall be not less than 1.2 
     percent and not more than 1.5 percent.''.
       (b) Effective Date.--This section and the amendments made 
     by this section shall become effective on January 1 of the 
     first calendar year beginning more than 180 days after the 
     date of enactment of this Act.

     SEC. 303. ACCESS TO LIQUIDITY.

       Section 204 of the Federal Credit Union Act (12 U.S.C. 
     1784) is amended by adding at the end the following new 
     subsections:
       ``(f) Access to Liquidity.--The Board shall--
       ``(1) periodically assess the potential liquidity needs of 
     each insured credit union, and the options that the credit 
     union has available for meeting those needs; and
       ``(2) periodically assess the potential liquidity needs of 
     insured credit unions as a group, and the options that 
     insured credit unions have available for meeting those needs.
       ``(g) Sharing Information With Federal Reserve Banks.--The 
     Board shall, for the purpose of facilitating insured credit 
     unions' access to liquidity, make available to the Federal 
     reserve banks (subject to appropriate assurances of 
     confidentiality) information relevant to making advances to 
     such credit unions, including the Board's reports of 
     examination.''.
                   TITLE IV--MISCELLANEOUS PROVISIONS

     SEC. 401. STUDY AND REPORT ON DIFFERING REGULATORY TREATMENT.

       (a) Study.--The Secretary shall conduct a study of--
       (1) the differences between credit unions and other 
     federally insured financial institutions, including 
     regulatory differences with respect to regulations enforced 
     by the Office of Thrift Supervision, the Office of the 
     Comptroller of the Currency, the Federal Deposit Insurance 
     Corporation, and the Administration; and
       (2) the potential effects of the application of Federal 
     laws, including Federal tax laws, on credit unions in the 
     same manner as those laws are applied to other federally 
     insured financial institutions.
       (b) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall submit a report to 
     the Congress on the results of the study required by 
     subsection (a).

     SEC. 402. REVIEW OF REGULATIONS AND PAPERWORK REDUCTION.

       Section 303 of the Riegle Community Development and 
     Regulatory Improvement Act of 1994 (12 U.S.C. 4803) is 
     amended to read as follows:

     ``SEC. 303. REGULAR REVIEW OF REGULATIONS AND PAPERWORK 
                   REDUCTION.

       ``(a) Review.--During the 1-year period following the date 
     of enactment of the Credit Union Membership Access Act, each 
     Federal banking agency and the National Credit Union 
     Administration shall, to the maximum extent possible and 
     consistent with the principles of safety and soundness, 
     statutory law and policy, and the public interest--
       ``(1) conduct a review of the regulations and written 
     policies of each such agency--
       ``(A) to streamline and modify those regulations and 
     policies in order to improve efficiency, reduce unnecessary 
     costs, and reduce the paperwork burden for insured depository 
     institutions; and
       ``(B) to remove inconsistencies and outmoded and 
     duplicative requirements; and
       ``(2) work jointly to make uniform all regulations and 
     guidelines implementing common statutory or supervisory 
     policies.
       ``(b) Report to Congress.--Not later than 1 year after the 
     date of enactment of the Credit Union Membership Access Act, 
     each agency referred to in subsection (a) shall submit a 
     report to Congress detailing the progress of the agency in 
     carrying out this section and making recommendations to the 
     Congress on the need for statutory changes, if any, that 
     would assist in the effort to reduce the paperwork burden for 
     insured institutions.''.

     SEC. 403. TREASURY REPORT ON REDUCED TAXATION AND VIABILITY 
                   OF SMALL BANKS.

       The Secretary shall, not later than 1 year after the date 
     of enactment of this Act, submit a report to the Congress 
     containing--
       (1) recommendations for such legislative and administrative 
     action as the Secretary deems appropriate, that would reduce 
     and simplify the tax burden for--
       (A) insured depository institutions having less than 
     $1,000,000,000 in assets; and
       (B) banks having total assets of not less than 
     $1,000,000,000 nor more than $10,000,000,000; and
       (2) any other recommendations that the Secretary deems 
     appropriate that would preserve the viability and growth of 
     small banking institutions in the United States.


                         Privilege of the Floor

  Mr. SARBANES. Mr. President, I ask unanimous consent that Dean

[[Page S8962]]

Shahinian of our committee be allowed on the floor of the Senate during 
consideration of this bill.
  The PRESIDING OFFICER (Mr. Allard). Without objection, it is so 
ordered.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York is recognized.
  Mr. D'AMATO. Mr. President, I ask unanimous consent that staff of the 
Committee on Banking, Housing, and Urban Affairs be permitted access to 
the floor during consideration of this bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York is recognized.
  Mr. D'AMATO. Mr. President, today, we consider H.R. 1151, the Credit 
Union Membership Access Act, which is critical legislation. It is 
legislation necessary to preserve the ability of all Americans to join 
the credit union of their choice, and to ensure that 73 million 
Americans who are currently members of a credit union in no way have 
their membership status jeopardized.
  Credit unions work, Mr. President. They work for working families, 
they work for the little guy. And in their hour of gravest need, it is 
time for Congress to work for them. I urge my colleagues to support 
this legislation as enthusiastically as our friends in the House did--
by an overwhelming vote of 411-8. I am confident that we will act to 
preserve the rights of all Americans to join credit unions now and into 
the future.
  Mr. President, this legislation was crafted in response to a Supreme 
Court ruling that was decided on a very narrow legal point, handed down 
on February 25 of this year. That ruling placed 20 million Americans in 
immediate jeopardy and tens of millions of others of being kicked out 
of the credit unions they belong to. Who are these Americans? They are 
small business employees and small business owners, low- and moderate-
income earners, farmers, laborers, church members--the hard-working 
American men and women who have a right to affordable financial 
services as much as anyone else.
  For decades, the American dream has been made a reality by credit 
unions. These cooperatives reach out to individuals, associations and 
communities who have had the door slammed in their faces by other 
financial institutions. Make no mistake about it, Mr. President, the 
economy, while strong today, the economy--such that people can get 
loans for a variety of reasons--may not always be that strong. I hope 
it is. But if history is any reminder of what may be in the future, 
there will be difficult times.
  It has always been the credit union that has given to the little guy, 
the forgotten middle class--I don't mean little in terms of size and 
not as a pejorative, but indeed I am talking about the backbone of this 
country--the opportunity to look his or her neighbor in the eye, who 
knows that they are good and who knows they will work to pay back that 
loan, as opposed to somebody 2,000 miles away who doesn't even see that 
person, who gets an application, who views it in terms of what the 
income is or the fact that the person is out of work, or the fact that 
the person has a small farm and is running against tough times and 
says, no, and turns them down.
  It has traditionally been the credit union neighbor, knowing a 
neighbor employee, working next to his co-employee, recognizing their 
needs, making that money available so they can send their kid to 
school. It is one of the great strengths of this country, and it gives 
us economic diversity, it gives people choice, and it provides 
competition.
  There are those who do not like competition, who set up a whole 
series--almost a canard as to, ``Oh, no; credit unions are a problem.'' 
They are a problem, because they give people affordable opportunities 
to borrow at the lowest rates, because they don't pay income taxes. 
Why? They are not paying dividends out to people. Where do those moneys 
go? Those moneys go so that additional loans are available to their 
members. I love it. I think it is great. I think it really is Americana 
at its best.
  During good and prosperous times, we should not turn away and we 
should not create conditions that make it difficult, if not impossible, 
for them to serve the needs of our neighbors and our friends, and 
people in all of our communities.
  Mr. President, it is not good enough to say, ``I am going to vote for 
a credit union bill,'' and then attempt to fix a whole series of 
measures aimed at impeding the credit unions from doing their job. 
There are going to be some of my good friends and colleagues who are 
going to come here and say, ``We want to make it possible for others in 
the financial services area to recognize that we love them and we care 
for them,'' et cetera.
  There are going to be a number of amendments that are going to be put 
forth. Some of these amendments, and one in particular, one that would 
attempt to remove the Community Reinvestment Act from the obligation of 
community banks--if that is passed, that will spell a veto of this 
bill.
  I am not suggesting to you we shouldn't help community banks. I want 
to help them. Indeed, our President who presides today has come forth. 
I want to commend the Senator from Colorado for some very creative, 
long overdue actions to help community banks in the most positive way 
by seeing to it that they do not have unfair tax burdens placed upon 
them, by seeing that they have the opportunity to expand their board of 
directors or their shareholders, the number of shareholders, without 
falling into another taxable area.
  There are things we can do and should be doing. But we shouldn't be 
attempting to do them, in my opinion, on this bill because it clouds 
the issue of whether or not we are going to give credit unions the 
opportunity to continue to serve their people.
  Let me suggest this. Our Senate bill goes much further than the House 
bill to ensure the safety and the soundness of credit unions through 
tougher, more detailed provisions requiring a system of prompt, 
corrective action for federally insured credit unions.
  This is not a giveaway. This is not the same bill that came from the 
House. It is improved. It is tougher on them and fairer on them. We sat 
down and negotiated with them. We said to them that we are not going to 
place at risk the FDIC insurance for the American taxpayer. They 
agreed.
  The system is be patterned after the prompt corrective action 
provisions of the Federal Deposit Insurance Act. This is a different 
bill from the one that comes from the House. It is aimed at protecting 
our taxpayers.
  The Senate bill also includes for the first time capital requirements 
for all federally insured credit unions, including a risk-based capital 
requirement for complex credit unions. Together, these provisions 
represent the most significant legislative reform of credit union 
safety and soundness since 1970 when the National Credit Union 
insurance fund was created.
  We have included the enhanced safety and soundness provisions upon 
the recommendation of the Treasury Department following an extensive 
Treasury Department study placed in legislation by our colleague, 
Senator Bennett. These are basic, prudent approaches to successfully 
manage any financial institution that Congress has already applied to 
banks and thrifts. In the long run, it is the American taxpayer that we 
protect by assuring that credit unions reach and attain high levels of 
capital, or face restrictions with respect to their operations.
  Credit unions, no matter how small or how large, need a sufficient 
capital buffer to handle unexpected downturns in the economy and 
subsequent losses. The capital requirements in this bill will see to it 
that those goals are achieved.
  We all know how important prevention is, along with legislative 
oversight, when dealing with financial institutions. Credit unions are 
no different from other financial institutions when it comes to 
prevention and oversight.
  There are those who will say you are going in and giving to the 
masses. No. We responded to their legitimate concerns that they can 
continue business. But we have tougher end requirements as it relates 
to sound operation and oversight and the ability to close those down 
who may not be meeting their obligations.

[[Page S8963]]

  In 1991, the GAO issued an extensive study which detailed the 
recommendations for corporate credit union investments and capital 
ratios that were later adopted. These recommendations were also adopted 
by the NCUA.
  The failure of Cap Corp. in 1995 raised specific concerns about the 
interest rate risk that corporate credit unions were taking. Our 
committee held hearings in early 1995 and later reported out a bill, S. 
883. In 1997, NCUA issued a comprehensive revision of the rules 
governing corporate credit unions to address concerns arising from the 
failure of Cap Corp.
  Mr. President, credit unions all over are now in solid shape, as 
concluded in the exhaustive study done by Treasury last year. The new 
safety and soundness provisions, as recommended by the Treasury 
Department, will further strengthen insured credit unions across the 
country and, in so doing, protect our taxpayers.
  Our legislation also goes much further than the House in placing for 
the first time significant restrictions on member business loans. We 
are going to hear something about that. We are going to hear that we 
should restrict loans that credit unions can make. While the House bill 
simply puts a freeze on current regulations and requires a study, our 
bill places statutory limits on the amount of total business loans 
available for credit unions.
  This is not a bill crafted to please all. This is a bill crafted to 
permit credit unions to do that which they do best--to make those 
loans, those personal loans to their members, and, yes, to meet the 
needs of the small businessmen.
  In the Senate bill, the total amount of outstanding member business 
loans of a federally insured credit union cannot exceed 12.25 percent 
of the assets of the credit union. Credit unions that become 
undercapitalized--that is, less than 6 percent of their net worth--are 
prohibited from making new commercial loans that would result in an 
increase in the total amount of member business loans outstanding. 
Credit unions that presently exceed the member business loan limits 
will be given 3 years in which to come into compliance.
  Mr. President, this is a pretty tough loan limitation, the first 
time. It is not in the House bill--never had any limitations on 
business loans. There are going to be some who genuinely feel that 
should be curtailed even further. I would suggest to go further would 
really do violence to the ability of almost 200 of the Nation's 1,500 
credit unions that make these loans available today. It is unintended 
mischief that will take place if that legislation passes. I say 
``unintended,'' Mr. President. Notwithstanding unintended, the 
consequences will not be fair and will be disruptive.
  These restrictions on business lending in our bill are real and they 
are meaningful, and together with the expanded safety and soundness 
provisions in title III of the bill, we will ensure that credit union 
business lending does not present any safety and soundness concerns. In 
a July 13 letter to the majority leader, Secretary Rubin has stated 
Treasury's position that the prompt corrective action in capital 
standard provisions in the bill represent an adequate response to any 
safety and soundness concerns about credit union business lending.
  Furthermore, I have a copy of the statement of the administration 
policy dated July 22, 1998, which states that there is no safety and 
soundness basis for additional business loan requirements.
  I ask unanimous consent that Secretary Rubin's letter and the 
Statement of the Administration Policy be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                   Department of the Treasury,

                                    Washington, DC, July 13, 1998.
     Hon. Trent Lott,
     Majority Leader, U.S. Senate,
     Washington, DC.
       Dear Trent: I appreciate your scheduling H.R. 1151, the 
     Credit Union Membership Access Act, for Senate floor action 
     beginning July 17. I am writing to urge expeditious Senate 
     passage of the bill--as approved by the Banking Committee on 
     April 30--without any extraneous amendments.
       In revising the statute governing federal credit unions' 
     field of membership, the bill would protect existing credit 
     union members and membership groups, and remove uncertainty 
     created by the Supreme Court's AT&T decision.
       The bill's safety and soundness provisions would represent 
     the most significant legislative reform of credit union 
     safety and soundness safeguards since the creation of the 
     National Credit Union Share Insurance Fund in 1970. The bill 
     would institute capital standards for all federally insured 
     credit unions, including a risk-based capital requirement for 
     complex credit unions. It would create a system of prompt 
     corrective action--specifically tailored to credit unions as 
     not-for-profit, member-owned cooperatives. It would also take 
     a series of steps to make the Share Insurance Fund even 
     stronger and more resilient.
       These reforms involve little cost or burden to credit 
     unions today, yet they could pay enormous dividends in more 
     difficult times.
       The bill rightly reaffirms and reinforces credit unions' 
     mission of serving persons of modest means. Section 204 would 
     require periodic review of each federally insured credit 
     union's record of meeting the needs of such persons within 
     its field of membership. This requirement is flexible, 
     tailored to credit unions, and will impose no unreasonable 
     burden. It rests on the Congressionally mandated mission of 
     credit unions and on the benefits of federal deposit 
     insurance. Such deposit insurance gives credit union members 
     ironclad assurance about the safety of their savings, and 
     thus helps credit unions compete for deposits with larger, 
     more widely known financial institutions (just as it helps 
     community banks and thrifts). Section 204 is particularly 
     appropriate in view of how the bill liberalizes the common 
     bond requirement and thus facilitates credit unions' 
     expansion beyond their core membership groups.
       Finally, I would like to comment on the safety and 
     soundness of credit unions' business lending. Credit unions 
     may make business loans only to their members, and cannot 
     make loans to business corporations. Under the National 
     Credit Union Administration's regulations, each business loan 
     must be fully secured with good-quality collateral, the 
     borrower must be personally liable on the loan, and business 
     loans to any one borrower generally cannot exceed 15 percent 
     of the credit union's reserves. Credit unions' business loans 
     have delinquency rates that are comparable to those on 
     commercial loans made by community banks and thrifts, and 
     charge-off (i.e., loss) rates that compare favorably with 
     those of banks and thrifts. We believe that existing 
     safeguards--together with such new statutory protections as 
     the 6 percent capital requirement, the risk-based capital 
     requirement for complex credit unions, and the system of 
     prompt corrective action--represent an adequate response to 
     safety and soundness concerns about credit unions' business 
     lending.
       We look forward to working with you and other Senators to 
     secure expeditious passage of a clean bill.
           Sincerely,
                                                  Robert E. Rubin,
     Secretary of the Treasury.
                                  ____


                   Statement of Administration Policy


             h.r. 1151--credit union membership access act

       The Administration strongly supports Senate passage of H.R. 
     1151, as approved by the Senate Banking Committee, without 
     extraneous or controversial amendments. The full Senate 
     should reject amendments rejected at the Banking Committee 
     mark-up, such as the amendment that would substantially 
     weaken the Community Reinvestment Act by exempting certain 
     banks from the Act's requirements. If H.R. 1151 were 
     presented to the President with such an amendment, the 
     Secretary of the Treasury would recommend that the President 
     veto the bill.
       The Senate Banking Committee version reflects a careful 
     balancing of important goals: (1) protecting existing credit 
     union members and membership groups; (2) removing uncertainty 
     created by the Supreme Court's AT&T decision; (3) 
     facilitating credit union expansion beyond core membership 
     groups in appropriate circumstances, such as when necessary 
     to meet the needs of underserved areas; (4) reforming credit 
     union safety and soundness safeguards, by instituting capital 
     standards and a risk-based capital requirement, as well as 
     further strengthening the Share Insurance Fund; and (5) 
     reaffirming and reinforcing credit unions' mission of serving 
     persons of modest means. The Administration strongly opposes 
     any efforts to upset this balance by stripping the bill of 
     any of these important provisions.
       Specifically, Section 204 would require periodic review of 
     each Federally-insured credit union's record of meeting the 
     needs of such persons within its membership. This requirement 
     is flexible, tailored to credit unions, and will impose no 
     unreasonable burden. It rests on the Congressionally mandated 
     mission of credit unions and on the benefits of Federal 
     deposit insurance. Inclusion of Section 204 is particularly 
     important to keeping credit unions focused on their public 
     mission in view of how the bill liberalizes the common bond 
     requirement.
       In addition, the Administration sees no safety and 
     soundness basis for an amendment that would limit the ability 
     of credit unions to make business loans to their members. 
     Existing safeguards, coupled with the new capital and other 
     reforms in the bill, are sufficient to protect against any 
     safety and soundness risk from member business lending.

[[Page S8964]]

                         pay-as-you-go-scoring

       H.R. 1151 would affect direct spending and receipts; 
     therefore it is subject to the pay-as-you-go requirements of 
     the Omnibus Budget Reconciliation Act of 1990. The 
     Administration's preliminary estimate is that H.R. 1151 would 
     have a net budget cost of zero.

  Mr. D'AMATO. We need to act expeditiously on this legislation. I am 
deeply grateful to the Senate majority leader for making this time 
available so that we can go forward. Make no mistake about it, without 
the ability to add new members and new groups, the credit union 
movement would be fatally injured.
  I am convinced that we are going to move in a prompt way and that the 
legislation will pass by an overwhelming margin. Why? Because it is the 
right thing to do. It is the right thing to do for 73 million Americans 
who now belong to credit unions, for the 20 million Americans whose 
current credit union membership is threatened, and for the 675 million 
Americans and small businesses who may be shut out, prevented from 
joining a credit union in the future. I certainly urge my colleagues to 
support and expeditiously act on this important legislation.
  Mr. President, before I yield the floor, I would be remiss if I did 
not thank my colleague, the ranking member of the Banking Committee, 
Senator Sarbanes, the distinguished senior Senator from Maryland, for 
his outstanding contribution and leadership in helping to craft this 
legislation and to bring it to this point in a totally bipartisan 
fashion. We would not be here positioned to go forth on this 
legislation were it not for his outstanding leadership and that of a 
dedicated bipartisan staff, might I add, on the minority side. They 
have done an absolutely fabulous job in bringing us to this point.
  I yield the floor.


                         Privilege of the Floor

  Mr. SARBANES. Mr. President, I ask unanimous consent that Patience 
Singleton and Loretta Garrison, staff members, be allowed privileges of 
the floor.
  The PRESIDING OFFICER (Mr. DeWine). Without objection, it is so 
ordered.
  Mr. SARBANES. Mr. President, first I want to thank my colleague, 
Chairman D'Amato, for his kind words and to underscore the very 
effective leadership which the chairman has exercised in bringing this 
legislation to this point. This bill came out of the committee on a 
vote of 16 to 2. We had very strong support within the Senate Banking, 
Housing, and Urban Affairs Committee, and I have been pleased to be 
able to work closely with the chairman in trying to craft this 
legislation.
  We had, as usual, outstanding contributions by members of the staff 
on both the Republican and the Democratic sides, and we are most 
appreciative to them for the many long hours they have put in on this 
legislation.
  The time is now to straighten out the credit union challenge which 
was posed by the Supreme Court decision. This legislation passed the 
House of Representatives in the beginning of April by a vote of 411 to 
8. The Senate Banking Committee, after holding two hearings on the 
issue, marked up the legislation on April 30 and reported it with 
amendments to the full Senate by a vote of 16 to 2. Since April 30, we 
have been looking for an opening on the Legislative Calendar in order 
to take the matter up in the Chamber, and the majority leader has 
provided this opening.
  If I could have the attention of the majority leader, I would like to 
ask, it is my understanding the intention now is to do the opening 
statements--I know that Senator Shelby and others have amendments--and 
begin debate on the amendments, continue that on Monday afternoon 
beginning at about 1 o'clock, and any votes that would transpire in 
relationship to the amendments which have been offered would occur 
beginning about 6 o'clock Monday evening?
  Mr. LOTT. Mr. President, if the Senator will yield, we would have to 
begin those votes a little earlier than that, probably at 5:30. It 
would be partially driven by how many votes we have. If we just had one 
vote lined up, for instance, we could begin about 5:45. If we have two 
or three, we would have to begin at 5:30 in order to get the voting 
sequence completed by 6:30.
  So that is what we are up against. We are trying to accommodate 
Senators coming in late and Senators who have to leave after 6:30. But 
the hope is that you would have two or three amendments ready to be 
voted on Monday afternoon beginning around 5:30, with the understanding 
that if we need to hold that first vote a little while for Senators 
coming in with a close plane connection, we would be prepared to do 
that, and then have the vote probably on the Shelby amendment and final 
passage Tuesday morning at 9:30.
  I discussed that with Senator Daschle, and he and I worked on trying 
to accommodate Senators' schedules on all sides. I believe, if you 
could go ahead and get debate on all amendments today and Monday, then 
we could have one or two or three votes Monday afternoon, sometime 
between 5:30 and 6, probably not later than 5:45, and then the last two 
votes Tuesday morning.
  Mr. SARBANES. As I understand it, some people will be scrambling to 
be here. I think if we didn't start before 5:45, or if we let that 
first vote run a little bit----
  Mr. LOTT. A little bit, except Senators have to leave at 6:30, and I 
am one of them, and that is the schedule I am particularly interested 
in.
  Mr. SARBANES. Of course, the Senator could make the beginning of the 
last vote and leave.
  Mr. LOTT. As long as I am out of here at 6:30, everything will be 
fine.
  Once again, I know we have had to work late, but we have made good 
progress on the appropriations bills. This is a good bill. But I still 
think the Senate should work during the day and be home with their 
families at night. That is a novel idea that I still advocate, so I am 
going to be with my wife eating supper Monday night at 7 o'clock. Good 
luck before then. But we will try to accommodate everybody, including 
my favorite lady in the world.
  Mr. SARBANES. I just want to underscore the intention is, and we have 
every reasonable expectation that, we are going to be able to complete 
this bill finally by Tuesday morning and do a good deal of it by Monday 
evening.
  In addition to the broad bipartisan support for this legislation in 
the Congress, it is strongly supported by the administration. Senator 
D'Amato has already placed in the Record a letter that Secretary Rubin, 
our very able Secretary of the Treasury, sent to the majority leader 
and to the minority leader urging expeditious Senate passage of the 
bill without any extraneous amendments. Of course, the amendments are 
the important issue that we will be considering over the next few days.
  President Clinton has personally indicated his support for this 
legislation, urging the Senate to pass the bill without weighing it 
down with extraneous and controversial amendments that would seriously 
jeopardize the legislation. H.R. 1151 is also supported by a very 
diverse range of groups in the community including the Consumer 
Federation of America, the Seniors Coalition, the National Farmers 
Union, National Educational Association, Americans for Tax Reform, the 
American Small Business Association, AFL-CIO, and the National Urban 
Coalition.
  The broad support for this legislation suggests the important role 
credit unions play in our economy. Since the founding of the first 
credit union in the United States in 1909, almost a century ago, credit 
unions have served as a way for people of average means, without easy 
access to credit, to pool their savings in order to make loans to 
fellow credit union members at competitive interest rates.
  Mr. President, the impetus for H.R. 1151 came from a Supreme Court 
decision earlier this year. In a 5 to 4 decision, the Court held that 
under the Federal Credit Union Act a federally chartered credit union 
may only have a single common bond of occupation. This overturned a 
policy of the National Credit Union Administration, the regulators of 
the credit unions, first adopted in 1982, which permitted multiple 
groups each having a separate common bond to be part of a single 
Federal credit union.
  The consequence of that Supreme Court decision is to prohibit the 
formation of multiple group credit unions. Even if the lower courts, in 
implementing the Supreme Court decision, permit existing multiple group 
credit unions to stay in business and to accept members from their 
current groups, employees from the large majority of

[[Page S8965]]

companies in the United States will find their future opportunities to 
become a member of a Federal credit union seriously constrained by the 
Supreme Court's decision.
  The National Credit Union Administration generally does not permit 
groups with less than 500 employees to start a credit union because it 
is judged the group is not broad enough or numerous enough to support a 
credit union in a safe and sound manner. The only way for employees of 
these companies to join a credit union is if the companies affiliate 
with existing credit unions. So, if new multiple bond credit unions are 
prohibited, this will no longer be possible and millions of Americans 
may be denied the opportunity to join a credit union. This outcome is 
clearly undesirable, in my view, and is, of course, the basis for the 
broad bipartisan support for enacting this legislation.
  This legislation would first grandfather existing multiple group 
credit unions and allow them to add members from their current groups. 
In addition, it would permit Federal credit unions to have multiple 
groups, each of which, after the first group, has a common bond of 
occupation or association and has less than 3,000 members. The bill 
would also give the National Credit Union Administration the power to 
authorize credit unions to add additional groups if it finds the groups 
cannot safely establish and operate a credit union on their own. The 
Credit Union Administration could also permit a Federal credit union to 
add a person or organization located in a local community, 
neighborhood, or rural district that it has determined is underserved 
by other depository institutions.
  But, in order for a Federal credit union to accept additional 
membership groups, the NCUA would have to find that the credit union is 
adequately capitalized, has adequate managerial or financial resources, 
and has a satisfactory examination record. The legislation directs the 
Credit Union Administration to encourage the formation of separately 
chartered credit unions whenever practicable and consistent with safety 
and soundness.
  In addition to addressing the membership issue, this legislation 
requires significant new safety and soundness standards for Federal 
credit unions. These new requirements are based on recommendations 
contained in a carefully prepared study of credit unions by the 
Treasury Department conducted at the direction of the Congress and 
submitted last year.
  Earlier, in legislation, the Congress directed the Treasury 
Department to study credit unions and to submit a report to the 
Congress. A good deal of what is contained in this legislation reflects 
the outcome of that study.
  The bill imposes, for the first time, statutory capital standards on 
Federal credit unions. The bill requires an insured credit union to 
have a net worth ratio of 7 percent to be ``well capitalized'' and 6 
percent to be ``adequately capitalized.'' A credit union with a net 
worth ratio of less than 6 percent would be ``undercapitalized,'' at 4 
percent it would be ``significantly undercapitalized,'' and at 2 
percent ``critically undercapitalized.'' The legislation provides a 
system of prompt corrective action which requires the National Credit 
Union Administration to take a series of progressively more stringent 
measures if the credit union falls below the ``adequately capitalized'' 
level. Each insured credit union that is undercapitalized would be 
required to submit an acceptable net worth restoration plan to the 
NCUA. Until that plan is approved, the credit union generally would not 
be permitted to increase its average total assets. If an insured credit 
union becomes critically undercapitalized according to the standards I 
mentioned earlier, the NCUA would be required to liquidate the credit 
union, appoint a conservator, or take such other action as it 
determines could better achieve the purpose of protecting the credit 
union insurance fund.
  I have taken a few moments to dwell on these provisions because I 
think they are quite important. They have generally not been involved 
in the debate that has led up to considering the measure on the floor, 
but I think Members need to appreciate the very important safety and 
soundness provisions contained in this legislation. This is a major 
step in ensuring financial stability in the credit union industry. It 
has led the Secretary of the Treasury, in the letter which he sent to 
the leadership, to make this statement. I just want to quote this 
paragraph from Secretary Rubin's letter:

       The bill's safety and soundness provisions would represent 
     the most significant legislative reform of credit union 
     safety and soundness safeguards since the creation of the 
     National Credit Union Share Insurance Fund in 1970. The bill 
     would institute capital standards for all federally insured 
     credit unions, including a risk-based capital requirement for 
     complex credit unions. It would create a system of prompt 
     corrective action--specifically tailored to credit unions as 
     not-for-profit, member-owned cooperative. It would also take 
     a series of steps to make the Share Insurance Fund even 
     stronger and more resilient.
       These reforms involve little cost or burden to credit 
     unions today, yet they could pay enormous dividends in more 
     difficult times.

  We worked closely with the Treasury in considering the provisions 
that were in the legislation. I think this is a major step forward. I 
really commend this aspect of the legislation to my colleagues as they 
consider the overall bill.
  Furthermore, this bill imposes, for the first time, a limit on 
commercial lending by credit unions. No such limit currently exists. 
The bill provides that a credit union would be generally limited in its 
member business loans to no more than the lesser of 1.75 times the 
minimum net worth required for well-capitalized credit unions--namely 7 
percent--or 1.7 times its actual net worth. This would put a limit on 
member business loans for a well-capitalized credit union at 
approximately 12.25 percent of its total loans. Loans of less than 
$50,000 would be excluded--that is an operating practice currently--and 
we would continue to adhere to that.
  Many credit unions are chartered for or have a history of making 
business loans to their members. Members of a specialized vocation--
farmers, fishermen, taxi drivers and so forth--would not be subject to 
this limit.
  Furthermore, this legislation imposes, for the first time, a modest 
but meaningful community obligation with respect to reinvestment in 
insured credit unions, which has been carefully tailored to the 
membership-based nature of credit unions. It would require the National 
Credit Union Administration to prescribe criteria for periodically 
reviewing the record of each insured credit union in providing 
affordable credit union services to all individuals of modest means, 
including low- and moderate-income individuals, within the field of 
membership of the credit union, and provide for making such results 
publicly available.
  The bill also directs the National Credit Union Administration, in 
evaluating any insured credit union under this requirement, to focus on 
the actual performance of the credit union and not to impose burdensome 
paperwork or recordkeeping requirements. We think this is a modest but 
important step in paying attention to the needs of low- and moderate-
income individuals, and thereby making access to credit more broadly 
available.
  In conclusion, let me just say this is a very carefully developed and 
balanced piece of legislation. As I said, the committee held two 
extensive hearings on the matter. It worked very carefully over the 
provisions that have been included in the legislation and brought here 
before the Senate. This legislation seeks to make credit union 
membership accessible while strengthening the safety and soundness of 
federally insured credit unions and encourages them to meet the 
financial service needs of all of their members.
  I strongly urge the support of this legislation by my colleagues. I 
strongly urge my colleagues to reject extraneous amendments that may be 
offered to the legislation that may complicate or jeopardize its 
enactment. We now need to move this legislation forward.
  I think a very careful package has been put together here. The credit 
union movement supports the legislation as reported by the committee. 
The administration supports the legislation as reported by the 
committee. I respect, obviously, the motivation of my colleagues who 
intend to offer amendments, but I can only point out that those 
amendments would greatly complicate our efforts to move this 
legislation to final passage and signature into law by the President. I 
very much hope my colleagues can back the work that

[[Page S8966]]

was done by the committee in bringing this matter to the Senate floor.
  I, again, thank Chairman D'Amato for his skillful work in developing 
the legislation to this point and bringing it to the floor of the 
Senate.
  Mr. President, I yield the floor.
  Mr. GRAMM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, let me add my voice to those who have 
congratulated Senator D'Amato and Senator Sarbanes for this bill. I 
believe we have put together a good bill. I think it is a dramatic 
improvement over the House bill. It does, for the first time, in an 
effective manner begin to look at capital requirements and safety and 
soundness, and, in doing so, it will dramatically improve the quality 
and regulation of credit unions all over the country. I think those who 
are part of the credit union movement want people to know that their 
deposits are safe, sound, insured, regulated and protected in the 
savers' interest.
  Second, the bill, for the first time, begins to put appropriate 
limits on the amount of business loans that credit unions can make. 
There are those who believe, and I happen to be one of them, that 
credit unions were chartered to provide consumer credit to their 
members as part of a cooperative effort. A dramatic movement of credit 
unions into commercial lending would circumvent the whole intent of the 
credit union movement, and in my opinion, it would be a negative factor 
on the progress of the credit union movement. In this bill, we for the 
first time set limits on the amount of credit union assets that can go 
into commercial loans. That is a very positive step.
  We deal with the common bond issue, and we settle once and for all 
the principle that every American ought to have the right to join a 
credit union--not any credit union--but join a credit union within an 
appropriate field of membership. it my view, and I believe that we 
achieve this with this bill, that it should be possible for every 
American citizen to find an appropriate field of membership by which he 
or she can associate with others, and have the opportunity to join a 
credit union and to affiliate with that credit union if they choose to 
do it.
  Those are the positive things about this bill. I am a strong 
supporter of the bill. I intend to vote for this bill, but there is one 
provision in the bill to which I am very strongly opposed.
  In this bill, for the first time ever, we begin to have the Federal 
Government direct credit unions as to how they will use their members' 
money. In this bill, for the first time ever, we begin the process of 
telling credit unions that the government is going to allocate some of 
a credit union's resources to promote a ``public purpose,'' even though 
it may not be the purpose of credit union members. I believe that not 
only is this very bad and dangerous public policy, but I think the 
logic of it is totally inapplicable to credit unions and the credit 
union movement.
  The name--it is a wonderful sounding name for a program that has 
nothing to do with any one word in the name--is Community Reinvestment 
Act. In this bill, for the first time ever, we apply in three different 
ways this Federal mandate and credit allocation to credit unions.
  Let me explain why, despite all the arguments you can make on the 
merits or demerits of the Community Reinvestment Act, why it does not 
belong on this bill.
  Credit unions are voluntary, private associations. They are nonprofit 
organizations. They are tax-exempt organizations. They represent a 
collective effort of members to pool their savings with a common 
objective. They pool their savings and they lend to each other, the 
members of the credit union. In doing so, they perform a cooperative 
credit function. In many cases, they provide credit that would not be 
available, certainly at rates that would not be available, in many 
cases, to the consumer.
  They are not in the business of promoting any broad, general 
purposes, such as the general welfare of the country or the community. 
They are small, private associations that are organized for the purpose 
of promoting the welfare of their members. The whole purpose is to pool 
nickels, dimes and dollars to build a cash base that can be lent to 
members for things such as buying a new car or new truck, buying a new 
tractor.
  The objective of the credit union is to promote the interest of 
credit union members. It is not a for-profit organization, and there is 
no logic to applying to it a provision of law where the Government adds 
an additional mandate that the credit unions should direct the money of 
those members to support some end other than the well-being of the 
people who put up the money in the first place.
  Let me explain how this works, and I want to read you some language--
in my mind, shocking language--that has been included in this bill in 
the House, and language that I believe should be removed.
  In the bill, the House has set up this requirement for a Federal 
mandate and capital allocation that goes by the name of community 
reinvestment. I will talk in a moment as to why this provision has 
nothing to do with community or reinvestment.
  This bill mandates that credit unions conform to this Federal capital 
allocation. Here is how it is defined, and here is basically how it 
works:
  In three different places, we have a reference to it in the bill. The 
first way that the bill would measure whether a credit union is 
complying with this Federal mandate allocating their members' hard-
earned money is on page 58 in new section 215. In subsection (b), it is 
set out that credit unions have to comply with this community 
reinvestment, and that in doing so, they will be regularly evaluated by 
the Federal Government, and their record will be looked at to see if 
the credit union is ``providing''--I want you to remember, that is 
``ing''--``. . . providing affordable credit union services to all 
individuals of modest means . . . within the field of membership of the 
credit union. . . .''
  In other words, in this section, the Federal Government will evaluate 
whether or not this credit union, in making loans, in allocating the 
money of the people who have joined the credit union, is providing 
affordable services--and I don't know how you define ``affordable.'' I 
think I know how you define ``providing;'' you test whether they are 
actually doing it, although I could imagine some very interesting and 
intrusive methods of testing that the regulators might conjure up. But 
the test of ``providing'' can be a very rigorous test, since the 
standard is not whether the credit union is offering its services, it 
is not whether they are trying to do it. They are required to do it. 
They are to be ``providing''--you are evaluating whether they are ``. . 
. providing affordable credit union services to all individuals of 
modest means . . . within the field of membership of the credit 
union.''
  You need to understand, field of membership and membership are two 
different things. A credit union considers itself successful if it is 
able to get about 20 percent of the people who could join that credit 
union to join it. So that in any field of membership, normally about 80 
percent of the people in the field of membership who were invited to 
join the credit union, who were invited to put up their money, said 
``No, I don't want to join your credit union; I don't want to put my 
money into your credit union.'' But the first provision of this bill 
requires that the credit union, to comply with this law on Federally 
mandated capital allocation, must be ``. . . providing affordable''--
and where are these terms defined? Nowhere--``credit union services to 
all individuals of modest means . . . within the field of membership.''
  Now, I do not believe we ought to be forcing credit union members, 
who put up their own money, to provide services to people that had an 
opportunity to join the credit union but decided not to join it. I 
think that violates the whole spirit of the credit union movement 
because a credit union is a cooperative, and if you want credit union 
services, you join the credit union. You participate in putting up the 
capital and you apply for loans or services from the credit union.
  The second evaluation has to do with community credit unions. And 
those are credit unions that serve an entire community. This second 
provision requires that credit unions are ``meeting''--not trying to 
meet--and please note, the law does not say that you ``offer'' 
services, that you offer ``affordable'' services, whatever that means, 
to

[[Page S8967]]

all people of modest means within your field of membership. The law 
requires that you ``provide'' it.
  Now, the second reference is, that you are ``meeting the credit needs 
and credit union service needs of the entire field of membership of the 
credit union.'' That is on page 59--``the entire field of membership. * 
* *''
  So again, you are in a community. This little credit union is 
providing services to people in a town with 5,000 people; roughly 20 
percent of those people have joined the credit union. But this law 
requires that they provide ``affordable'' services--whatever that 
means--to people who did not even join the credit union. How can that 
be right? Clearly, in my opinion, it cannot be right.
  Now, the third case, very similar to the first, except the language 
gets even more grandiose. Imagine writing a Federal law where you can 
threaten the deposit insurance of a credit union and put it completely 
out of business. If it does not have Federal deposit insurance, it is 
not going to be able to operate. This law applies to both Federal 
credit unions and State credit unions, as long as they receive Federal 
deposit insurance.
  Listen to this language. You have regulation to see if the credit 
union is ``satisfactorily''--satisfactorily, mind you--``providing,'' 
``affordable''--I do not know how you define these terms. I have 
discussed ``providing.'' The credit union is actually doing it. It is 
not ``offering'' services; it is ``providing'' them, services are being 
accepted and received, not just offered. ``Satisfactorily'' is an 
undefined term, satisfactory to whom? ``Affordable'' is undefined and 
undefinable --that the ``credit union is satisfactorily providing 
affordable credit union services to all individuals of modest means 
within the field of membership of the credit union,'' whether or not 
they join the credit union in the first place.
  Mr. President, this provision does not belong in this bill. This 
provision is piracy. This provision came about because we have a crisis 
in the credit union movement because of the court ruling, a crisis 
which requires congressional action. And what those in the House, who 
put this provision in the bill, have, in essence, said is, that in 
order to resolve your crisis, you have to pay tribute. And the tribute 
you have to pay is that we are writing a provision of law which says 
that every year you will be evaluated by a group of Federal bureaucrats 
who will determine whether you are satisfactorily providing affordable 
credit union services to people who are not even members of the credit 
union. And then they will publish their findings.
  Now, what does this produce? What this produces is a situation where 
you literally--I am going to use some strong language here; and I mean 
every word of it--this produces a situation where literally you have 
professional protesters who extort resources from banks, and if this 
bill passes unchanged, they will be extorting resources from credit 
unions. Here is how it works. And I am going to give you some examples. 
And you are going to be shocked by these examples.
  What happens is that periodically you have this evaluation that is 
made public, and whether or not the evaluation is satisfactory, you 
have a group of people who show up from various organizations to tell 
you how to use your resource for their benefit. ACORN is very active in 
this effort, and there are many other organizations, it is a growing 
industry--they show up at the bank and they say, ``You're not meeting 
your CRA requirements. And here are some things we want you to do. And 
if you'll do these things, then we will say that you're meeting these 
requirements, and we will stop protesting for now.''
  It works like this. You have a bank who may have a perfect record on 
CRA requirements, but they want to merge with another bank. Even though 
they may have never had anything other than an exemplary rating, 
protesters can enter the process and challenge the merger on the 
grounds of community reinvestment and cost the banks millions of 
dollars because of the delays that their protests cause.
  Now, let me give you two examples of where this has occurred.
  The first I will refer to happened in 1989 in California. And let me 
say, Mr. President, it is hard to get banks to talk about this. I 
recently spoke to the CEO of a major Fortune 500 company, and I 
mentioned to him an effort I am supporting, an effort Senator Shelby is 
undertaking to provide CRA relief for small community banks. When I 
mentioned CRA, he said, ``It's extortion.'' If I called him up and 
asked, ``Could I use your name?'' how many people who are being 
extorted want their name used? They do not. They are afraid to have 
their name used. When a CEO of a Fortune 500 company in America is 
afraid to say his mind publicly, to expose extortion, something is 
wrong in America.
  Now, let me give you my examples and offer my amendment, and then we 
will debate this again on Monday.
  In 1989, California First Bank wanted to merge with Union Bank. But 
when they sought to merge, opposition was lodged under the CRA 
provisions of banking law, and in order for these protests to be 
withdrawn so that delays could be ended and the merger could go 
forward, here is what California First Bank agreed to: One, to increase 
purchases from women and minority-owned vendors to 20 percent of 
purchases within the next 5 years. Second, they agreed to give 
charitable contributions, cash grants, not loans, in the amount of 1.4 
percent of income in 1989 and 1.5 percent of income in 1990.
  Now, I do not know this, but if I were a U.S. attorney in that 
district, I would go look and see if they gave those contributions to 
the groups that protested the merger. That would be a very interesting 
inquiry.
  Next, California First Bank committed that 60 percent of the 
employees placed in middle and senior management positions within the 
next 5 years would be minorities and women. And finally, they committed 
to appoint three minority and women directors.
  That is what they had to do in order to get the right to merge with 
another bank. Now, listen to this next one.
  Sumitomo Bank of California--now I do not know, but I guess that 
Sumitomo Bank is a Japanese affiliate. I think it is relevant because I 
want you to put yourself in this position. Let us assume that an Ohio 
bank had opened an affiliate in the Dominican Republic and that some 
government agency there had said that, ``You are not meeting your CRA 
requirements.'' And then they published that, and then a group of 
people came to the bank and said, ``We want you to do some things so 
that we then will tell the government that you are meeting these 
requirements.'' Let's see what the things were that our Government in 
effect forced this bank to do. Let me read to you what they did.

  No. 1, $500 million was committed to CRA-related loans. No. 2, the 
bank committed to spend 2 percent of income on charity, nonprofit 
organizations, with two-thirds of the money going to inner-city 
development, this being cash, grant money. No. 3, the bank committed to 
appoint minority board members. No. 4, the bank agreed to appoint a 
paid five-member minority advisory board to consult with management. 
And, No. 5, the bank agreed to give 20 to 25 percent of outside 
contracts to minority-owned vendors.
  Now if that happened to an Ohio bank operating in the Dominican 
Republic, what would you call it? I would call it extortion. That is 
what I would call it. I would call it extortion, or maybe even 
expropriation, a taking of private property.
  Now, how does something like that happen? How it happens is that we 
let people write into law provisions like ``satisfactorily providing 
affordable services,'' which no one can define, nobody knows what it 
means, and if you have to comply--a regulator that is willing to let 
protest groups file objections to banks merging, for example, by simply 
the ability to hold that merger up--they are able to extort resources.
  Now, I could go on for quite a while and add to the list. For 
example, when Bank One wanted to merge with First Chicago. But what do 
you think happened when they filed that merger? What happened was, they 
had a group of protesters who showed up, who filed a boilerplate 
objection which could be drawn up in 15 minutes by any lawyer who deals 
in this area. I am sure the bank president said, ``Well, we have an 
exemplary CRA record.'' The protestors said, ``We have objected to your 
merger.''

[[Page S8968]]

  So weeks go by, time goes by, and this is the Woodstock Institute 
that objected in Chicago--I better be careful to get the name right--
yes, in Chicago, the Woodstock Institute objected. So what happens in 
such cases? The bank ends up allocating the resources of its 
stockholders in order to eliminate the objection just to be able to 
move forward with its business.
  Now, let me read a quote to just show the arrogance of these people 
who we are empowering under these laws. Forgive me if I get a little 
excited about it, but it is the kind of practice I hate worst. This 
comes from the proposed merger of NationsBank and Bank of America. They 
have received outstanding CRA grades, but in spite of their 
unprecedented $350 billion CRA packages of loans and services to inner 
cities, et cetera, CRA activists are raising protests against the 
merger. One of the activist leaders has said the following--remember, 
this is about banks that have exemplary CRA records, at least according 
to the Government regulators who regulate this activity. These banks 
have exemplary records. But here is what the protester said, ``We will 
close down their branches and ensure they fail in California.'' That is 
what they said. ``We will close down their branches and ensure they 
fail in California. This is going to be a street fight and we're 
prepared to engage in it.''
  Do you know what this reminds me of? This reminds me of a little 
immigrant storeowner. He and his wife and three children are running a 
little store, and these great big hoods come knock on his door. They 
come in and say, ``Somebody could do you some harm. There might be 
people who could come and break in your store, steal your goods. They 
might beat you up; they might break your arm. But I will tell you what 
we will do. If you will pay us 5 percent of what you earn in this 
store, we will see that nobody comes and breaks your arm.''
  That is what this reminds me of. That is exactly what this reminds me 
of.
  Now, I don't like the fact that it is going on. Some day I will get 
rid of it. Some day this is going to be gone. I intend to speak out on 
this for so long with such great passion that in good time Congress is 
ultimately going to rise up and stop this. That is not likely to happen 
here today, but some day it will happen.
  What I don't want to do is, I don't want to start this business with 
credit unions. Now, I am sure that we are going to hear from someone 
who will say credit unions don't support this amendment. Well, the 
credit unions have been told, ``You support the Gramm amendment, and 
maybe your bill won't get passed. You support this amendment, and maybe 
the President won't sign your bill. You support this amendment, and 
maybe it will mean endless delays.'' Now, that is like saying to 
someone sticking a gun to your temple, saying, ``You feel good about 
things, don't you?''
  We will vote on this amendment on Monday afternoon.
  I don't want credit unions to have to be evaluated on whether or not 
they are providing satisfactory, affordable services to people who 
didn't even join the credit union.


                           Amendment No. 3336

(Purpose: To strike provisions requiring credit unions to use the funds 
  of credit union members to serve persons not members of the credit 
                                 union)

  Mr. GRAMM. Mr. President, as a result of not wanting that to happen, 
I send this amendment to the desk to strike these provisions, and I ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Texas [Mr. Gramm] proposes an amendment 
     numbered 3336.

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

       Strike section 204 of the bill and renumber the sections 
     accordingly, and beginning on page 45, line 24, strike all 
     through page 46, line 4, and redesignate subparagraph (E) and 
     (F) on page 46 as subparagraphs (D) and (E), respectively.

  Mr. GRAMM. Mr. President, it is my understanding this will be the 
first vote we have on Monday. It is also my understanding that there 
will probably be an hour set aside so each side will have 30 minutes to 
debate the amendment. Rather than stay around today and debate it, I 
will use my 30 minutes on Monday.
  I thank my colleagues for their indulgence. This is an important 
amendment. We ought not to add these onerous CRA provisions to credit 
unions, which are investor owned, which are set up as cooperatives to 
serve the people who are members.
  Imagine, for example, in New York, where you have a credit union that 
was set up so cabdrivers could save their money and lend it to one 
another, and the loans, then, would be made to buy a Medallion so 
somebody could own their own cab.
  Now, with CRA, the Federal Government comes in and says, ``Hey, how 
many loans have you made to people who aren't members of your credit 
union who could have been--they are in your field of membership, but 
they didn't choose to join your credit union; how many Medallions have 
you helped them buy?''
  So Joe Brown, who put money into the credit union for 15 years, 
finally gets to the point where he thinks he can buy his Medallion, but 
because of this provision, the credit union has to take Joe's money and 
lend it to somebody who never joined the credit union, never wanted to 
be in the credit union.
  If you can defend that, good luck.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota.
  Mr. JOHNSON. Mr. President, I rise to address the overall issue of 
the legislation before the Senate, H.R. 1151.
  I want, first, to commend Chairman D'Amato and the ranking member, 
Senator Sarbanes, for their help in this legislation getting to the 
floor in a timely fashion.
  I will not address the issue raised by my colleague from Texas. I 
know there are others who will want to talk about that at much greater 
length.
  There is an underlying legitimate debate there about whether an 
industry that benefits from Federal insurance, Federal regulation 
assuring that industry's stability and long-term viability, should, in 
turn, have to commit itself to making investments back into its own 
community or not. That debate can go forward. But I want to talk 
briefly about the underlying bill.
  As we all, I think, understand, following the Supreme Court's 
decision earlier this year, the credit union membership of some 20 
million credit union members all across America has been in some 
jeopardy. There was initially legislation offered in the other body 
that was designed simply to overturn the Supreme Court decision. The 
other body chose not to do that. Nevertheless, they did reach a 
compromise bill that passed in April on an overwhelmingly vote of 411-
8.
  Following that debate, and passage of that legislation, the Senate 
Banking Committee took up our version of credit union legislation, with 
the understanding that prompt action was in fact needed. But again, 
rather than simply choosing to overturn the Supreme Court decision and 
rather than simply choosing to pass the legislation passed in the 
House, the Senate Banking Committee crafted its own version, 
strengthening significantly the language of that original H.R. 1151.
  Now, there is a compromise involved here. Most Members in this body, 
and many Americans, are members of both credit unions and banks. It is 
important that they both be viable, strong contributors to our national 
economy. It has always been--and it is the nature of compromises--that 
some will go away not entirely satisfied, but, on the other hand, we 
can reach that balance that will allow both the banking and credit 
union industries to go forward in a fair and competitive fashion. That 
certainly, at least, is the goal of this legislation.
  So in the course of crafting this bill, we were able to arrive at 
bipartisan agreements on the level of restraint on expansion of credit 
unions that ought to be put into legislative language. There are some 
who would rather have no restraint whatsoever; others would rather have 
much greater restraint on what definition of ``common bond'' is used. 
We did reach a level of restraint in our legislation that, for the 
first time, now exists. I think perhaps, most

[[Page S8969]]

importantly, the Senate Banking Committee adopted the Treasury 
Department's recommendations on safety and soundness.
  I think one of the greatest concerns all of us have had in this body 
is to make sure that if we are going to have an industry that is 
growing and prosperous, that it have underlying regulatory safety and 
soundness provisions that are really necessary for its long-term 
viability and for the confidence of the American consumers--not to 
mention the confidence the taxpayers ought to be able to have that they 
will not be called upon at some future time to bail out an industry 
that may have failed for lack of adequate safety and soundness 
provisions. I think one of the most important parts of the Senate 
response to the crisis that we have faced this year is stronger safety 
and soundness provisions and the adoption of the Treasury's 
recommendations.
  The committee also took up the issue of restraint on commercial 
lending--or member business loans, as they are sometimes referred to--
which now, for the first time, is in place. Again, there are those who 
would have much more severe restrictions and those who would have no 
restrictions and ask why any restrictions ought to exist over and above 
our safety and soundness standards. But this compromise was reached, 
and I think it is one that is supported by the credit union industry 
and is supported by the consumer groups as well. And the Senate 
committee chose to retain language on CRA--or ``CRA-light'' as it is 
sometimes referred to--that was instituted by the other body when they 
took up H.R. 1151.
  Again, there are those who would like to see a much more rigorous, 
aggressive approach to CRA taken, and there are those who are simply 
philosophically disinclined to support any kind of CRA, even though 
this ``light'' version is simply a direction to the regulator of credit 
unions to come up with some assurance that, in fact, credit unions are 
investing in their local communities, which certainly has always been 
the case, although now there are larger credit unions with billions of 
dollars of capital, and some question is raised there. In any event, 
this is a provision that is accepted by the industry.
  We need a strong banking industry and we need a strong credit union 
industry. They both have legitimate, important roles to play in the 
provision of credit across America. In my State of South Dakota, with 
some 700,000 citizens, almost 200,000 of them belong to credit unions. 
We have historically a long track record of utilization of cooperative 
ventures, whether it is our rural electric, telephone co-ops, or other 
agricultural cooperatives across the State. We have that long 
tradition, one that has contributed significantly to affording more 
options, a greater level of economic prosperity, to a great number of 
people across rural America.
  Mr. President, I ask unanimous consent that a letter in support of 
this legislation from the National Farmers Union and a letter from the 
National Rural Electric Cooperative Association be printed in the 
Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                       National Farmers Union,

                                    Washington, DC, June 23, 1998.
     Re Credit Union Membership Access Act.

     Hon. Tim Johnson,
     Member of the U.S. Senate,
     Washington, DC.
       Dear Senator Johnson: I am writing on behalf of the 300,000 
     members of the National Farmers Union (NFU) to urge you to 
     support H.R. 1151, the Credit Union Membership Access Act, 
     which will restore an open field of membership to credit 
     unions. In addition, we urge you to oppose the Hagel-Bennett 
     amendment which would make it more difficult for farmers and 
     ranchers to obtain loans from their credit unions.
       Farmers, ranchers, and rural citizens around the country 
     are facing tough times right now due to low commodity prices. 
     The Hagel-Bennett amendment would unnecessarily restrict 
     credit unions from making loans to their members for business 
     purposes, and will worsen the difficult situation farmers, 
     ranchers and rural citizens now face.
       During our 95th annual convention, NFU members affirmed 
     their support for credit unions: ``We are unalterably opposed 
     to any proposal that seeks to curtail services by credit 
     unions to their members under the false guise of regulatory 
     reform or financial soundness. Such proposals are especially 
     discriminatory against rural credit unions which provide 
     agricultural credit services. We pledge our support to the 
     credit union movement in its efforts to combat the anti-
     competitive regulatory tactics undertaken by other segments 
     of the financial services industry.''
       We urge you to pass this important legislation, without 
     adoption of the Hagel amendment.
           Sincerely,
                                                   Leland Swenson,
     President.
                                  ____

                                           National Rural Electric


                                      Cooperative Association,

                                     Arlington, VA, July 15, 1998.
     Hon. Tim Johnson,
     U.S. Senate,
     Washington, DC.
       Dear Senator Johnson: On behalf of the over 30 million 
     Americans who currently receive electricity from rural 
     electric cooperatives, we strongly urge you to vote in favor 
     of H.R. 1151, the Credit Union Membership Act, without any 
     amendments.
       It is vitally important that certainty be brought to the 
     nation's credit unions and their members. For many Americans 
     credit unions are their only source for affordable banking 
     and credit services.
       H.R. 1151 represents an excellent balance among the 
     competing financial interests and deserves to be enacted 
     before the August recess. The House passed this measure by an 
     overwhelming majority of 411-8 and the Senate Banking 
     Committee reported the bill out in a 16-2 vote.
       H.R. 1151 has broad bipartisan and constituent support. 
     Please pass this legislation.
       Thank you for your consideration.
           Sincerely,
                                                    Glenn English,
                                          Chief Executive Officer.


                         Privilege of the Floor

  Mr. JOHNSON. Mr. President, I ask unanimous consent that Scott 
Swanjord, a staff member of mine, may have floor privileges during this 
debate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. JOHNSON. Mr. President, we have minimal time remaining in this 
105th Congress. The schedule is full. We have virtually the entire 
budget still to do, and other key issues are facing us. Frankly, we 
cannot afford to have this legislation held up with vetoes, veto 
threats, with ongoing, never-ending negotiations. So I think it is very 
important that we move forward with this legislation.
  A veto threat has been issued by the White House. If the CRA 
provisions are taken out--the ``CRA-light'' provisions--we will lose 
our bipartisanship, and it is a provision that is supported by the 
industry itself. It would appear to me that we need to move forward 
expeditiously with this legislation. We will be taking up bank 
regulatory relief legislation later on this coming week perhaps. There 
will be other vehicles in which to debate some of these extraneous 
matters dealing with the banking industry and, peripherally, the credit 
union industry. But I think it would be a mistake for us to be caught 
up in too many side issues on the underlying bill here.
  There is an absolute urgency that we move this bill forward. If we do 
not, the membership of some 20 million Americans will, in fact, be in 
very real and very great jeopardy. So with the legislation that passed 
411-8 in the House, passed the Senate Banking Committee by a 16-2 vote, 
it would be my hope that this coming week we could conclude debate on 
this bill, obviously, with the adequate consideration of well-intended 
amendments, hopefully limited in number, but then get this bill in its 
current form onto the President's desk for signature.
  I yield the floor.
  Mr. SHELBY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. SHELBY. Mr. President, something was said just a minute ago about 
the threat of a veto by the President. I have heard this a lot on 
different bills. But I know the process should work. Especially when 
you have a principle that you believe in and that you know is right, 
you should not step aside because someone intimates that they might 
veto it. That is part of the legislative process.
  Mr. President, having said that, later in the debate--probably Monday 
when we get back--I will be offering an amendment to the bill dealing 
with the Community Reinvestment Act, or CRA. My proposed amendment 
would authorize a small bank exemption from the Government-mandated 
credit requirements of the Community Reinvestment Act, which Senator 
Gramm from Texas so eloquently talked about earlier this morning. 
Community banks, as you well know, as a Senator and present Presiding 
Officer, by their

[[Page S8970]]

very nature, serve the needs of their community.
  They do not need a burdensome, government mandate to force them to 
allocate credit or originate profitable loans. Make no mistake about 
it. Community banks would not exist very long if they didn't take care 
of the whole community; and they do.
  Since H.R. 1151 increases the competitive advantage credit unions 
have over banks, we feel this amendment is necessary to reduce the 
inequities in this area and allow our small community banks to better 
meet the needs of consumers.
  Nine members of the Banking Committee sponsored a small bank 
exemption amendment to H.R. 1151 in the committee markup. The amendment 
resulted in a tie vote of nine to nine. The nine members of the 
committee that supported the amendment felt so strongly about the small 
bank exemption, that all nine members signed a statement of additional 
views to the committee report, which is unusual.
  Let me say from the start, CRA is a tax on community banks, CRA 
raises the costs of inputs to banks by increasing their regulatory 
burden and compliance costs. In addition, CRA forces banks to make 
loans according to a federal quota, increasing the risks, and therefore 
the costs, of borrowing to consumers. Make no mistake about it, the 
Community Reinvestment Act raises the cost of borrowing through higher 
loan rates and punishes savers in the form of lower savings rates. 
Congress I believe should adopt policies that lowers the cost of 
borrowing, and my amendment would do that.
  I would also point out that the federal government does not know the 
demand for loans any better than the local banker. CRA preempts the 
free market lending criteria of community banks and imposes the 
judgment of federal bureaucrats. CRA is government mandated credit 
allocation, the form of credit allocation that has proven disastrous 
most recently in east Asia. We have an opportunity to reduce the scope 
of government mandated credit allocation with this amendment, and I 
urge my colleagues to do so.
  I want to revisit, and give a little history contextually.


                                history

  When the Community Reinvestment Act was introduced in 1977, the 
bill's chief sponsor and chairman of the Banking Committee, William 
Proxmire stated:

       The authority to operate new deposit facilities is given 
     away, free, to successful applicants even though the 
     authority conveys a substantial economic benefit to the 
     applicant. Those who obtain new deposit facilities receive a 
     semi-exclusive franchise to do business in a particular 
     geographic area. The Government limits the entry of other 
     potential competitors into that area if such entry would 
     unduly jeopardize existing financial institutions. The 
     Government also restricts competition and the cost of money 
     to the bank by limiting the rate of interest payable on 
     savings deposits and prohibiting any interest on demand 
     deposits.

  Senator Proxmire later said:

       The regulators have thus conferred substantial economic 
     benefits on private institutions without extracting any 
     meaningful quid pro quo for the public.


                                 review

  The central premise on which Senator Proxmire bases his justification 
for ``extracting any meaningful quid pro quo'' may have existed in 
1977, but absolutely does not exist today. Taken one at a time, each 
and every claim Senator Proxmire used to justify CRA in 1977 is no 
longer applicable today. Let us go through them one at a time:
  Chartered institutions ``receive a semi-exclusive franchise to do 
business in a particular geographic area.''
  Congress passed the Reigle-Neal Interstate Banking and Branching 
Efficiency Act of 1994, which allowed one bank to acquire another bank 
in any other state, thus subjecting small community banks to the 
competition of acquisition hungry megabanks.
  Senator Proxmire also said:
  ``Government limits the entry of other potential competitors.''
  That was in 1977.
  Clearly this is not the case. The underlying bill, H.R. 1151 does not 
limit, but dramatically increases the entry of potential competitors.
  The bill essentially says that credit unions can serve every group in 
a community--making them the same as community banks.
  Senator Proxmire said in 1977 regarding CRA justification:
  ``Government also restricts competition and the cost of money to the 
bank by limiting the rate of interest payable on savings deposits and 
prohibiting any interest on demand deposits.''
  This is no longer true.
  The Depository Institutions Deregulation and Monetary Control Act of 
1980 phased out the interest rate ceilings on savings deposits and 
introduced Negotiable Orders of Withdrawals (NOW Accounts) that allowed 
the payment of interest on demand deposits to consumers.


                   Proxmire Premise no longer exists

  Twenty-one years later, the ``substantial economic benefit'' to which 
Senator Proxmire refers no longer exists. Since the benefit no longer 
exists, neither should the Government mandate of credit allocation. 
Congress should lift this mandate off small community banks.


                           Regulatory Burden

  According to a recent Federal Reserve study, entitled, ``The Cost of 
Banking Regulation: A Review of the Evidence,'' regulatory costs 
account for up to ``13 percent of noninterest expenses'' of banks. That 
is a lot of money. In addition, the study concluded that ``(A)verage 
compliance costs for regulations are substantially greater for banks at 
low levels of output''--in other words, smaller banks--``than for banks 
at moderate or high levels of output''--or larger banks.
  This regulatory burden is borne out in the efficiency rate of banks. 
As you can see by the chart, small banks are less efficient than large 
banks.
  Banks with less than $250 million in assets have an efficiency ratio 
of 63 percent versus that of large banks over $250 million with an 
efficiency ratio of 60.5 percent. These inefficiencies translate into a 
lower return on equity for small banks. Large banks have a return on 
equity of 14.4 percent versus 11.3 percent for small banks. This means 
the average large bank has a return on equity 27 percent greater than 
small banks.


                        Exemption of Bank Assets

  Contrary to what opponents of the amendment would have you believe, 
the small bank exemption would not ``gut'' CRA.
  Banks with less than $250 million in assets account for less than 12 
percent of bank assets nationwide. Thus, 88 percent of bank assets are 
concentrated in banks with over $250 million in assets and would still 
be subject to CRA, assuming that the Shelby amendment is adopted.
  I have a chart that will help put that into perspective for my 
colleagues. Although there are 8,110 small banks below $250 million in 
assets, those banks account for only $593 billion in combined assets. 
That means small banks account for 11.7 percent of bank assets 
nationwide.
  However, one bank--BankAmerica, the new bank resulting from the 
merger of NationsBank and BankAmerica--possesses assets of $570 billion 
or 11.3 percent of total bank assets. Thus, one financial giant holds 
assets nearly as big as that of all 8,110 small banks across America. 
That begs the question, why do we have to burden 8,110 small community 
banks that only account for such a small portion of CRA monies? The 
vast majority of bank assets are concentrated in the large, billion 
dollar megabanks that can more easily shoulder the burden.


                     small banks serve communities

  Small community banks have an excellent record of serving their 
communities. Since over half of all banks and thrifts below $250 
million have only one or two branches, they really have no other place 
to go but to their community to do business. Of the 8,970 small banks 
and thrifts, only nine--.1 percent--received a ``substantial 
noncompliance'' CRA rating in 1997. In addition, small banks have a 
better record with regard to the most common type of community-based 
lending--real estate lending.
  Banks under $250 million had a real estate lending to assets ratio of 
37 percent in 1997 versus 23.9 percent for large banks over $250 
million.


                           fair lending laws

  The small bank exemption from CRA is not about discrimination. The 
following fair lending laws will still apply, including: The Fair 
Housing Act of 1968 which prohibits discrimination on the basis of 
race, color, religion, sex, national origin, familial status

[[Page S8971]]

and handicap in all aspects of the housing industry; the Equal Credit 
Opportunity Act of 1974 which prohibits creditors from discrimination 
based on race, color, religion, national origin, sex, marital status, 
age, or receipt of public assistance; and the Home Mortgage Disclosure 
Act of 1975 which requires banks to keep current records of its 
mortgage lending activity.
  Any assertion that small banks do not serve their communities rings 
hollow. Small banks must serve their communities if they want to 
survive. Any claim of discrimination also rings hollow given the fair 
lending laws that apply to all lenders.


                               conclusion

  In conclusion, Mr. President, the Community Reinvestment Act was 
introduced in 1977 by Senator Proxmire under the premise that banks 
receive a ``substantial economic benefit.'' That benefit does not apply 
today as we enter the 21st century.
  The small bank exemption from CRA would go a long way in helping 
reduce the costs and risks of mandated credit allocation. CRA is not 
only a bad law for banks, but it is also a bad law for consumers. CRA 
forces banks to underwrite risky loans because they find that 
preferable to being terrorized and vandalized by so-called community 
groups that extort money from banks. As a result, consumers around this 
country are being forced to subsidize this terrorist activity in the 
form of higher loan rates, lower savings rates and a lower return on 
equity.
  Mr. President, I ask my colleagues to support this very important 
amendment on behalf of the small community banks around America but, 
more importantly, every bank customer who walks in to get a loan and is 
forced to subsidize this government mandated credit allocation.
  I yield the floor.
  Ms. MOSELEY-BRAUN addressed the Chair.
  The PRESIDING OFFICER. (Mr. Gorton). The Senator from Illinois.
  Ms. MOSELEY-BRAUN. I thank the Chair.
  Mr. SARBANES. Mr. President, will the Senator from Illinois yield me 
just 2 minutes without losing her right to the floor?
  Ms. MOSELEY-BRAUN. Certainly.
  Mr. SARBANES. Mr. President, before the Senator from Alabama leaves 
the floor--because this is going to turn into a very interesting 
debate, and I want to make clear the parameters of it, obviously--he 
sent out a letter quoting Senator Proxmire. I am sure he is a good 
former trial lawyer, and he would anticipate that we would go and read 
all of the Proxmire statement from which he was making selections which 
were reflected on the chart that he just showed us.
  Now, from that Proxmire statement, the very one containing these 
selections which the Senator says is his rationale for supporting the 
Community Reinvestment Act, and from which the Senator allegedly shows 
that the rationale no longer applies--although I disagree with even 
that assertion--let me read to you. I will read the next sentence, 
which didn't appear on the Senator's chart, I regret to say.
  Mr. SHELBY. If the Senator will yield----
  Mr. SARBANES. Let me make the point, and then I would be happy to 
yield.
  The next sentence said:

       The Government provides deposit insurance through the FDIC 
     and the FSLIC with a financial backup from the U.S. Treasury.

  ``The Government provides deposit insurance through the FDIC and the 
FSLIC with a financial backup from the U.S. Treasury.''
  That wasn't quoted as a rationale why it is reasonable to expect 
financial institutions to look after the needs of their community--
because they are getting a very important Government support in the 
deposit insurance.
  Now, Senator Proxmire made the statement in 1977. To prove his 
statement, in the 1980s, and to underscore the meaningfulness of the 
public benefits provided to federally insured financial institutions 
during the S&L crisis, the GAO report says that ``the direct and 
indirect cost to the United States taxpayers of resolving the savings 
and loan crisis, namely delivering on this insurance which is provided 
to them, was $132 billion--$132 billion--``and that does not include 
the interest expenses associated with financing the direct costs of the 
crisis which would drive the figure even higher.''
  So, please, with all respect to the former chairman of the Senate 
Banking Committee, if we are going to start doing selections out of his 
statements, certainly we should include what I regard as the most 
important single rationale that he put there:

       The Government provides deposit insurance through the FDIC 
     and the FSLIC with a financial backup from the U.S. Treasury.

  Now, that comes right out of the Congressional Record of January 24, 
1977, which is what the Senator said in the letter he sent to Members 
he was quoting from. But, unfortunately, for the purposes of clarity in 
debate, that provision was not cited. Of course, that is the very 
provision that became applicable in the 1980s when we had the S&L 
crisis, and we delivered to the tune of $132 billion in order to honor 
the deposit insurance requirements. Obviously, without the deposit 
insurance requirements, you wouldn't have these industries. They are 
absolutely dependent on them to provide a basic level of financial 
stability and consumer confidence.

  So I appreciate the Senator yielding, but I thought it was important 
to get that on the Record at this point, although we will bring it up 
again in the debate later on.
  The PRESIDING OFFICER. The Senator from Illinois.
  Ms. MOSELEY-BRAUN. Mr. President, I thank the Senator from Maryland 
for shedding light on this debate, because I think it is very important 
that this debate be put in context and that the whole story be told. 
The truth is that this debate, reduced to its essentials, really does 
relate to a fundamental philosophical difference. Either you are for 
the politics of conflict and anger and ``I got mine, too bad for you,'' 
or you understand and appreciate the value of a politics based on 
cooperation, on finding common ground, and in recognizing that, as 
Americans, we are all in this together.
  The fact of the matter is, the CRA is not extortion, as, apparently, 
it was called on this floor this morning. It is a perfect example of 
coming up with a construct that allows financial service institutions 
to do good while doing well. I think it is very important for the 
listening public to understand that this gives money away to no one. 
These institutions are not giving away money. They are not losing 
money. They get back every cent. In fact, the loss ratio, to the extent 
that we have studies on this, the loss ratio for banks doing business 
under the Community Reinvestment Act is no different. Banks have done 
no more poorly while under CRA. The Community Reinvestment Act simply 
provides access to capital for underserved communities. There are those 
of us who think that is a good thing for America, that that helps 
everybody, that everybody benefits when we do not have whole sectors of 
our country, rural areas, inner-city areas--when we don't have whole 
sectors of our country cut off from capital flows.
  I was going to rise in opposition specifically to the amendment by 
the Senator from Alabama to this credit union bill. But, really, my 
remarks have to be directed, I think, at both of the pending 
amendments, both the amendment of the Senator from Alabama, as well as 
the amendment of the Senator from Texas.
  Before I speak specifically on the amendment, however, I think it is 
important to say what a strong supporter I am of the underlying bill, 
H.R. 1151. I commend and congratulate the Senator from New York as well 
as the Senator from Maryland for their very good work in resolving the 
issues that are reflected by the Credit Union Membership Access Act, 
which was reported out of our Banking Committee by a vote of 16 to 2. 
The fact is this, the underlying legislation, responds to a ruling by 
the U.S. Supreme Court that, frankly, terrified a number of people that 
they would lose their ability to participate in credit unions. 
Certainly this legislation will put an end to those fears.
  I believe credit unions play such an important role in the panoply of 
financial institutions in our country precisely because we have to have 
ways to make certain that ordinary citizens will be able to access 
credit and capital, will have someone they can put a face on, who is in 
the neighborhood,

[[Page S8972]]

who is part and parcel of the community. Those values, associated with 
financial institutions, is just as important for our country as making 
certain that our big banks and our big institutions can compete 
internationally. We have to do both. We have to have the focus and the 
attention paid to Main Street, to little towns and communities, to 
parents who want to send their kids to college, to somebody who wants 
to borrow for a car, somebody who wants to borrow for a house or 
whatever their immediate needs are. We have to have those kinds of 
opportunities in our system of financial institutions or financial 
services, as well as the big banks and the institutions capable of 
competing with the European and other industrialized nation's banks 
that can aggregate huge amounts of capital.
  So I think making certain the credit unions are strong and secure and 
able to provide access to capital and credit for citizens is a very, 
very important thing, and, again, I strongly support the effort by the 
Senator from New York and the Senator from Maryland in hammering out 
the basis of H.R. 1151, and I support it.
  Having said that, I want to talk specifically about the amendment of 
the Senator from Alabama as well as, more generally, about the 
conversation from the Senator from Texas. I sat here, frankly, when my 
blood wasn't boiling over some of the conversation--actually the 
Senator from Alabama has a more soothing tone so he doesn't get your 
blood up as much as might otherwise happen. But it occurred to me it 
was really important in this debate to tell the listening audience and 
the general public what actually is going on here, because so much 
information has been left out of the conversation so far.
  In the first instance, it is important to understand what the 
Community Reinvestment Act is not. Let's start there. CRA is not ``fair 
lending.'' It has nothing to do with race as a specific thing. It is 
not that. It has to do with geographic distribution of capital, so it 
relates to communities more than anything else, not so much to 
individuals. That is important to keep in mind as we talk about CRA, 
because this debate will continue into next week.
  The second point I think is important to make, again in terms of what 
CRA is not, CRA is not a giveaway. Every penny comes back--or at least 
as much as to any other lending institution. It is about loans. It is 
not a mandated interest reduction. It is not requiring financial 
institutions go into social work. CRA is not charity.
  As the Senator from Maryland pointed out, the taxpayers put up the 
money, really, for deposit insurance. We also have a tax exemption with 
regard, at least, to the credit unions. There are bankers, frankly, who 
are more than a little annoyed that credit unions have almost a 30 
basis point advantage because of the tax exemption that they enjoy. But 
the tax exemption has been there precisely because we want to make 
certain that individuals, people in communities, have a chance to go 
into their neighborhood credit union or credit union associated with 
their job and borrow money for college or whatever. So there is a basis 
point advantage that the credit unions get.
  The taxpayers, all of us, all Americans who pay taxes, help make that 
possible. That happens any time you create a tax exemption from 
something that ought otherwise be taxed. If we say we are going to tax 
everything from here to here, from A to D, but we are going to exempt 
this little part C to D and say, ``Because you are doing something we 
like, we are not going to tax you for that,'' that tax exemption, then, 
has to be made up by everybody else, right? So it becomes what we 
sometimes call a tax expenditure. When you take something out of A to 
D, that little part has to be made up if you have to get to D, and that 
is what happens if we provide for tax exemptions generally. Everybody 
chips in; everybody participates.
  It should be for that reason, if nothing else, that we recognize that 
when you talk about policy like this, it really does matter, it really 
does come down to recognizing we are all in this together, that we all 
have an investment, that we all share in these policies, and that 
finding the place for cooperation and common ground makes a lot more 
sense for our country than, again, finding the points of conflict, of 
anger, and of ``I got mine, too bad for you.''
  Another thing CRA is not, it does not have an explicit credit 
allocation criteria. There are no bureaucrats. This is another one of 
the old saws that just get people's blood boiling, ``Oh boy, those 
nasty Federal bureaucrats telling us what to do.'' There are no 
bureaucrats telling the credit unions, the banks or anybody else, how 
to do their jobs. It is a results-oriented kind of legislation.
  And, in fact, there are, since the 1995 amendments, simply three 
separate criteria: A lending test evaluates whether or not a bank has a 
record of meeting the credit needs of its local community. Boy, is that 
awful. Has the bank met the credit needs of its local community.
  An investment test evaluates how well a bank satisfies the credit 
needs of its local neighborhoods through qualified community 
investments that benefit the assessment area. Another horrendous 
extortion we were hearing about a minute ago.
  Finally, a service test that evaluates how well the needs of the 
community are being met by the bank's retail delivery systems.
  All of these things go into defining what CRA is about. Again, it is 
no bureaucrat telling somebody on the front end how to do it, but it is 
assessing whether or not the decisions were made in the private sector 
in an appropriate way that would achieve results.
  Another thing that CRA is not is sanctions. Again, this gets to the 
inflammatory language we heard on the floor about extortion and a gun 
to the head and all the rest of it. There are no sanctions for poor 
performance, no explicit sanctions.
  What it does is, the regulators will take an institution's CRA 
ratings into account in making evaluations with regard to their 
attempts to expand or merge or otherwise change the way they do 
business. What you have here then is a modest attempt to provide the 
basis for community reinvestment, and even that is under attack, again, 
I think, by some shopworn and already, hopefully, discredited politics 
that I don't believe the American people care to hear anymore. It is 
fighting yesterday's battles all over, or, as Yogi Berra would say, 
``It's deja vu all over again.''
  The amendment of the Senator from Alabama seeks to exempt fully 86 
percent of our Nation's banks--that is to say, those with under $250 
million in assets--from the provisions of the Community Reinvestment 
Act. This is not the first time he has offered this amendment. In 1995, 
this very amendment was considered as part of a banking regulatory 
relief bill. At that time, the Community Reinvestment Act regulations 
were undergoing revision to make them less burdensome and more 
effective for banks and customers and consumers and communities. The 
amendment was unnecessary and counterproductive then. It is even more 
so now. In addition to failing to relate to anything having to do with 
the current reality, it fails to make the case that it will help 
effectuate the goals of the Community Reinvestment Act.
  The attempt to describe the CRA as overly burdensome to banks is not 
true, has not been true, it is not true. Frankly, the banks themselves 
have stepped forward to tell us that they believe the CRA is a positive 
thing that allows them to do good and to do well.
  Let me share for a moment some of the comments by members of the 
banking industry.
  Alan Morris, commissioner of banks for the Commonwealth of 
Massachusetts, Division of Banks and Loan Agencies:

       I would like to dispel any myths which may still exist 
     about CRA, myths which abound not only among some bankers but 
     among many regulators and community groups. CRA makes good 
     business sense. Of the many bank failures which occurred in 
     Massachusetts over the last 3 years, I can assure you that 
     not one is attributable to a bank making too many CRA loans. 
     We tend to forget, after all, that sound loans to people in 
     businesses in an institution's own local community is what 
     CRA is all about. The false assumptions by some that low and 
     moderate income persons are not deserving of or cannot use 
     banking services is harmful to the communities, the 
     institutions and the economy.

  Again, this is something that affects us all. If we don't have 
capital flows going to all parts of our country, it is

[[Page S8973]]

kind of like not having blood circulate to your feet. You can either 
get the blood circulating to your feet, or you can cut it off, or you 
can walk around in pain and misery. We can decide we are going to look 
at abandoned communities with boarded-up houses, with no jobs, where 
people cannot access capital and credit, or we can do something to get 
the blood pumping into those communities. And that is what the 
Community Reinvestment Act does.
  Another banker talking about CRA:

       My message is simple: Community reinvestment in low and 
     moderate income communities is good and profitable business.

  Again, doing good and well at the same time.
  Nora Brownell, senior vice president, corporate affairs, Meridian 
Bank Corporation:

       I want to reiterate the Community Reinvestment Act offers 
     all of us an opportunity to address major economic 
     development and service issues in our environment today.

  The question becomes, What battle are we fighting here? What is going 
on? Why are we fighting a battle that doesn't exist? Why are we 
creating an ersatz crisis, or why are we coming up with an ersatz 
solution in search of a problem if the bankers don't think a problem 
exists, if the credit unions are happy with the bill as it is?
  I point out the letter from the credit union--what is the quote--they 
are happy with the bill ``as passed by committee.'' ``As passed by 
committee'' does not mean either the amendment by the Senator from 
Alabama or the amendment by the Senator from Texas.
  If the credit unions like the bill as it is, if the bankers aren't 
upset with the Community Reinvestment Act, what then are we talking 
about and why are we talking about it? I submit to you, I say to my 
colleagues, that the reason we are talking about it is that some people 
like to energize conflict and anger as a part of their politics; that 
some people like to have people mad at each other, because when they 
get people mad at each other, then they can get their voters 
particularly angry and their supporters particularly annoyed, and out 
of that annoyance, they wind up getting political power. That is what I 
think all of this really comes down to.
  I don't mean to be nasty, and I don't mean to be discourteous to any 
of my colleagues, but it is just stunning to me that we continue to 
have a debate about the burdensome nature of the Community Reinvestment 
Act when the banks themselves aren't complaining about it.
  To say they are not complaining about it because they are scared, 
because there is a gun at their head, really--that then suggests they 
are not only not being burdened but they are too cowardly to talk about 
it. I don't think any of the people who run these institutions are 
afraid to speak up for their own interests, particularly bankers. This 
institution has never been known not to listen to bankers. If bankers 
wanted to complain about something, they could have brought it to the 
attention of this committee and this institution. They certainly have 
the power and clout and have never been too shy in other regards when 
they needed something--when they needed bailing out, when they needed 
support. This institution has been very responsive to bankers, and I 
suggest they have not been afraid to show their faces and complain 
about the Community Reinvestment Act.
  Let's talk a little bit about the history of the CRA. The CRA was 
passed in 1977 to combat what was called the ``redlining'' of certain 
neighborhoods. Redlining refers to the practice of--in some instances, 
people actually found evidence where red lines were drawn on maps to 
indicate areas that were off limits for lending.
  The goal of the CRA is to encourage banks to meet the credit needs of 
their entire communities, including low- and moderate-income areas--
nothing more, nothing less. This obligation had its roots, frankly, in 
the Banking Act of 1935 which required banks to meet the convenience 
and needs of their communities, and that, of course, was reiterated in 
the Bank Holding Company Act of 1956 and, of course, the bank charters 
themselves.
  CRA is not new, really, in that regard. There is precedence in other 
existing laws with regard to the intent of making certain that banking 
and that the access to capital and credit are evenly and equitably 
distributed throughout all communities.
  The CRA does not require any banks to make bad loans. It only asks 
them to explore good loan possibilities in their entire market area. 
CRA opens new markets and allows banks, again, to do good while doing 
well.
  Now, it is critical, again, to keep in mind what it is and what it is 
not. It is not an effort to treat banks as if they were arms of the 
Government. It does not set up banks and financial institutions as 
social service agencies. It is not about treating them as an equivalent 
of a Government grant. This is not giving money away to anybody. It is 
not a credit allocation. It is not forcing somebody to give credit to a 
particular group or particular community in a particular way. And it 
certainly is not about minorities.
  I certainly hope that nobody gets away with demonizing the Community 
Reinvestment Act on the basis of race, or demonize it, frankly, on the 
basis that it is for inner-city communities because it is not. It is 
about communities all over the country, and particularly in rural 
communities. Actually, rural communities in some instances are more 
challenged than our inner-city and urban areas in terms of getting 
access to capital and credit.
  It is especially important to preserve the CRA obligations for rural 
banks when often they are the only game in town for credit purposes. 
Several years ago, our Banking Committee held some CRA oversight 
hearings and we discovered cases of small banks in which the service 
area consisted of two towns, each with a population of about 10,000. 
The bank in that case was found to be in substantial noncompliance with 
CRA because its loan portfolio consisted of only 5 percent of the total 
assets of the bank.
  Now, again, 5 percent--you say, how could that happen? You have a 
bank in a little town. Why would it give only 5 percent of its loans in 
the town? Well, in some instances the investments are in Treasuries and 
other things like that which wind up being more profitable for the 
bottom line, but it certainly does not serve the interests of the 
community. And that is not where banking laws--again, going back to 
1935--that is not where the banking laws want to take us. Frankly, that 
does not in any way reflect or relate to or in any way show support 
back for the kind of support that taxpayers and citizens overall give 
to these financial institutions.
  The last time the efforts were made to exempt small banks from the 
CRA--I am speaking specifically to the amendment by the Senator from 
Alabama--there was an article that appeared in the Madison Capital 
Times in Wisconsin. It is ``Bank measure bad for farms.'' Referring to 
that amendment, the very same amendment, this article, ``Bank measure 
bad for farms'' presents the view of a concerned rural resident who was 
concerned about the unpainted barns and boarded-up rural businesses 
that she saw in her community.
  I ask unanimous consent to have this article printed in the Record.
  There being no objection, the material ordered to be printed in the 
Record, as follows:

            [From the Madison Capital Times, July 20, 1995]

                       Bank Measure Bad for Farms

                          (By Margaret Krome)

       Earlier this week I drove past unpainted barns and boarded 
     up rural businesses on my way to a meeting. Like many city 
     dwellers, I fretted about the health of farms I passed and 
     small towns I drove through, but felt powerless to help.
       However, we urbanites can protest policies that actively 
     harm rural communities. One such proposal is before Congress 
     right now. It would gut a major safeguard for money 
     borrowers, the Community Reinvestment Act.
       As in all communities, rural citizens need credit. When 
     farmers, other small businesses, and rural citizens deposit 
     their money in their local bank, they do so both to protect 
     their funds and with the hope that when they want to start a 
     new business or bring a new family member into their farm 
     operation, the local bank will, in turn, lend them money.
       But sometimes banks, and especially many rural banks, 
     establish a very different pattern, where local lending takes 
     a lower priority than making more assured investments, like 
     federal government securities. Thus, such banks drain local 
     resources outside of the very localities that support them, 
     making it that much harder for local citizens to get credit.

[[Page S8974]]

       The Community Reinvestment Act was passed in 1977 to make 
     banks more responsive to the credit needs of the community 
     they serve. The measure provides that before a bank can 
     expand, be bought, merge with another, or make other changes 
     in business structure, its record of community reinvestment 
     is reviewed.
       If community members voice dissatisfaction with how the 
     bank has met local needs, or if the bank's local lending rate 
     is consistently low, it triggers a regulatory yellow light. 
     Before the bank's plans can proceed, it must respond to 
     citizen concerns.
       When M&I Bank proposed to buy out Valley Bank holdings in 
     1993, for example, citizens in southwestern Wisconsin held 
     meetings to raise concerns about lending practices in that 
     10-county region. Without ever becoming a formal challenge, 
     the process resulted in M&I's working with the community to 
     increase agricultural and small businesses.
       Despite such successes, now comes H.R. 1858, the 
     ``Financial Institution Regulatory Relief Act of 1995,'' to 
     the rescue of oppressed bankers everywhere. In three simple 
     swipes, it effectively eviscerates the CRA.
       First, it removes a citizen's or community group's ability 
     to challenge a bank's application for expansion based on its 
     prior CRA performance.
       Second, it outright exempts banks with less than $100 
     million in assets from CRA regulations, which especially 
     hurts rural areas, where such banks are located. In fact, 
     under H.R. 1858, CRA provisions would not apply in 34 of the 
     state's 72 mostly rural counties.
       Finally, and incredibly, it allows banks between $100 and 
     $250 million in assets to ``self-certify'' their CRA 
     compliance . . . as if any bank would ever be motivated to do 
     otherwise.
       The banking community's complaint that meeting CRA 
     regulations is too costly is unconvincing, given record 
     profits that Wisconsin banks have registered in recent years. 
     Granted, CRA-related paperwork for some banks has been 
     considerable at times, but after a 2-year regulatory reform 
     process, even those problems were addressed in April with 
     greatly lessened reporting requirements and a streamlined 
     examination process for small banks.
       The ``reforms'' in H.R. 1858 are not designed to relieve 
     banks of onerous reporting requirements. They appear to be 
     poorly disguised efforts to grant banks a carte blanche to 
     invest local monies in whatever ways best suit their private 
     profit-making interests.
       There's nothing wrong with making a profit, but in rural 
     areas, where often there's little competition among banks, 
     it's wrong to revoke one of the few accountability measures 
     citizens have.
       Historically, banking officials hold all the cards during 
     any local lending negotiation. The CRA shifts that power 
     balance by giving citizens a forum to air concerns about a 
     bank's pattern of lending.
       If rural communities are to regain the vitality their 
     citizens deserve, they need true help an meaningful 
     solutions. Permitting banks free rein in the name of 
     regulatory relief is not one of them.

  Ms. MOSELEY-BRAUN. The author stated in the article:

       As in all communities, rural citizens need credit. When 
     farmers, other small businesses, and rural citizens deposit 
     their money in their local bank, they do so both to protect 
     their funds and with the hope that when they want to start a 
     new business or bring a new family member into their farm 
     operation, the local bank will, in turn, lend them money.
       But sometimes banks, and especially many rural banks, 
     establish a very different pattern, where local lending takes 
     a lower priority than making more assured investments, like 
     Federal Government securities. Thus, such banks drain local 
     resources outside of the very localities that support them, 
     making it that much harder for local citizens to get credit.

  She goes on--by the way, I do not know how many people who are 
listening to me now got a chance to hear the earlier comments about the 
nasty Federal Government, but, again, here this lady is saying they are 
taking money out of home localities in rural communities and investing 
them in Federal Government securities.
  She goes on to describe how the Community Reinvestment Act spurred 
one bank in particular to increase its commitment to agricultural and 
small businesses. And I quote. She says:

       . . . in rural areas, where often there is little 
     competition among banks, it's wrong to revoke one of the few 
     accountability measures citizens have.

  Mr. President, I believe that she is exactly right. Even if banks 
under $250 million represent a small percentage of total banking 
assets, they still represent 100 percent of options for many small town 
residents.
  To go back to the article, the author also writes:

       If rural communities are to regain the vitality their 
     citizens deserve, they need true help and meaningful 
     solutions. Permitting banks free rein in the name of 
     regulatory relief is not one of them.

  In addition to the article that I just mentioned, I would like, Mr. 
President, to have printed in the Record a letter. This letter, which I 
received yesterday, expresses strong opposition to the amendment by the 
Senator from Alabama.
  It asserts that:

       Rural Americans need the tools of the Community 
     Reinvestment Act to ensure accountability of their local 
     lending institutions. It is needed to prevent rural banks 
     from abandoning their commitment to serve millions of 
     Americans living in smaller low- and moderate-income 
     communities.

  This letter, by the way, is signed by 11 groups: The Center for 
Community Change, the Center for Rural Affairs, the Federation of 
Southern Cooperatives, the Housing Assistance Council, the Intertribal 
Agriculture Council, Iowa Citizens for Community Improvement, National 
Catholic Rural Life Conference, National Family Farm Coalition, 
National Farmers Union, National Rural Housing Coalition, and the Rural 
Coalition.
  I ask unanimous consent that letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                    July 23, 1998.
       Dear Senator: On behalf of the undersigned organizations 
     representing rural Americans, we are writing to express our 
     strong opposition to legislative efforts to weaken the 
     coverage of the Community Reinvestment Act (CRA). Our 
     understanding is that Senator Shelby plans to offer an 
     amendment to H.R. 1151, the credit union legislation, that is 
     scheduled for floor action. In addition, Senator Gramm plans 
     to offer an amendment that strikes provisions, in H.R. 1151 
     that would ensure that credit unions provide services to all 
     individuals of modest means within their field of membership.
       The Shelby amendment would exempt banks under $250 million 
     in assets from CRA coverage. This affects over 85% of banks 
     nationally. For citizens in Iowa, Kansas, Minnesota, Montana, 
     Nebraska, and Oklahoma, 95% of the banks would be exempt.
       Rural Americans need the tools of the Community 
     Reinvestment Act to ensure accountability of their local 
     lending institutions. It is needed to prevent rural banks 
     from abandoning their commitment to serve the millions of 
     Americans living in smaller low and moderate-income 
     communities. Unfortunately, small commercial banks do not 
     automatically reinvest in their local communities. This is 
     documented by national data on reinvestment trends and loan 
     to asset ratios for banks across the country. 50% of small 
     banks have a loan-to-deposit ratio below 70%, with 25% of 
     these having levels less than 58%. The data for 1997 reveals 
     that banks under $100 million in assets received 82% of the 
     substantial non-compliance ratings.
       We strongly urge you to oppose these amendments to H.R. 
     1151. The Shelby amendment ignores the important regulatory 
     changes since 1995 that have significantly reduced the 
     paperwork and reporting issues for small banks. The Gramm 
     amendment will strike an important provision from the bill 
     that for the first time would require credit unions to meet 
     the financial services needs of their entire field of 
     membership.
       A vote against these amendments will help meet the credit 
     demand of millions of family farmers, rural residents, and 
     local businesses. Thank you for considering our concerns.
           Sincerely,
         Center for Community Change; Center for Rural Affairs; 
           Federation of Southern Cooperatives; Housing Assistance 
           Council; Intertribal Agriculture Council; Iowa Citizens 
           for Community Improvement; National Catholic Rural Life 
           Conference; National Family Farm Coalition; National 
           Farmers Union; National Rural Housing Coalition; Rural 
           Coalition.

  Ms. MOSELEY-BRAUN. In addition, I have received many letters from 
community groups and other concerned citizens who oppose this 
amendment.
  I must point out that, again, in 1995, when this amendment was 
proposed before, letters were sent in opposition by the Save CRA 
Coalition and others. Unlike many of the special interest groups around 
here in Washington, frankly, that group's name lets you know exactly 
what it stands for. The Save CRA Coalition was established to defeat 
the amendment of the Senator from Alabama when it was previously 
offered.
  The letter they sent, opposing the weakening of the CRA, was signed 
by 2,181 State and local government organizations, for-profit 
businesses, community groups, unions, farm groups and faith-based 
organizations from every State in the country, the District of 
Columbia, Puerto Rico, and the Virgin Islands, by the way, including a 
number of organizations from Alabama and Texas.

[[Page S8975]]

  Now, I am going to ask that the letter be printed in the Record also. 
I am not intending to filibuster, and I know that some of my colleagues 
are here on the floor wanting to speak, but there is a long, long list 
of organizations which are very, very recognizable that I hope my 
colleagues have a chance to take a look at to see the breadth and the 
level of opposition to the amendment by the Senator from Alabama and 
the opposition to weakening the CRA.
  I hope that also every Member of the Senate will have occasion to at 
least review the names of the organizations in their own State with 
regard to opposition to this amendment. My own State, what, it is three 
pages--Illinois has page 9, page 10, and on to page 11. They are just 
names in a single space of organizations in opposition to that 
amendment. And I am sure if I were to take Missouri or Delaware or any 
of the other States, they would be an equally long list. I hope my 
colleagues will familiarize themselves--or New York--will familiarize 
themselves with the names of the organizations that, again, are against 
weakening the Community Reinvestment Act.
  However, I ask unanimous consent that the letter itself be printed in 
the Record, but not the names of the organizations who signed the 
letter because that would take up too much space in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                       Save the CRA Coalition,

                                Washington, DC, September 7, 1995.
     Hon. Alphonse D'Amato,
     U.S. Senate, Washington, DC.
       Dear Senator D'Amato: The following state and local 
     governments organizations, for-profit businesses, community 
     groups, unions, farms groups, and faith-based organizations 
     oppose legislative changes in S. 650 and H.R. 1858 that 
     weaken the Community Reinvestment Act (CRA). CRA ensures that 
     creditworthy borrowers have access to the American system of 
     commerical credit. It has given banks an incentive to 
     discover profitable lending and investment opportunities in 
     rural, suburban and urban communities. Congress does not need 
     to revise this effective law.
       Preservation of CRA is vital to the work of community 
     developers and small business nationwide, CRA has been the 
     catalyst for important local alliances among financial 
     institutions, local businesses, nonprofits, and state and 
     local governments. It has led to hundreds of thousands of 
     modest-income families becoming first-time home owners, 
     generated new capital for small businesses and small and mid-
     size family farms, and made financing available for local 
     economic development projects. Additionally, CRA has spurred 
     the creation of innovative mechanisms for providing credit 
     such as revolving loan funds and consortia.
       We recognize the value of making CRA a more performance-
     based system rather than a process of documentation, however 
     federal regulators have addressed this issue. On April 19, 
     1995, the four bank regulatory agencies issued final rules 
     making CRA compliance more effective. The process of revising 
     these regulations covered two years of intense deliberation; 
     public hearings involving hundreds of bankers, community 
     groups and local officials; and nearly 14,000 written 
     comments from banks and other organizations nationwide. We 
     strongly believe that the regulations agreed to by the 
     nation's financial regulators effectively address whatever 
     weaknesses banks have complained about in CRA's 
     administration and thereby bolster its successes.
       Proposed ``regulatory relief'' legislation (S. 650 and H.R. 
     1858) would stifle local community efforts by exempting an 
     overwhelming majority of banks and allowing the rest to 
     abandon their commitments to millions of Americans in low- 
     and moderate-income communities. In addition to provisions 
     that explicitly modify the Community Reinvestment Act, other 
     provisions in this legislation deter community reinvestment 
     efforts by abolishing constructive channels for community 
     input in decisions regarding bank mergers and other corporate 
     expansions, and eliminating critical data collection 
     requirements that enable objective assessments of bank 
     performance.
       Since its enactment in 1977, CRA has attracted more than 
     $60 billion worth of investments in low- and moderate-income 
     communities around the country, and stimulated local 
     economies. Every dollar spent in community-based development 
     circulates through the economy an estimated five times 
     through vendors, suppliers, subcontractors and related 
     workers.
       In light of the success of the CRA, we urge you to strike 
     provisions within S. 650 and H.R. 1858 that weaken the CRA 
     and to oppose any efforts to cripple this critical law.
           Sincerely,
                                              2,181 Organizations.

  Ms. MOSELEY-BRAUN. One of the reasons that CRA has such broad support 
is very simple. It does not force banks to make bad loans. It 
encourages them to examine unexplored markets in their service area, 
and it, again, allows a financial institution to do good while doing 
well simultaneously. They make money on these loans.
  My favorite CRA story is about one banker who said that he hated the 
CRA, but he did not think it was burdensome. What he hated was the fact 
that other banks did it, too. Other banks were complying with CRA. He 
had discovered years ago--it was kind of a market rating situation--he 
discovered years ago that there were many cash-poor but credit-worthy 
customs out there. And he had previously been the only one issuing 
loans in certain low- and moderate-income areas in low- and moderate-
income neighborhoods.
  So now with CRA in place, he was forced to compete where he had once 
enjoyed a monopoly. And so he was annoyed, if you will, that his 
monopoly over the areas that had not had access to capital and credit, 
except via him--that that monopoly was now opened up because other 
institutions were beginning to engage in those communities, because and 
by virtue of the Community Reinvestment Act.
  Again, he had learned a lesson that many bankers are now learning. 
Because of CRA, community reinvestment is the best way to do good while 
doing well simultaneously. And CRA is profitable for banks. In a survey 
conducted by the Federal Reserve Bank of Kansas, 98 percent of banks 
found that their CRA activities were profitable.
  Many others agree with the Kansas City study. Most major banks, 
including NationsBank and Bank of America, have reiterated their 
commitment to the CRA. As I recall, when we last had a hearing in the 
Banking Committee, some bankers testified in favor of keeping CRA 
intact. In fact, I was delighted at a hearing we had of the Banking 
Committee. Secretary Rubin had previously come out in support of the 
CRA, but I actually put the question to Chairman Greenspan, who is 
acknowledged as the guru of financial everything, I guess, and Chairman 
Greenspan reiterated or spoke to his support of the CRA, which I was 
absolutely delighted about.
  I will give an earlier statement of Chairman Greenspan:

       When conducted properly by banks which are knowledgeable 
     about their local markets, CRA can be a safe, sound, and 
     profitable business. CRA has prepared financial institutions 
     to discover new markets that may have been underserved 
     before.

  I see a number of my colleagues standing and looking at me. I think 
this means I am talking too long. I don't mean to filibuster this 
issue. I just want to say I believe I have spoken to the issue. There 
are facts and figures I would like to share with my colleagues, but I 
know we will have another opportunity to do that because we will have 
this issue come up again on Monday.
  Suffice it to say that expanding the Community Reinvestment Act to 
the credit unions, which apparently the Senator from Texas doesn't like 
very much, is not something which has the credit unions themselves 
riled up. They like the bill we passed out of committee. They don't 
want to have that amendment. They want to see us go forward with H.R. 
1151.
  With regard to the CRA-gutting attempt, taking out 85 percent of CRA 
activity that the Senator from Alabama would suggest, I submit that 
also is an amendment that the credit unions don't want to see on this 
bill because it is too important to them.
  With regard to just an overall appeal to my colleagues, let me 
suggest that to find a solution like these two are suggesting in search 
of a problem does not do justice to the level of the cooperation that 
we have seen in this Congress, and particularly with this Banking 
Committee, that CRA gives us an opportunity to find common ground, to 
work together, and to work together for the good of our entire country. 
The alternative is an appeal to conflict and anger which I think is 
beneath the Senate. I hope my colleagues will join me in opposing both 
of these amendments.
  I thank the Chair. I yield the floor.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Mr. President, I propound a unanimous consent request: 
That the pending Gramm amendment be temporarily set aside; I further 
ask that at 4:30 p.m. on Monday, July 27, the Senate resume 
consideration of the

[[Page S8976]]

Gramm amendment, with 1 hour for debate equally divided prior to a 
motion to table; I further ask that the tabling vote occur at 5:30 p.m, 
with no second-degree amendments in order to the amendment prior to the 
vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. D'AMATO. I believe my colleague from Connecticut has a brief 
statement. I believe he has asked our other colleagues that he be 
recognized.
  Mr. DODD. Let me thank my colleagues who are here, and I will keep 
these remarks brief. I thank my colleagues from Colorado, North 
Carolina, and Missouri.
  Briefly, Mr. President, let me, first of all, extend my compliments 
to the distinguished chairman of the Banking Committee and the ranking 
member, Senator D'Amato and Senator Sarbanes, for their excellent 
leadership in bringing this bill on credit unions to the floor. This is 
a very, very important piece of legislation. I think most of my 
colleagues who have followed this debate hoped we wouldn't have had to 
come to the floor with a credit union bill. But as a result of Supreme 
Court decisions, we have been forced to act, and to act expeditiously 
in this Congress. In fact, as a result of a letter drafted by the 
chairman, several others, and myself, we have asked the court not to 
initiate their decision so that there would be time for us 
legislatively to respond to the Supreme Court decision.
  This is not just any other bill we are bringing up that may or may 
not have some importance on the Legislative Calendar. It is critical 
that before this Congress adjourn this piece of legislation be 
considered and adopted and signed into law if we are going to provide 
the kind of relief that must be sought as a result of the AT&T credit 
union decision.
  Again, my compliments to the leadership of Senator Domenici, Senator 
Sarbanes, and other members of the Banking Committee, who voted 16-2, I 
think was the vote, that brought this bill to the floor of the U.S. 
Senate.
  It is critically important. Why is it important? It is important 
because if we are going to see members of credit unions forced to leave 
their credit unions as a result of the AT&T credit union decision, the 
resulting loss of those members could cause a credit union to become 
insolvent. That is the problem here, and that in itself would create a 
drain on the taxpayer-backed deposit insurance fund.
  So, it is very, very important we not allow those credit unions to 
run the risk of losing its membership as a result of that decision or 
our inability to act and then causing these credit unions to fail 
around the America. None of that will happen, obviously, if we move to 
adopt the legislation.
  I point out that in the House, the other body, they adopted the 
legislation, I think, something like 411-8. It was overwhelmingly 
adopted. I am confident that will be the case here, as well. We will 
get a good, strong vote provided we don't get sidetracked on some side 
issues. Whether they have merit or not, there will certainly be other 
vehicles in the minds of some people, but the idea we would allow it to 
be attached to this, running the risk--you run the risk of having this 
credit union legislation collapse. If that does happen, then the 
resulting consequences of that collapse will have to be borne by those 
who try to take advantage of this vehicle to add extraneous matters. 
That is very, very clear to credit union members all across the 
country.
  This is an opportunity for us to act on this bill. I have strong 
views about the amendment of our colleague from Alabama on CRA. I am 
opposed to what he wants to do. I know there are Members who strongly 
agree with what he wants to do. But also I will tell you that if you 
allow that provision to be added to this bill, you are going to cause 
this bill to fall. If that is the case, then the resulting 
consequences, I think, are terribly predictable.
  I am not going to necessarily, today, engage in the debate on the 
Shelby amendment on the CRA, Community Reinvestment Act, except to say 
that I know in my State of Connecticut for the literally thousands of 
members of credit unions, the millions in the State of New York and 
California and elsewhere all across this country who are watching this 
debate, knowing if this bill falls because of a desire of some to come 
up with an amendment here that has some appeal, I think the 
transparency of the efforts will be quite obvious that, in fact, it is 
really not the issue of CRA.
  There are those who, frankly, want to kill this bill, who don't like 
the credit union bill but don't really want to take it on directly and 
so will offer an extraneous amendment, hopefully, that might just 
narrowly get adopted, the bill collapses, and you have been able to 
sort of smuggle the destruction of this important piece of legislation 
through. It is extremely important that we deal with this bill in as 
clean a fashion as possible, no matter how appealing some of these 
amendments may be. So that is important.
  The second question obviously we want to still address is whether or 
not we want the maximum possible number of Americans to have the choice 
of joining a credit union. I think people ought to be free to make that 
choice of joining a credit union. The overwhelming majority of credit 
unions provide affordable financial services to working families all 
across this country.
  Let me draw one theme that has been raised during consideration of 
the bill--that is whether credit unions have lost their mission of 
serving middle-income Americans and families of modest means, which was 
written into the original act. The question surfaced because of a 
campaign of misinformation, in my view, prompted by some industries 
that compete with credit unions. During the Banking Committee hearing 
of these issues, back in March, one banking industry representative 
stated that ``credit union membership had become so compromised that 
membership was being offered to members of wealthy country clubs.'' I 
am not making up this example. This one actually happened.
  Needless to say, those who support credit unions were very upset 
about that allegation because it would run contrary to the thrust of 
what credit unions are supposed to do. We examined that allegation and 
it is was true, in fact, that there were wealthy country club 
memberships.
  What they fail to tell you is that the people being solicited to join 
the credit union were the cooks, janitors, groundskeepers, and others. 
They weren't members of the country club, they worked at the country 
club. Yet, if you listened to the allegation, you assumed it was people 
who paid significant fees to join the club, rather than employees. That 
is the sort of misinformation that is going on to try to destroy this 
bill and this important credit union organization across the country.
  The average credit union is still very small in size. It is limited 
by the number of people they serve. In my State of Connecticut--an 
affluent State, a strong middle class State--the average size of a 
credit union as an institution is $16 million in assets. In fact, if 
you take all the assets of all of my credit unions in Connecticut and 
total them up, they don't equal the assets of one of my 10 largest 
banks in the State of Connecticut. I know that is not true in every 
State, but in Connecticut, which is a fairly affluent State and has an 
aggressive, strong credit union organization, total assets of all of my 
credit union members don't equal the size of any one of the 10 largest 
banks.
  In fact, assets of all the 11,392 federally insured credit unions was 
$327 billion, or less than the size of Chase Manhattan Bank or 
Citibank. The asset size of the 11,452 federally insured banks is $5.2 
trillion, compared to $327 billion for all the credit unions. So the 
notion that somehow this is some great threat to commercial banking in 
this country, I think, is unwarranted, it is not credible at all. Small 
banks and thrifts are threatened in many ways in this country, but I 
suggest that they are much more threatened by aggressive banking giants 
like NationsBank than by any credit union. The loss of banking services 
in many communities that I visited has much more to do with aggressive 
takeovers and consolidations practiced by large national financial 
institutions or large regional institutions than it does competition 
from credit unions. That is the least of these smaller banks' and 
community banks' threats.
  The facts show that while credit unions have experienced modest 
growth since the implementation of

[[Page S8977]]

the multiple common bond, that growth is dwarfed by the growth in the 
banking industry.
  Ultimately, the complaints of the bank and thrift industry boil down 
not so much to a loss of market share but to the fact that credit 
unions offer customers a pretty good deal. They offer customers higher 
interest rates on savings and checking, as well as lower interest rates 
on credit cards and certain kinds of loans; credit unions don't charge 
their customers a fee for every conceivable type of transaction. We 
have reached a point in the banking industry where seeking out a new 
fee income has replaced seeking out new loan business as the way to 
make profits.
  Not only are banks generating $3 billion a year in ATM fees--a 
subject matter that the chairman of the committee cares deeply about--
$3 billion a year in ATM fees in excess of their costs, but some banks 
even started charging customers for using a deposit slip at branches, 
or for having the temerity to actually call a live person--if you can 
ever find one--on the phone during normal business hours.
  While the banks claim that credit unions offer a better deal because 
they don't pay taxes, that is also a fiction. Credit unions have no 
access to capital markets to raise funds; they keep the capital needed 
to stay in business only through retained earnings. That is vastly 
different from what the banks do. Moreover, the banks also don't 
acknowledge the many tax advantages they enjoy, such as being able to 
write off billions in taxes every year for loan losses that never 
occur, or for receiving a tax credit for any minimal premium they must 
pay toward maintaining taxpayer-guaranteed deposit insurance.
  Credit unions are nonprofit organizations that put their earnings 
into both creating capital and keeping costs down for their customers, 
the actions that were precisely envisioned by Congress in establishing 
the Federal credit unions of 1934.
  So, Mr. President, I think there is an important role that our credit 
unions play. There is good, healthy competition out there. Let me end 
where I began. That is, I urge my colleagues--those of you who truly 
care about allowing the Supreme Court decision to be dealt with 
legislatively--there is only one window where we are going to get a 
chance to do this. Even if you find yourself attracted to a standing-
alone provision on the CRA issue--which I don't, but some do--even if 
you are slightly attracted to that amendment, by supporting that 
amendment you will bring down this bill, and then people are going to 
understand what happened here.
  So I certainly endorse and support the comments of our colleague from 
Illinois, Senator Carol Moseley-Braun, who speaks eloquently on the 
issue of the Community Reinvestment Act--the strength of it, how well 
it has worked, and how well it is working in reaching sectors of our 
society that have been too often in years past denied access to 
financial services in our country. I think it would be a mistake to 
jeopardize this credit union bill, which has come out of our committee 
with such a strong vote and such a strong vote in the other body.
  I think on Monday we can certainly do a great deal to relieve the 
anxiety and fears of literally millions of people across the country 
who utilize credit unions for their financial security and their 
futures. They are going to be terribly disappointed in this body if we 
get involved in extraneous matters and bring this bill down. So over 
the weekend, I urge that members of credit unions across the country 
certainly let their Members of Congress know how important this bill is 
to them and how important it would be to keep off amendments that could 
destroy our ability to pass this legislation.
  I thank my colleagues for their graciousness. I compliment the 
chairman and Senator Sarbanes for their fine work on this bill.
  Mr. FAIRCLOTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Carolina.
  Mr. FAIRCLOTH. Mr. President, I rise in support of H.R. 1151. Credit 
unions have played an important role in our financial system. They have 
given a helping hand and a hand-up to millions of Americans whom it 
otherwise would not have been available to. Nearly 70 million Americans 
are members of credit unions. I consider myself a strong supporter of 
credit unions. We have over 195 in my State, including the second 
largest in the Nation. Over 2 million people in North Carolina are 
members of credit unions. I do not believe that we should limit their 
access to credit, and it is the principal reason I support the credit 
unions in this bill. We have to protect and preserve credit unions for 
the future.
  Mr. President, this bill is not without controversy. This bill 
started out as a court case in my home State. The case went to the 
Supreme Court that began in North Carolina and was decided against the 
credit unions.
  Now, there has been a lot of heated conversation about this 
legislation. Some of what has been said is correct, but a large part of 
it has been incorrect.
  Very simply, this is what it would do. This legislation would allow 
multiple groups, each with their own common bond, to be part of one 
credit union. The Federal Credit Union Act of 1934 was unclear on this 
point. But beginning in 1982, the National Credit Union Administration 
has allowed groups to be part of a credit union. The real question is 
whether Congress will support the policy that has, in effect, been the 
law since then, since the 1980s. I have to conclude that the Congress 
will, but they are only going to do it with some limitations.
  Essentially, this is why we have to change the law.
  And let me say, the changing marketplace has changed the banking 
world too. Glass-Steagall--the bank law that separates banks and 
securities firms has almost no meaning in today's society. In fact, it 
is little adhered to.
  Mr. President, the workplace has changed dramatically since 1934. The 
era of working for one company, with one occupation, with one skill--
for all of one's life is gone. Technology and global markets have 
forever changed our way of life.
  These changes mean that a one group credit union will have difficulty 
surviving in today's day and age.
  Banks used to not have banks outside their own States, and primarily 
within their own community. Banks used to be able to sell insurance in 
only towns of 5,000 people. Now they are limited to the United States.
  We need to update our bank laws as well--and I hope and anticipate 
that we can do that.
  And I have not stood in the way of the bank regulators that have had 
to update our laws through executive action, rather than the Congress 
acting.
  And I think the same view is reasonable with respect to credit 
unions.
  But--as I said--there should be some limitations--and there are 
limitations in this bill.
  Credit unions do not pay taxes. I am adamantly opposed to taxing 
credit unions.
  The answer to this problem is not to impose taxes on credit unions. 
The answer is to reduce taxes for small banks. That is why Senator 
Allard and I introduced legislation yesterday to make tax law changes 
to help community banks.
  We need to reduce regulation for small banks--that is why I will vote 
for Senator Shelby's amendment to remove CRA for community banks.
  We do not need to punish credit unions to help small banks--I think 
we should simply help small banks.
  Let me also say this.
  We have done a number of things to change and reform the credit union 
industry.
  This bill is not without tough provisions for the credit union 
industry and some of them are pretty tough provisions.
  We have limited commercial loans to be made by credit unions to 12 
percent of their assets. Before now, there was no limit. And there was 
only a study in the House bill.
  We have required the NCUA to charter separate credit unions where 
possible.
  We have limited the use of geographic charter credit unions to a 
``defined'' community--so that there cannot be abuses in the chartering 
of geographic credit unions.
  Finally, we have imposed prompt corrective action on credit unions--
and we have essentially established minimum net worth requirements for 
credit unions.
  So there are many reforms to the industry that have not been 
discussed by the opponents of this bill.

[[Page S8978]]

  Mr. President, let me just say again--this is an important bill to 
keep credit unions going into the future and into the 21st century.
  If we don't pass this bill--it is uncertain if people can continue to 
join credit unions. And there is the possibility that persons could 
lose their right to be a member of a credit union. The district court 
has not yet decided how this case will be implemented.
  It is simply wrong to suggest that if we don't pass this, that given 
benign neglect, it will probably go away. It will not. We have to pass 
this bill so that current members are assured of keeping their status.
  Mr. President, I thank you and urge pass passage of the bill. But let 
me comment also on the two pending amendments.
  First, I support Senator Gramm's amendment.
  It makes absolutely no sense to put CRA on credit unions. Credit 
unions are member organizations to begin with. The very nature of 
credit unions is to lend to their members. To put CRA on it is 
redundant, and ridiculous.
  The provisions in the H.R. 1151 is redundant, as I said, and is, 
frankly, absurd. Anybody that has looked at it knows it.
  I strongly support Senator Gramm's amendment. We do not need CRA for 
credit unions. We need to reduce the burden for small banks. Every bank 
that I have talked to has a problem with the CRA. It is too subjective. 
There are too few definitive standards. Small banks spend an inordinate 
amount of their time and money complying with Federal law when their 
lending is almost totally local.
  I support Senator Shelby's amendment because CRA makes no sense for 
small banks. Small banks can't survive, if they don't lend in their 
community. That is what CRA says they need to do. But for a small bank, 
where else does it lend if it is not in its community?
  That was the purpose of the CRA to begin with. It simply is not today 
viable. To take deposits and lend in a small community is what 
community banks do.
  The Senator's amendment exempts 8,000 banks. But they account for 
only 11 percent of the assets of the industry. In fact, these 8,000-
plus banks have roughly the same amount of assets as one of our North 
Carolina banks. It is not an unreasonable amendment. Small banks are 
shrinking, they are disappearing, and the more burden we put on them 
the less there will be.
  Just as I don't think credit unions threaten big banks, I don't think 
exempting small banks from CRA is a threat to the CRA.
  The Shelby amendment only exempts 11.7 percent of the assets of the 
banks of this country.
  As I said, we have one bank in North Carolina with roughly the same 
amount of assets.
  Mr. President, I thank you. I yield the floor.
  Mr. ALLARD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Colorado.
  Mr. ALLARD. Mr. President, I rise in support of H.R. 1151.
  First, I want to begin by thanking Chairman D'Amato for skillfully 
steering the Credit Union Membership Act through the Senate Banking 
Committee and onto the Senate floor.
  It has been a pleasure to work with both him and his staff on this 
Senate Banking Committee. That also is speaking in behalf of my staff 
also. We have been very appreciative of their work in helping us with 
our issues and what you are doing for credit unions.
  I am pleased to support this credit union bill in the Banking 
Committee, and I am pleased to continue to support it now.
  I have always been a supporter of the credit union movement. The main 
reason I have been supportive is because I felt that any competition 
among financial institutions is vitally important. And, obviously, the 
credit unions provide the customer another choice out there; another 
way of meeting his banking and financial needs.
  During my years in the Colorado State Senate I worked closely with 
the Colorado Credit Union League and the numerous credit unions and 
members that we have in Colorado.
  I have been pleased to continue my work with the Colorado Credit 
Unions as a member of the Senate Banking Committee.
  Mr. President, there are 185 credit unions in Colorado. There are 
1,321,000 credit union members in Colorado.
  And the credit unions hold nearly $7 billion in assets in Colorado.
  Credit Unions play a vital role in our communities. They provide an 
opportunity for groups of people to join together and pool their 
assets.
  Credit Unions are run by their members. Those members make loans and 
help each other to get ahead and build a prosperous life for their 
families and for their communities.
  Let me turn to several provisions in the Credit Unions bill.
  I am particularly supportive of the new capital requirements and the 
``prompt corrective action'' requirements that we put in the bill 
during our deliberations in the Senate Banking Committee. That is 
because I feel so strongly that we need to work to make sure that our 
financial institutions remain safe and sound.

  I have always felt that we were particularly blessed to be serving in 
the Senate particularly during a time when our economy is doing very 
well.
  As much as I would like to hope that our economy continues to 
prosper, history has shown us that periodically there are fluctuations 
in our economy; there are good times and there are bad times. If we do 
not make good decisions today to assure safety and soundness, it is 
going to create problems in the future. So that is why I have been so 
pleased with the safety and soundness provisions that we have added to 
H.R. 1151. These provisions are vital to protect credit union members. 
We want the credit union members' movement to remain strong and well 
capitalized.
  Let me turn to the issue of taxation. From the beginning of this 
debate, I have opposed the taxation of credit unions. They are 
collective organizations. They are not-for-profit businesses. They pool 
their assets. Their gains go back to the members as assets. They also 
go back to their members as interest, and that interest is taxable to 
the credit union members. As I said earlier, credit unions exist to 
help their members, and consequently I do not believe that credit 
unions should be taxed. I have been concerned with the tax and 
regulatory burden that remains on small financial institutions, whether 
they are banks or credit unions. Consequently, I will support 
elimination of the Community Reinvestment Act. I support lifting the 
CRA burden on small financial institutions, and I support reducing the 
tax burden on small banks.
  I raised this issue during the Banking Committee's hearing last month 
on the proposed financial modernization legislation. We need to do 
something to make certain that our small community banks can remain 
viable. We do not want those banks to drown in the burden of regulation 
and taxation.
  At the time of the hearing I had brought up a question about 
subchapter S corporations and independent banks, and, graciously, the 
chairman says, ``You know, I think maybe you are on to something. We 
ought to continue to pursue that.'' Consequently, because of the strong 
support from the chairman in trying to give tax relief to small banks, 
I put together some legislation. This has all resulted because a small, 
independent banker from my State of Colorado decided to share with me 
some ideas he had about S corporations and how we could help small 
banks through the Tax Code.
  So the chairman was very receptive to those concerns. He said, 
``Well, let's work on it.'' We worked on it. We have introduced some 
legislation that will be helpful to small bankers in Colorado and 
throughout the country.
  It has become very clear that small banks do want something done with 
their subchapter S corporations. The subchapter S provisions of the 
Internal Revenue Code reflect the desire of Congress to eliminate the 
double tax burden on small business corporations.
  Subchapter S has been liberalized a number of times, and most 
recently in 1996. Yesterday, I introduced legislation that will expand 
and improve subchapter S of the Internal Revenue Code, and this is S. 
2346. I am joined in this effort by Senators D'Amato, Faircloth, Hagel, 
Enzi, Bennett, Mack, Shelby, and Grams. This legislation contains 
several provisions that will make the subchapter S election more widely 
available to small businesses in

[[Page S8979]]

all sectors. It also contains several provisions of particular benefit 
to community banks that may be contemplating a conversion to the 
subchapter S.
  Financial institutions were first made eligible for the subchapter S 
election in 1996. This legislation builds on and clarifies the 
subchapter S provisions applicable to financial institutions.
  As Congress considers credit union legislation and financial 
modernization legislation, it is important that we explore ways in 
which we can ensure that the tax and regulatory burden on our community 
banks remains reasonable. This S corporation legislation is reflective 
of that desire, and we will now begin working with the Senate Finance 
Committee to see if we can get this legislation in a bill this year.
  Section 403 of this credit union bill will require the Secretary of 
the Treasury to submit a study to Congress within 1 year that will make 
legislative recommendations on how Congress can reduce and simplify the 
tax burden on small banks. I hope the Treasury Department will be 
endorsing this S corporation legislation.
  It seems to me that it is one of the better ways to reduce the tax 
burden on small banks. In the last several months, there has been 
considerable conflict between banks and credit unions. They both play a 
vital role in our communities. I hope that in the coming months we can 
produce legislation that will strengthen credit unions as well as 
community banks, and I support the bill.
  I thank the members of the committee, particularly the chairman, for 
their support of H.R. 1151, and look forward to swift passage. I am 
particularly pleased to serve on this committee because of the 
cooperation and sincere desire in that committee to make sure that we 
have strong financial institutions and that we have competition out 
there, which I think is the real answer to a lot of our problems.
  I yield the floor, Mr. President.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER (Mr. Hagel). The Senator from New York.
  Mr. D'AMATO. Mr. President, let me just take a brief moment because I 
know the Senator from Missouri has been anxiously waiting to seek the 
floor.
  I thank my colleague from Colorado, a member of our Banking 
Committee, as well as the Presiding Officer, for their support not only 
in this endeavor as it relates to the credit unions but for our overall 
legislative efforts. Indeed, I believe that Senator Allard has offered 
in a most constructive way an opportunity to begin to give to the small 
business entrepreneur, and in this case the small community bank, an 
opportunity to create meaningful competition, to allow retained 
earnings to be held to avoid double taxation, and to make a very 
positive impact on financial modernization that will lead to greater 
competition and in the long run will expand the economy and the tax 
base for individual small banks, and as a result, benefit all of our 
citizens. This effort is not only a worthwhile endeavor, it is one that 
all of us should seek to support, Republicans and Democrats alike.
  Let me simply say this because I feel compelled to do so. I 
understand the frustrations of many of my colleagues as we debate the 
question of CRA and whether or not it should be a factor for small 
banks, whether it should be continued, or whether it should be 
modernized. Indeed, I think we should take a closer look at this issue, 
as Senator Allard has in terms of coming forth with his legislative 
proposal which addresses tax relief.
  The CRA amendment regarding small banks is a broad brush, shotgun 
approach for those who would support the effort of dealing with this 
issue in the context of a very important legislative matter. It 
beclouds the issue. Addressing this important matter of CRA for small 
banks now does not help in attempting to see to it that we remove 
barriers from honest competition, barriers that maybe should be removed 
and that we should address. But, I repeat, to bring it up in this form 
with the limited time that we have this Session will be disruptive to 
the overall effort.
  I ask all of my colleagues, my Republican colleagues in particular, 
and even those who have signed on and indicated support of the effort 
of the Senator from Alabama to help community banks, not to undertake 
it at this time. It actually distracts from the merits of their 
argument. It will prevent considering their concerns carefully and 
analyzing what can be done to ease these burdens, to assess if they 
really are burdensome and if so, in what way. So I am going to appeal 
to my colleagues--I appeal to them today; I will appeal to them on 
Monday--this is not the time to be going forward seeking relief that we 
will not have the opportunity to act on in any event. It will fracture 
our efforts on the credit union bill. It will at the least, the very 
least, bog down this effort. The House of Representatives will not 
accept the bill with this amendment. If they do accept it, then what 
will happen is that the bill will be a vetoed. Now what are we 
accomplishing? Why do we want to confuse whether or not we are really 
supporting credit unions with this attempt at dealing with another 
unrelated issue? That will only serve to hurt our efforts for credit 
unions.
  This Senator intends to support the motion of Senator Gramm of 
removing the CRA provisions from this credit union bill. But my gosh, 
if we are going to begin reaching far back through existing laws, 
without doing so in a meaningful way, then what I suggest what we are 
doing is purely mischief making. We want to be loved by all. We want to 
make everyone happy. I understand that. That is the nature of those in 
politics. But there comes a time when we have to take a stand and do 
what is right. Sometimes you can't have the adoration of all. Better to 
have the respect and to do what is right.
  I will be urging that of my colleagues, and particularly those who 
have concerns about the application of CRA on the community banks. 
Let's do what is right.
  I yield the floor.
  Mr. BOND addressed the Chair.
  The PRESIDING OFFICER. The Senator from Missouri.
  Mr. BOND. Mr. President, I ask unanimous consent to proceed 5 minutes 
as if in morning business to introduce a piece of legislation.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The remarks of Mr. Bond pertaining to the introduction of S. 2354 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. D'AMATO. Mr. President, I think, as much as we will be returning 
on Monday to resume debate and consideration of the credit union 
legislation, which is so important, and which I believe will be adopted 
overwhelmingly, I urge any of my colleagues who might want to make 
statements that we will be available to receive those statements at 
this point. If not, it seems to me we will then be moving, at the 
request of the majority leader, to adjourn until Monday.
  So I am going to suggest the absence of a quorum and hope if there 
are any of my colleagues who would like to make their statements now, 
opening statements or observations, that they would do so within the 
next 5 to 10 minutes.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SARBANES. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, I will be very brief. I know we, in 
effect, have concluded the debate today with respect to the credit 
union bill, but there were some comments made earlier about the CRA 
aspects of this legislation, and I want to put this in the Record.
  First of all, let me make it very clear, the CRA that is being 
applied to the credit unions is not the Community Reinvestment Act. It 
is a provision drafted especially for the credit unions, and it is 
designed to ensure that they pay full attention to the field of 
membership. I think it is a reasonable provision. I hope it will stay 
in the bill.
  I know that the Senator from Texas is trying to strike it, but, of 
course, he is against any CRA, any version of CRA anywhere and at any 
time. I disagree very strongly with that. We will have

[[Page S8980]]

an extended debate on the effort to exclude some banks from CRA.
  There is really a basic philosophical difference. We see the CRA as 
bringing people into the mainstream of economic life and involving them 
in our economic process. I have spoken to many bankers who support CRA. 
They think it has produced good results. Federal Reserve Chairman 
Greenspan has said:

       The essential purpose of the CRA is to try to encourage 
     institutions who are not involved in areas where their own 
     self-interest is involved, in doing so. If you are indicating 
     to an institution that there is a forgone business 
     opportunity in an area X or loan product Y, that is not 
     credit allocation. That, indeed, is enhancing the market.

  That is Chairman Greenspan.
  It is being portrayed by its opponents as sort of a mandatory credit 
allocation. It certainly is not that. It is an effort to ensure a 
reasonable amount of money goes back into the community.
  A number of banks have issued statements in support of CRA. They say 
it has increased their focus on their lending performance. In fact, the 
Bank of America said:

       Over the past several years, Bank of America, in 
     partnership with community organizations, has developed CRA 
     lending into a profitable mainstream business.

  And that is really what we are trying to achieve--a profitable 
mainstream business.'' These institutions receive deposit insurance, 
and I earlier indicated the importance of that to the workings of the 
industry and the fact we had to produce hundreds of billions of dollars 
in the S&L crisis in order to deliver on that promise.
  There was a problem with CRA over bookkeeping, recordkeeping, and so 
forth. Secretary Rubin led a major effort to revise the Federal 
regulations. This extended over a 12- to 18-month period. All groups 
were involved--the bankers, the community groups, academics, the 
administration. In effect, Members of the Congress were drawn into the 
process, and, in the end, very, very significant changes were made. As 
a consequence, I think many of the defects that earlier were argued 
against CRA were taken care of. Much of the regulatory overburden I 
think was removed.
  The argument was made that these small banks hold only a fraction of 
the assets. The fact is that in 30 States, over 80 percent of the banks 
would be affected by the Shelby amendment. In other words, it would 
exclude 80 percent of the banks; in 6 States, over 95 percent; in 9 
other States, over 90 percent; and the remainder, the other 15 States, 
over 80 percent.
  Most of these are rural States, and there seems to be a perception 
that CRA benefits only the urban areas of our country. However, rural 
areas, no less than urban areas, are affected by it. We received a 
letter from a coalition of rural and farm groups, including the 
National Farmers Union, the National Family Farm Coalition, the 
National Rural Housing Coalition, and the Federation of Southern 
Cooperatives, in opposition to the small bank exemption for CRA.
  I ask unanimous consent that the letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                    July 23, 1998.
       Dear Senator, On behalf of the undersigned organizations 
     representing rural Americans, we are writing to express our 
     strong opposition to legislative efforts to weaken the 
     coverage of the Community Reinvestment Act (CRA). Our 
     understanding is that Senator Shelby plans to offer an 
     amendment to H.R. 1151, the credit union legislation, that is 
     scheduled for floor action. In addition, Senator Gramm plans 
     to offer an amendment that strikes provisions in H.R. 1151 
     that would ensure that credit unions provide services to all 
     individuals of modest means within their field of membership.
       The Shelby amendment would exempt banks under $250 million 
     in assets from CRA coverage. This affects over 85% of banks 
     nationally. For citizens in Iowa, Kansas, Minnesota, Montana, 
     Nebraska, and Oklahoma, 95% of the banks would be exempt.
       Rural Americans need the tools of the Community 
     Reinvestment Act to ensure accountability of their local 
     lending institutions. It is needed to prevent rural banks 
     from abandoning their commitment to serve the millions of 
     Americans living in smaller low and moderate-income 
     communities. Unfortunately, small commercial banks do not 
     automatically reinvest in their local communities. This is 
     documented by national data on reinvestment trends and loan 
     to asset ratios for banks across the country. 50% of small 
     banks have a loan-to-deposit ratio below 70%, with 25% of 
     these having levels less than 58%. The data for 1997 reveals 
     that banks under $100 million in assets received 82% of the 
     substantial non-compliance ratings.
       We strongly urge you to oppose these amendments to H.R. 
     1151. The Shelby amendment ignores the important regulatory 
     changes since 1995 that have significantly reduced the 
     paperwork and reporting issues for small banks. The Gramm 
     amendment will strike an important provision from the bill 
     that for the first time would require credit unions to meet 
     the financial services needs of their entire field of 
     membership.
       A vote against these amendments will help meet the credit 
     demand of millions of family farmers, rural residents, and 
     local businesses. Thank you for considering our concerns.
           Sincerely,
         Center for Community Change, Center for Rural Affairs, 
           Federation of Southern Cooperatives, Housing Assistance 
           Council, Intertribal Agriculture Council, Iowa Citizens 
           for Community Improvement, National Catholic Rural Life 
           Conference, National Family Farm Coalition, National 
           Farmers Union, National Rural Housing Coalition, Rural 
           Coalition and the United methodist Church, General 
           Board of Church and Society.

  Mr. SARBANES. Mr. President, I will quote a portion of this letter:

       Rural Americans need the tools of the Community 
     Reinvestment Act to ensure accountability of their local 
     lending institutions. It is needed to prevent rural banks 
     from abandoning their commitment to serve the millions of 
     Americans living in smaller low- or moderate-income 
     communities. Unfortunately, small commercial banks do not 
     automatically reinvest in their local communities.

  It is a strong view that CRA has really brought investment back into 
the communities and that this has redounded to everyone's advantage, 
including--including--the advantage of the banks.
  We think that CRA has been remarkably effective in encouraging both 
large and small banks to look closely at market opportunities in all of 
the areas which they serve and in building a better relationship 
between the banks and the community. The result has been billions of 
dollars in market-rate profitable loans in urban and rural communities 
that historically have had difficulty in gaining access to credit.
  That is the basic, bottom-line message, and it is a very good 
message. It is a very good message for the country.
  I very much hope that as my colleagues think through this issue, they 
will appreciate the benefits that flow from CRA and reject the Shelby 
amendment, which would exclude banks under $250 million in assets--
which, as I indicated, are the overwhelming number of banks in the 
country--and reject the Gramm amendment which seeks to eliminate a 
modest provision in the credit union bill that would require the credit 
unions to take a look at how they are serving their field of membership 
in their community, a provision which, I might note, the credit unions 
have indicated they accept. In fact, their stated position to us is 
that they support this bill as reported from the committee.
  Mr. President, I yield the floor.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Mr. President, I must say that in the areas in which my 
ranking member, friend and colleague, Senator Sarbanes and I have 
worked on in the Banking Committee, we have shared rather similar 
positions on--well, just about 80 or 90 percent of the issues we have 
addressed, whether it be on housing issues or mass transportation 
issues or issues regarding financial services. Indeed, I almost 
reluctantly come to the conclusion that this is not the appropriate 
time to undertake expanding CRA activities by prescribing them for 
credit unions. And just as I have cautioned my colleagues and friends--
most of them on the Republican side--that if we are to look at the 
benefits, and maybe some of the effects that are not beneficial which 
could be the unintended consequences of a well-intentioned law--and I 
have no doubt it is well-intentioned--it is my opinion, overall, that 
CRA has been beneficial in attempting to ensure that financial 
institutions that accept deposits from a particular area or community, 
direct some of those financial activities back into that community.

  Now, let us not kid ourselves. I think we are disingenuous if we 
would suggest that all institutions are sure to

[[Page S8981]]

meet both a financial and moral commitment and balance both. Some of 
these financial institutions have to be conscious of their stockholders 
and conscious of doing business in our very competitive society. And I 
think that we would be less than candid if we were not to recognize 
that there have been institutions over the years that have directed 
their investment activities with almost a singular purpose--to bring to 
the bottom line the greatest profits that they can possibly derive, 
without attempting to help a community, to derive an investment 
strategy or portfolio that would only give them the highest possible 
return.
  I think it was as a result of looking at activities where communities 
and banks were gathering deposits from communities and giving little, 
if any, back and, indeed, engaged in the practice of redlining--and 
there have been studies, these practices are documented. The Federal 
Reserve Bank of Boston conducted a study that documented redlining 
practices in Boston, Massachusetts. And that is unfortunate, it is an 
outrage. But those are the facts.
  Consequently, Congress came forth and passed legislation--and it is 
the law of the land--that directs credit allocation to these areas that 
heretofore were not receiving it, whether they be the rural areas or 
whether they be in the inner cities. But let us not kid ourselves. 
Redlining was taking place, and it is, again, disingenuous for any of 
our colleagues to suggest that it was not.
  Maybe we should provide an opportunity for some of the smaller 
institutions that have an exemplary record--and indeed I am very 
conscious of the statements made in the 1997 Federal Reserve report, 
that there were only nine--only nine out of the thousands of community 
banks that were cited for inadequate investment, not meeting the goals 
of CRA. That is a great, great record. Maybe we could find a solution 
where there is a less frequent accounting or reporting process that 
would ease the burden, particularly for institutions that have 
demonstrated that they do care, that they have a concern, and that they 
meet their social responsibility. That is why CRA came about--to see to 
it that it was not just to get the highest yield every time, because 
Congress said, ``We insure these, and we think there should be some 
effort made at allocating credit, yes, in communities that might not 
otherwise be as attractive for investment purposes.''
  That is what we are talking about. That is how CRA came about. So 
while I am sympathetic to the unintended burdens that may have been 
created, I also am appreciative of the fact that there have been 
billions of dollars as a result of this program that have been invested 
in rural areas, in rural America, and in urban centers that may not 
have otherwise benefitted from investment. This practice has, in turn, 
created profits, jobs, opportunity and hope for Americans that 
otherwise wouldn't be.
  Having said that, I am arguing on one side why we should not at this 
time be looking to simply wipe out CRA legislation affecting community 
banks. I am willing to discuss this matter, willing to hold hearings 
and willing to go forward and examine, What alternative solutions can 
ease burdens that may exist? But by the same token, regarding CRA-like 
implications for credit unions, I just believe it is wrong. We are 
talking about groups of people, cooperatives, who come together by 
their very nature.
  When we look at this matter more closely--Monday, I intend to look at 
the profile of the credit union member. I have to tell you, they meet 
the description when we try to encourage making available moneys and 
resources and to see to it, whether it be the community banks or all 
the financial institutions, that they become involved. And that is why 
they have come together. Their very profile, absolutely in terms of 
demographics, in terms of per capita income, meets the needs that we 
have tried to establish overall through CRA.
  I believe it is absolutely counterproductive to say to the very 
people of these cooperatives--nonprofit institutions, have moneys that 
go right back into that institution; it is their capital, not the 
individual who earns more, or takes out more, or a stockholder--that we 
then place this requirement on them when it has never been demonstrated 
to be necessary. Indeed a letter from the NCUA attests to that fact. I 
will just read part of this letter. It was written to Phil Bechtel, 
chief counsel for the Senate Banking Committee, June 1, 1998, signed by 
Robert Loftus, director of Public Congressional Affairs.
  It says, ``Our investigations have not produced any evidence''--any 
evidence--``that credit unions are guilty of redlining or other 
discriminatory practices.''
  Given that history, let us move forward--I support this legislation, 
but I believe that the Senator from Texas is right in moving to strike 
this provision. I also strongly believe that, to those of my colleagues 
who want to give regulatory relief to the small banks and community 
banks, as well intentioned as they are, their efforts will absolutely 
do nothing but delay, bring about more confusion, and the charges that 
in their attempt to do provide relief to small banks, what they are 
really doing is trying to defeat this legislation. I think whether it 
is an unintended consequence or not, that is exactly how it is going to 
be portrayed. And I will say on the floor to my colleagues: Recognize 
what you are doing, recognize that you want to be loved by all.
  I think that the point can be made. I think we can fight for 
regulatory relief. There are times and places to do it. But this is not 
the time nor the place. If this was the last boat going out of town, 
then fine, we would do it. I think there are a couple other areas where 
I could suggest that my colleagues address this issue of relief for 
small banks, if they really want to see this legislation enacted. And 
it would be appropriate to undertake that, but not here, and not on 
this credit union bill.
  I see the distinguished chairman of the Finance Committee is here, 
and I know he wants to speak to this bill.
  I yield the floor.
  Mr. ROTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. I thank the distinguished Senator from New York for 
yielding to me. I congratulate him and his colleague, Senator Sarbanes, 
for bringing this legislation before us.
  I want to take this opportunity to restate my support for Delaware's 
credit unions. As we all know, months ago, a Supreme Court decision 
placed the viability and future of credit unions in limbo. For that 
reason, I am particularly pleased that the Senate will be voting next 
week on H.R. 1151, a bill to ensure credit unions will be able to add 
new member groups.
  Mr. President, I support credit unions because I know how vital they 
are to the financial health of thousands of Delaware families and 
businesses. These nonprofit member-run institutions are unique. Their 
sole purpose is to provide financial services to their members at the 
best rates and under the most favorable conditions possible.
  Savvy consumers know that credit unions are often a great option. 
Their ATM fees are reasonable or nonexistent; single-digit credit card 
interest rates are common at credit unions; and your child's first 
savings account won't face a monthly low-balance fee. I don't think I 
mentioned, I say to my distinguished Senator from New York, you can 
also set up a Roth IRA.
  All Senators have undoubtedly heard from the thousands of credit 
union members in their States. Their message is one of self-sufficiency 
and of low-cost, low-fee consumer-based financial services. Credit 
unions are good for families, good for businesses, and they are good 
for Delaware.
  H.R. 1115 is necessary for these valuable institutions to thrive.
  Again, I want to thank the chairman of the Banking Committee and the 
ranking member for their role in bringing this legislation to this 
point. I look forward to voting for this legislation next Monday.
  Mr. D'AMATO. Mr. President, let me thank the distinguished chairman 
of the Finance Committee for his help and his work. Indeed, he and his 
staff are working on important legislation with Senator Allard, and I 
believe the Presiding Officer and others have signed on to give some 
tax relief to the small community banks.
  The Senator and his staff have been most cooperative in helping to 
move it forward. I hope we would even have an opportunity to do 
something this year.

[[Page S8982]]

  Mr. ROBERTS. Mr. President, notwithstanding all the advice we have 
received from Senator Sarbanes and Senator D'Amato in regard to how 
world banks make their loans or don't, and what is in the minds of 
country bankers all throughout the Nation, and without CRA we simply 
wouldn't have ever made a loan in rural America, I suggest the absence 
of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. KENNEDY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Roberts). Without objection, it is so 
ordered.
  Mr. KENNEDY. Mr. President, I support H.R. 1151, the Credit Union 
Membership Access Act, but I strongly oppose the amendments being 
offered by Senator Gramm and Senator Shelby. Credit unions have a 
distinguished history of providing affordable financial services to 
America's low- and moderate-income communities. This legislation will 
help them continue to do that.
  It is ironic that we are now debating the issue of whether banks and 
credit unions should serve low- and moderate-income communities and to 
reinvest in the communities in which they receive deposits. 
Massachusetts has 317 credit unions, at 1.7 million members. They have 
had community reinvestment obligations for many years, and they have 
done an excellent job of meeting needs of consumers at all income 
levels. Massachusetts credit unions are a model for the Nation. The 
vast majority of banks take their community reinvestment obligation 
seriously in meeting these obligations.
  The Massachusetts Bankers Associations, whose member banks are doing 
excellent work in community reinvestment, does not support the Shelby 
amendment. Institutions which have received outstanding ratings, like 
Bank of Boston and Citizens Bank, are using the Community Reinvestment 
Act to provide profitable lines of business.
  Senator Shelby's amendment to eliminate the Community Reinvestment 
Act for 85 percent of the banks would eliminate an important source of 
affordable credit and financial services from low- and moderate-income 
families who are bankable. Massachusetts banks do not support this 
amendment, and I urge my colleagues to oppose it.
  Senator Gramm's amendment would say to credit unions who are being 
granted expanded power, they have no obligation to serve members of 
modest means. Both these amendments are bad policy.
  In this period of sustained economic growth, it is vital that all 
families have the opportunity to obtain credit in order to buy a home, 
start a small business, or send a child to college. The Community 
Reinvestment Act has a long history of success. Since 1992, it has 
helped banks to extend over $800 billion in loans for housing, small 
businesses, economic development and local communities across the 
Nation.
  As many have said, there is no capitalism without capital. We should 
oppose any effort to reduce access to credit which families need in 
order to buy a home, to start or expand a business, and send their 
children to college. The Community Reinvestment Act is not charity. It 
creates a positive obligation for banks to reinvest in communities from 
which they receive deposits. It is good business and it helps 
communities, businesses, and families nationwide; requiring similar 
investments by credit unions is good policy.
  I urge my colleagues to pass this important piece of legislation and 
to oppose these two amendments. It hurts all those who want a better 
future for themselves and their families, and it hurts our inner cities 
and rural communities who are rebuilding. Most of all, they reverse 20 
years of successful reimbursement in our neighborhoods, and it deserves 
to be defeated.

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