[Congressional Record Volume 144, Number 101 (Friday, July 24, 1998)]
[Senate]
[Pages S8987-S8988]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   CREDIT UNION MEMBERSHIP ACCESS ACT

  Mr. GRAMS. Mr. President, I want to talk a little bit, as I mentioned 
earlier, on an amendment offered by Senator Shelby dealing with the 
CRA.
  I take a few moments today to rise in support of the amendment 
offered by the Senator from Alabama and urge my colleagues to support 
it as well.
  Senator Shelby's leadership on this issue is well-established and he 
should be commended for his perseverance, even in the face of fierce 
opposition by some of his colleagues and the Clinton administration.
  Mr. President, this amendment is a simple and appropriate step to 
removing an inappropriate and unnecessary burden from our Nation's 
small banks and thrifts. The amendment exempts small banks and thrifts, 
under $250 million in assets, from the grasp of the Community 
Reinvestment Act, or CRA.
  I am sure that some of my colleagues may come to the floor and argue 
that the Federal banking regulators have taken steps to remove the 
burdens from banks, and thus, this amendment is unnecessary. Although I 
commend the regulators for easing the burden of CRA, this contention 
does justify the appropriateness of the underlying arguement that 
government-mandated credit allocation is inappropriate. As we have seen 
most recently in Asia, when the government mandates that the private 
markets allocate their resources in set ways--capital in this case--the 
results can be disasterous.
  I think there are three arguments which must be considered regarding 
Senator Shelby's amendment.
  The first is, What was the justification for enactment of CRA in the 
first place? The Community Reinvestment Act was enacted in 1977 in 
response to rumors of redlining in the banking industry. The debate at 
that time shows that supporters felt there were three factors 
justifying enactment, and they are: first, that banks enjoy a semi-
exclusive franchise--due in part to interstate banking restrictions and 
activity restrictions on competitors such as thrifts and credit unions; 
two, that the government limits competition within the banking sector 
by limiting interstate banking and limiting the acitivities of 
competitors such as credit unions and thrifts; and, third, that the 
Government restricts the cost of money to banks through interest rate 
caps on savings accounts and a prohibition on paying interest on demand 
deposits. If these three points, as the record shows, truly were the 
justification for imposing CRA on banks, the authors would certainly 
have to reconsider their action in light of the current environment 
facing banks.
  Banks no longer enjoy the limited competition they did in 1977. The 
Reigel-Neal Interstate Banking and Branching Efficiency Act of 1994 
opened the doors to interstate banking, thus providing competition not 
only among banks within a state but with banks across the country as 
well. Also, the bill we are considering today will throw open the doors 
of competition to another set of competitors--credit unions--which will 
be able to add any group of individuals they choose, limited only by 
its size. Also, these two examples I have just explained do not take 
into account all of the non-bank financial services which have evolved 
and expanded since 1977--including money market accounts, mutual funds, 
and deposit-like insurance products.
  Banks also no longer enjoy protection against set costs which had 
been

[[Page S8988]]

imposed through interest rate controls. The 1980 Depository 
Institutions Deregulation and Monetary Control Act of 1980 
appropriately removed these price controls which inhibited competition.
  The second argument which must be considered when we discuss the 
Shelby amendment is the claim that the amendment will exempt 88% of the 
banks from coverage under the CRA. Although this percentage seems 
staggering--and may sway someone who feels that CRA is okay in some 
instances--a closer look reveals that opponents of the amendment are 
using sleight of hand to give the impression that this amendment will 
have a deeper impact than it truly will. Although it may be true that 
88% of banks are exempted, in terms of the number that really counts--
that is, assets--the impact that this exemption will have is 
overstated. That is because less than 12% of bank assets are exempted.
  The approximately 8,100 banks exempted have $593 billion in assets, 
but that accounts for only 11.7% of bank assets in this country. These 
assets are only one-half-of-one percent, or $3 billion, more than the 
combined assets of the soon-to-be-completed Bank of America--
NationsBank merger. In other words, one bank in the country will soon 
have close to the same number of assets as the 8,100 banks which would 
be exempted under this amendment. When you realize that the overall 
impact of this amendment on the CRA is so small, you must question why 
it is being contested with such vigor.
  The third contention which must be contemplated in considering this 
amendment is whether it will have a negative impact on preventing 
discrimination. To listen to the critics of the amendment, one would 
believe that the amendment gives banks a ``get out of jail free'' card 
when it comes to discrimination.
  However, you must understand that this amendment in no way restricts 
the enforcement of the Fair Housing Act, the Equal Credit Opportunity 
Act, or the Home Mortgage Disclosure Act. These acts, designed to 
prevent discrimination, will remain unfettered in detering 
inappropriate practices of financial institutions. The amendment in no 
way weakens laws designed to protect individuals; instead, it removes 
the inappropriate policy of dictating where banks must operate.
  Mr. President, I realize that some in the credit union movement are 
concerned that adoption of the Shelby amendment may endanger swift 
enactment of this legislation. However, after contemplating the points 
raised, I do not understand how the President could consider vetoing a 
bill based on this appropriate and narrow relief and I do not 
understand how any of my colleagues can argue the doom and gloom 
scenarios they are painting about this amendment.
  So, again, Senator Shelby should be commended for his leadership and 
his amendment should be adopted, insisted on in conference, and signed 
into law by the President.

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