[Congressional Record Volume 144, Number 102 (Monday, July 27, 1998)]
[Senate]
[Pages S9006-S9032]
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 now 
resume consideration of H.R. 1151, the Credit Union Membership Access 
Act, which the clerk will report.
  The bill clerk read as follows:

       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 resumed consideration of the bill.
  Pending:

       Gramm amendment No. 3336, to strike provisions requiring 
     credit unions to use the funds of credit union members to 
     serve persons not members of the credit union.

  Mr. HAGEL addressed the Chair.
  The PRESIDING OFFICER. The distinguished Senator from Nebraska is 
recognized.


                           Amendment No. 3337

 (Purpose: To amend the bill with respect to limits on member business 
    loans, the definition of a member business loan, and experience 
               requirements for member business lending)

  Mr. HAGEL. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Nebraska [Mr. Hagel], for himself, Mr. 
     Nickles, Mr. Roberts, Mr. Helms, Mr. Shelby, Mr. Enzi, and 
     Mr. Grams, proposes an amendment numbered 3337.

  Mr. HAGEL. 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:
       On page 54, strike lines 12 through 21 and insert the 
     following:

[[Page S9007]]

       ``(a) Total Amount Permissible.--
       ``(1) 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 minimum net worth required under section 
     216(c)(1)(A) for a credit union to be well capitalized.
       On page 55, strike line 10, and insert the following:
       ``(c) Experience Requirement for Member Business Lending.--
     Beginning 3 years after the date of enactment of this 
     section, each employee or related person of an insured credit 
     union shall have not less than 2 years of direct professional 
     experience in the member business lending field before making 
     or administering any member business loan on behalf of the 
     insured credit union.
       ``(d) Definitions.--As used in this section--
       On page 56, strike lines 1 through 5.
       On page 56, line 6, strike ``(iv)'' and insert ``(iii)''.
       On page 56, line 12, strike ``(v)'' and insert ``(iv)''.

  Mr. HAGEL. Mr. President, I am offering this amendment today on 
behalf of myself, Senators Bennett, Nickles, Roberts, Helms, Shelby, 
Enzi, and Grams.
  Before I address this amendment, I want to say that I am grateful, as 
all our members on the Banking Committee, for Chairman D'Amato bringing 
this important piece of legislation up, focusing on it with some 
dispatch, getting it out of committee and onto the floor of the Senate. 
Also, I wish to thank the ranking member of the Banking Committee, 
Senator Sarbanes, for his leadership as well.
  As I suspect, both Chairman D'Amato and Senator Sarbanes are not 
going to agree with my amendment. Nevertheless, I am grateful that they 
have focused on this issue and provided the kind of leadership that is 
important on these financial service matters.
  Mr. President, I support credit unions and the cost-efficient service 
they provide to their members.
  Our amendment, which we are offering today, is not designed to hurt 
credit unions. To the contrary, our amendment is designed to keep 
credit unions strong, secure, and focused on their special role of 
serving consumers. It does that by preventing the unchecked expansion 
of credit unions into commercial lending. Currently, there are no 
limitations on how much commercial lending in which a credit union may 
engage.
  Let me emphasize that our amendment does not prevent credit unions 
from making commercial loans.
  Our amendment has essentially three main points:
  First, we would lower the commercial lending cap contained in H.R. 
1151 from 12.25 percent of a credit union's assets to 7 percent of a 
credit union's assets. This would establish for the first time a cap on 
commercial lending by credit unions. But the cap currently contained in 
H.R. 1151 is arbitrary, and because of an accounting loophole, is 
essentially meaningless.
  We share with the authors of H.R. 1151 the belief that credit union 
commercial lending should be limited. But we also believe those limits 
should be relevant and be meaningful. The 12.25 percent of assets 
commercial lending cap now in H.R. 1151 is completely arbitrary. Our 
amendment's 7-percent cap is tied directly to the amount of capital 
that H.R. 1151 requires a ``well-capitalized'' credit union to keep in 
reserve.
  Let me explain what this means.
  Credit unions, like all other financial institutions, are required by 
their regulators to keep a certain amount of ready capital on hand as a 
cushion in case of hard times--a sort of ``rainy day'' fund. H.R. 1151 
would, for the first time, establish a target amount of capital that a 
well-capitalized credit union should keep in reserve, and would 
prohibit credit unions from making commercial loans if they fall too 
far below that target. By tying commercial loans dollar for dollar to 
capital reserves, we strengthen the safety and soundness of credit 
unions that choose to engage in business lending. We must make sure 
that credit unions cannot risk more of their loan portfolio on 
commercial ventures than they have reserve capital ready to back up the 
loans if those loans go bad.
  We protect the consumer. We protect the credit union members. Credit 
unions would have a 3-year grace period to comply with this cap.
  Our amendment will help H.R. 1151 to better achieve its main purpose, 
which is described, by the way, in the Banking Committee report on H.R. 
1151. This is the actual language coming out of the Senate Banking 
Committee. And I quote:

       . . . [to] ensure that credit unions continue to fulfill 
     their specified mission of meeting the credit and savings 
     needs of consumers, especially persons of modest means, 
     through an emphasis on consumer rather than business loans.

  Second, our amendment would require that all of a credit union's 
commercial loans must count toward its cap.
  Current National Credit Union Administration policy, which would be 
codified by H.R. 1151, excludes any commercial loans made to a single 
member that totals less than $50,000 from being counted as commercial 
loans.
  Mr. President, you heard it right. That is right. Current 
regulations, which H.R. 1151 would codify, say that a commercial loan 
is not a commercial loan if it is less than $50,000.
  With this loophole, there is no accurate, full, or honest accounting 
for commercial lending in credit unions. This makes no sense. No other 
financial institution enjoys this sort of charade and slight of hand. 
This loophole makes any commercial lending cap meaningless, because it 
permits an unlimited number of commercial loans so long as each of 
those loans is less than $50,000.
  Our amendment would require truth in accounting--truth in 
accounting--for all commercial loans.
  Third, our amendment codifies current NCUA policy that requires a 
credit union to use qualified personnel to administer commercial loans. 
Our language states that a commercial loan officer must have 2 years 
experience in his field. This is a commonsense provision that needs to 
be codified. For those smaller credit unions that feel this would be a 
new regulatory burden, there are three responses.
  We are simply codifying current NCUA policy, and we provide a 3-year 
phase-in for compliance with this provision. The experience requirement 
will not force credit unions who make a few small commercial loans to 
hire a full-time staffer. The NCUA's general counsel has stated that 
this requirement could be met by hiring contract assistance on a case-
by-case basis.
  This is a very basic safety and soundness provision.
  Let me be very clear about what our amendment does not do.
  Our amendment does not--does not--restrict credit for farmers, small 
business owners, or low-income areas that rely on credit unions.
  That's because H.R. 1151, as reported by the Banking Committee, 
already contains several generous exceptions to the commercial lending 
cap--and our amendment does nothing to change these important 
exceptions. The four exceptions are:
  First, a credit union that is primarily engaged in business lending, 
which includes agricultural and small business lending, will not be 
subject to the commercial lending cap. That means those credit unions 
that qualify for this exemption can make agriculture or small business 
loans without any limits.
  Second, a credit union that is chartered for the purpose of business 
lending will not be subject to the cap. This means an agriculture co-op 
credit union would be exempt from the cap.
  Third, a credit union that serves predominantly low-income members 
will be exempt from the cap. This ensures that low-income areas, many 
of them located in urban areas, are not hurt by the new commercial 
lending restrictions.
  Fourth, a credit union that is determined to be a ``community 
development financial institution,'' as defined in existing banking 
law, will be exempt from the cap. This exception is intended to help 
low-income community development efforts across the Nation.
  Mr. President, only 13 percent of the 11,400 credit unions across 
this country, including Federal- and State-chartered, have any 
commercial loans at all. That is according to the Credit Union National 
Association.
  Our amendment has absolutely no effect on the other 87 percent of 
credit unions that choose not to make commercial loans.
  And even of that 13 percent of credit unions that are in the 
commercial lending business, the vast majority will not be restricted 
by the 7 percent of assets cap that our amendment proposes.

[[Page S9008]]

 That is because commercial loans currently constitute only 1 percent 
of total credit union assets, according to the Credit Union National 
Association.
  Why should credit unions be subject to a meaningful commercial 
lending cap? There are several answers to that question.
  First, credit unions, as stated in the preamble of the Federal Credit 
Union Act of 1934, were created by Congress to make, and I quote from 
the preamble: ``credit more available to people of small means.'' To 
achieve this goal, Congress exempted credit unions from paying Federal 
income taxes. Credit unions do not pay any Federal income taxes. When 
thrifts were exempt from income taxes before 1952, Congress prohibited 
them from making any commercial loans because of their tax-exempt 
status.
  A second reason to have meaningful limits on commercial lending is to 
ensure fair competition--competition between small banks and credit 
unions in the commercial lending arena. Credit unions' tax exemption 
allows them to offer lower interest rates on loans and higher interest 
rates on savings accounts and certificates of deposit.
  The third reason to have meaningful limits on commercial lending is 
to protect taxpayers by ensuring the safety and soundness of the credit 
union system. The Federal Government stands behind each credit union 
depositor, insuring deposits up to $100,000. If a serious financial 
crisis in the credit union system depleted the Credit Union Share 
Insurance Fund--which is Federal deposit insurance for credit unions--
then the Federal Government would have to step in with taxpayer funds 
to protect depositors against loss.
  I have several concerns about credit union safety and soundness:
  First, unlike banks and thrifts, credit unions--as non-profit 
entities--cannot issue stock to replenish their capital reserves during 
hard times. That's a real weakness when a quick capital infusion is 
needed--such as during a time of defaults, such as during the 1980s 
when we all recall the tragedy of the S&Ls, when capital levels fell 
quickly and new capital was required immediately.

  Second, we've seen commercial loans put credit unions in danger 
before. Rhode Island experienced a credit union crisis in 1991 that 
resulted in the failure of a State-chartered private deposit insurance 
fund. The crisis was, in part, caused by excessive and risky commercial 
lending. Thirteen of the State's credit unions were permanently closed, 
and the state sought Federal assistance to repay depositors.
  Third, by their own admission, credit unions make loans to those who 
don't qualify for credit at banks.
  This is their strength. This is the strength of a credit union, 
serving those who do not receive service at traditional financial 
institutions. However, this is also a very important area of concern, 
because this means credit unions are many times making very high risk 
loans to people whose credit history makes them ineligible for loans 
elsewhere.
  Fourth, all banks and thrifts are required to abide by risk-based 
capital standards. This means they must set aside more capital, 
depending on how risky their loans are. Unfortunately, credit unions 
don't have risk-based capital standards today. Now, H.R. 1151 makes a 
weak, valiant but weak, attempt to address this issue by regulating 
capital standards for ``complex credit unions,'' but that effort is 
neither clear nor meaningful. That is why our 7-percent-of-assets cap, 
which ties credit union commercial loans dollar for dollar to capital 
reserves, makes sense. This protects the credit union members whose 
money is at risk.
  In summary, our amendment strengthens the safety and soundness of 
credit unions with open and honest accounting. It brings market 
fairness to the relationship between tax-exempt credit unions and tax-
paying small community banks, and it refocuses the original intent of 
credit unions on consumer loans and services. I hope my colleagues will 
support this important amendment.
  I reserve the remainder of my time and yield the floor.
  The PRESIDING OFFICER. The distinguished Senator from Utah is 
recognized.
  Mr. BENNETT. I thank the Chair.
  Mr. President, let me give you a little history as I see it with 
respect to this bill and why this amendment, in my view, makes sense.
  We are here because the Supreme Court has ruled that the NCUA, the 
regulatory body dealing with credit unions, has been misapplying the 
law since 1982. The Supreme Court in response to lawsuits that were 
brought before it has ruled that credit unions have grown in violation 
of the law, or have engaged in actions that are a violation of the law 
since 1982.
  Since those credit unions were following the dictates of the NCUA, 
their regulator, it would be unfair to penalize the credit unions; they 
were playing by the rules as they understood them. And when the 
rulemaker itself was the agency that was making a mistake, it is not 
fair to penalize the people who followed those rules. But we have to 
change the rules if they have been improperly applied, and that is what 
the result of the Supreme Court decision has presented us.
  We have decided, as a Congress, that we are going to change the 
rules, that we are going to now codify that which has been done since 
1982, and I think it is right and proper that we do so. I am in favor 
of doing that, however much that may disappoint the banks that were 
hoping that with the winning of this lawsuit they could turn the clock 
back to 1982. But we cannot. We must say that those who have 
appropriately opened accounts at credit unions will have those accounts 
protected, and that we will not turn the clock back that many years.
  As we have done this, we have raised the maximum size of an employee 
group which is eligible to affiliate into a multiple common bond credit 
union from 500 to 3,000. That is a sixfold increase, and the 3,000 
employee threshold encompasses 99 percent of all businesses in America. 
There are only 16 private companies in my entire State that employ more 
than 3,000 people. So this is a major step forward to support and 
encourage the credit union movement, and I believe it is the real heart 
of the bill that is before us, and I support this activity.
  But in the process of dealing with the Supreme Court ruling and 
making the change about the maximum size of employee groups, the 
Banking Committee has taken a look at the credit union situation 
overall and has come to the conclusion, rightly in my view, that in 
order to protect the safety and soundness of credit unions, there 
should be a limit on the amount of commercial loans that credit unions 
make.
  The only controversy that we have with respect to the amendment 
before us is not should there be such a limit but, rather, where should 
the limit be. As it came out of the committee, the limit was at 12.25 
percent of assets, and I supported that. But I recognized that it 
needed to be looked at more carefully, and as I have looked at it more 
carefully, along with the other Senators who have cosponsored this 
amendment, I have come to the conclusion that the limit should be 
slightly less than the 12.25 that was in the bill from the committee. 
It should be at 7 percent, which is the amount set aside by regulation 
as to credit union capital.
  Why the lower amount? Well, there are several reasons. One of them 
that Senator Hagel has already addressed has to do with safety and 
soundness and the experience in other States, specifically Rhode Island 
that had some serious difficulties. We don't want a repeat of those 
difficulties, and a lower limit is a greater bulwark against those 
difficulties than the one which is higher.
  I am interested that the telephone calls we get in our office as this 
amendment gets talked about out in the credit union world almost always 
follow the same dialog.
  They say, ``Why is Senator Bennett proposing an amendment that the 
credit unions don't like? We thought he supported credit unions.''
  Then the member of my staff answering the call said, ``Senator 
Bennett is supporting an amendment that would put a limit on commercial 
loans.''
  Then the caller said, ``But credit unions don't make commercial 
loans.''
  Which then puts us in the position to say, ``If that in fact is true, 
why do you object to a limit?"
  Most credit union people who talked to me believe that credit unions 
make

[[Page S9009]]

loans only to individuals. And the credit unions that have come to see 
me from the State of Utah have all stressed the fact that commercial 
lending is a very small percentage of their business. Indeed, they say, 
``No, we do not go above 5 percent of our total capital involved in 
commercial loans.''
  And, to them I say, once again, ``If you don't go above 5 percent, 
why would you object to a limit that is at 7 percent? You can continue 
to do exactly what you are doing under the Hagel amendment, with no 
difficulty.''
  Then, finally, one of them who was seized with a burst of candor 
cornered me when I was in the State this last time and said, ``We want 
to grow our commercial loan business, and if you put in the 7 percent 
cap that you are talking about, we will hit that within a matter of 
months. We are growing very rapidly. We want the cap higher so we can 
grow beyond that level.''
  This gentleman--and I use the word ``gentleman" appropriately, 
because he certainly was in the way he handled himself in our 
conversation--has, as his background, a career in commercial banking. 
He, for reasons good and sufficient unto himself, decided he was going 
to leave the bank that he had worked at most of his life and go to work 
for a credit union.
  Naturally, the thing he wanted to do with his new employer is use his 
skills to the very best advantage. And since his whole history is in 
growing commercial loans at the bank for which he had worked, he 
decided he would now work to grow commercial loans in the credit union 
where he worked. And he has been very successful. The credit union 
portfolio of commercial loans under his direction is growing rapidly, 
growing rapidly to the point that, as I say, if you put a cap at the 7 
percent we are talking about with this amendment, his credit union will 
hit that within a matter of months. And he said, ``Can't you stick with 
the 12.25 percent that came out of the committee, because we will not 
hit that for maybe a year or so?"
  So, as I said, the issue is not, should we have a cap; the issue is 
only where should it be. And, because he wants, naturally and properly, 
to see the amount of portfolio that he is overseeing grow to as big an 
amount as it possibly can, he wants the cap to be as high as it can. I 
am very sympathetic to him and, to be honest, I don't think there is a 
safety and soundness problem in his institution. I think he is properly 
trained as a banker, so that he can handle commercial loans in a credit 
union atmosphere and do very well.
  But the public policy issue that we have to decide here on this floor 
is, do we want credit unions in that kind of business in a major way? 
The 12.25 percent limit in the bill that came out of the committee 
answers that question, ``Yes.'' That is a fairly major involvement for 
credit unions. And we run the risk of having those who are not equipped 
with former commercial bankers, like the man who talked with me, going 
up to that limit and endangering the savings and the assets of their 
other members.
  One of the aspects of the amendment that is before us to which credit 
union representatives object says that, if you are going to make 
commercial loans, you have to have someone in your organization who has 
at least 2 years of business lending experience--in other words, 
someone like the man who came to see me while I was back in Utah, who 
clearly had plenty of years' experience.
  Again, I am interested that credit union representatives object to 
this requirement at the same time they insist they are not in the 
business of making commercial loans. You cannot have it both ways. If, 
indeed, you want to get in commercial lending in a big way, you ought 
to have the requirement that you have someone with experience in 
commercial lending in a big way. You can't say, ``We want a higher 
limit for the amount of commercial lending we can do, but we want no 
requirement that we have anybody around who understands commercial 
lending.'' This is a recipe for the kind of thing that the Senator from 
Nebraska has described as already happening in some States.
  So, I come back to the basic issue before us: What should be the 
proper public policy role of credit unions in the financial services 
mix? I believe credit unions have earned an honored place in that mix. 
I believe they have demonstrated for the last 60 years that they 
provide a vital function and that they should be encouraged to continue 
that vital function, and, indeed, in that function they should be 
encouraged to grow, and we should create a circumstance in which they 
can grow and prosper. I believe that this bill does that.
  But the policy question is, Should we as a Congress, while fixing the 
problems created by the Supreme Court decision, at the same time 
encourage them to grow in a field where, by their own statements and 
admissions, they have not been in the past? Should we use this bill 
setting aside a Supreme Court decision as the vehicle to encourage new 
ventures on the part of credit unions that are ill equipped for those 
ventures? I think the answer is no, we should not. And, therefore, 
after studying the matter between markup and the full committee and the 
floor, I join with Senator Hagel in saying the limit level should be 
lower rather than higher with respect to the amount of involvement 
credit unions should have in commercial lending.
  I don't understand why they object to the lower level, because they 
themselves tell me, ``We are not interested in commercial lending. That 
is not our bread and butter. That is not our area of expertise. That is 
not what we are doing.''
  And then I say, ``Then why do you object if we put a situation in 
place that keeps you in your traditional area?''
  Finally, I share this one last thought with you, Mr. President. With 
respect to how important this amendment is to credit unions, in the May 
29 National Journal's Congress Daily, the NAFCU vice president, Pat 
Keefe, is quoted as saying, ``From our point of view, this is not 
major.''
  Mr. Keefe was referring to an amendment that would have imposed 
tighter restrictions than the one we are talking about. I think he 
speaks for the vast majority of credit union members who have been in 
touch with my offices. This is not major for them. I think it is 
significant for the community banks. I think it is a responsible 
decision for us to take.
  Let me make it clear, if we do not agree to this amendment, I will 
still support the bill, as I did in the committee, where it had a limit 
at 12.25 percent. Just because I think the 7 percent is more prudent 
does not mean that I think this is a deal killer. So, in that sense I 
guess I am signaling, ``This is not major.'' But, to me, it is major 
because it is a demonstration of where the public policy ought to be 
with respect to the thrust and main direction of the credit union 
movement. They think it is not major. To me, it is. I hope we agree to 
this amendment.
  I yield the floor.
  The PRESIDING OFFICER. The distinguished Senator from New York is 
recognized.
  Mr. D'AMATO. Mr. President, I rise in strong opposition to the 
amendment submitted by the Senator from Nebraska.
  I don't believe that the Senator intends to hurt the credit unions, 
but I think an unintended consequence of his amendment will impose some 
very real burdens, burdens on 4,000-plus credit unions, the small mom-
and-pop credit unions, by including in that cap those loans that are 
made for $50,000 and under. And, indeed, they are made to the members 
who want to start businesses, who have an idea, and they believe, given 
sufficient capital, they can go out there and take an entrepreneurial 
idea, or maybe they have been working for someone and want to start 
that business with a small loan. Who better to know and judge than a 
fellow member? Indeed, it requires a burden as it relates to the kind 
of people who will now have to be utilized to make that loan. That is a 
burden. Are we now going to be getting in there, micromanaging the 
small, well-capitalized credit union with better than 7 percent, 8 
percent, 9 percent? I think that this will have an unintended 
consequence. I know it will. I have heard from people inside credit 
unions. They have told me.
  Now, Mr. President, people will ask, how do we get to 7 percent? And, 
by the way, how did we get to 12.25 percent? Those are interesting 
questions. Who determines where a credit union s business lending 
should or shouldn't stop?

[[Page S9010]]

 Let's start with the history of this provision.
  There was no limitation, Mr. President, none whatsoever, prior to the 
markup. There wasn t any in H.R. 1151. We approached this in the best 
way we could. There were no risk-based standards. For the first time we 
set them up, and we say 7 percent for well-capitalized. That was never 
intended to be the criterion--to say, ``Therefore, you can only make 
commercial loans up to 7 percent.''
  To take one application when we, for the first time in the history of 
the credit union movement, say, ``Well-capitalized, 7 percent; adequate 
capital, 6 percent; and, by the way, if you go under that 6 percent, 
you can't make any commercial loans,'' I think that is a tremendous 
step, because we recognize we can't do business as usual. We want to 
protect the taxpayer, and that is exactly what we did.
  We came up with 12.25 because we did not want to create chaos, and we 
wanted to give those who were involved in commercial loan activity an 
opportunity to disengage without creating a problem that would be 
difficult, if not impossible, to handle. By setting that, there will 
still be a significant number at 12.25 percent. There will be 85 
institutions that make 5,400 loans for $250 million, and they will be 
given 3 years to comply with the cap. So we looked at institutions, and 
we looked at the numbers of members and we arrived at a number.
  The amendment at the desk, in addition to creating a burden that is 
going to be very difficult for small credit unions to make in terms of 
who can and can't grant these business loans, it now picks up an 
additional number of institutions. Mr. President, 177 already exceed 
the cap. We are talking about well-capitalized institutions that are 
making loans, have been making loans, and don't have problems, and 
because we arbitrarily come to 7 percent--and I say ``arbitrarily.'' 
There is no reason to suggest again that because we deem a bank to be 
well-capitalized at 7 percent, therefore, we should cap the whole 
industry at 7 percent. I don't understand it. We will now throw 8,700 
of those loans, $360 million, and 177 institutions into an area where 
they have to begin to disengage to get under this arbitrary number. And 
it is arbitrary.
  We worked with the credit unions for quite a while and with the 
administration in attempting to come to a number. They weren't happy 
about our imposing these standards, but we did because it was the right 
thing to do to protect the taxpayer.
  Let me say this to you. Let's look at the totality of this. The 
unintended consequences of this are going to say, where we have some 
well-run institutions that are providing their members and their 
community with these loans and, obviously, there is a need for them, 
that we are going to preclude them and say, ``Oh, no; just 7 percent.''
  Heretofore, we had no limit. I think really we can second-guess 
everybody and anything, and we can make an appeal to the community 
bankers: ``We're your best friends, because look what we did.'' Do I 
really think that is what we should be engaging in? I hope not. Only 13 
percent of all of the institutions--that is, 1,551 out of 11,000--make 
these loans.
  Let me leave you with one last thought. If every institution were 
able to--and I am talking about every credit union, all 11,000, 
recognizing that only 13 percent make commercial loans--were to be 
engaged in business lending, the total would come to something under 
$40 billion nationwide by 11,000 institutions.
  Come on, I say to my colleagues, let's be serious. What are we trying 
to do here? That would be approximately 3 percent of all the commercial 
loans, $1.1 trillion in commercial loans that are out there.
  What are we doing? What are we saying? I think what we are doing is 
trying to say we are the friend of the community banker, and this is 
what we are going to do, we are going to be limiting these folks. 
Instead of saying we have limited, instead of saying this bill does now 
limit, this bill does have criteria which we never had before, we are 
going to one-up it, and that is not going to help.
  You may say the credit unions will accept this. I have to tell you, 
we will go to conference, and little does one know what will take place 
when we get into that conference. I would like to avoid that. I would 
like to say we have done something that even the Secretary of the 
Treasury has supported in his letter to Majority Leader Lott.
  Mr. President, I ask unanimous consent that this letter be printed in 
the Record.
  There being no objection, the letter 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.

  Mr. D'AMATO. The letter is addressed to Senator Lott, the majority 
leader, with copies sent to myself and Senator Sarbanes, the ranking 
member. He concludes by saying:

       We believe that existing safeguards--together with such new 
     statutory protections as the 6 percent capital requirement, 
     risk-based capital requirement for complex credit unions, and 
     the system of prompt corrective action--represent an adequate 
     response to the safety and soundness concerns about credit 
     unions' business lending.

  Mr. President, I believe the 7 percent will constitute a very real 
and severe burden and hardship. As I mentioned, 85 credit unions 
already exceed the cap. It is mischief making. The unintended 
consequences will not improve the safety and soundness of credit union 
operations. That is just not the case.
  I yield the floor.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The distinguished Senator from Maryland is 
recognized.
  Mr. SARBANES. Mr. President, I will be very brief, but I want to 
follow on the chairman in expressing my opposition to this amendment. 
The chairman

[[Page S9011]]

just quoted from a letter from Secretary Rubin, but I would like to 
expand that quotation a bit. In his last paragraph, Secretary Rubin 
said:

       Finally, I would like to comment on the safety and 
     soundness of credit unions' business lending.

  So he addressed this very issue.

       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.

  It is important to note, of course, that the Secretary is speaking 
with the benefit of an 18-month--actually, the distinguished Senator 
from Utah was the one who put the requirement in in the previous piece 
of legislation for the Treasury to undertake such a study. That study 
came in a few months ago and then was available to the Treasury, in 
terms of making recommendations as we address this legislation, and 
available, of course, to the Members of the Congress.
  The Secretary pointed out in his 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 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.

  Mr. President, I think it is important to note that this legislation, 
as it came to us in the committee, had no limitations. And under the 
current law and regulations, there are no limitations. So what the 
committee is doing here is putting in a limitation where none had 
heretofore existed. So it is not as though the committee simply ignored 
the assertions that are now being made. The committee reached a 
decision and struck a balancing point. And that is what is reflected in 
the legislation.
  But as I said, this does place statutory restrictions on member 
business loans for the first time. In fact, undercapitalized credit 
unions would not be permitted to increase their net commercial lending. 
In fact, the restrictions that are in this legislation are tighter than 
what now applies under the regulations of the National Credit Union 
Administration.
  These loans can only be made to members, not to an outside business 
corporation. This is consistent with the credit union's mandate to 
provide services to members, not a broad array of customers, and in and 
of itself places a significant constraint on credit union commercial 
lending overall.
  I understand the arguments that are being made. I think the committee 
reached a reasonable process. The $50,000-loan issue, I think, is an 
important one in terms of the requirements placed upon credit unions. 
In fact, it is the NCUA, under its regulations, that determines that 
the dollar amount of risk is very small, small enough that they have 
regulations that excluded loans less than $50,000 from being counted as 
a member business loan.
  This is the current state of affairs. There are not all that many 
such loans. But for some credit unions, it is quite important in terms 
of their member activities. It also avoids the necessity of trying to 
separate out what is a commercial loan and what is a business loan.
  If you buy a pickup truck and use it for business activities, does 
that then become a commercial loan? And how would the credit unions 
have to address those kinds of questions?
  I say to my colleagues, recognizing the issue that is being raised by 
the amendment, I simply say that the committee was not oblivious to 
this issue. We tried to address it, I think, in a sensible and balanced 
and forthright way. That is why we have the limitations that are 
contained in the legislation that is before us.
  I urge my colleagues not to alter those limitations and, therefore, 
to reject this amendment.
  Mr. BENNETT addressed the Chair.
  The PRESIDING OFFICER (Mr. Sessions). The distinguished Senator from 
Utah is recognized.
  Mr. BENNETT. Mr. President, I appreciate the comments made by the 
chairman and the ranking member of the committee. They underscore my 
earlier statement that the issue here is not, should we have a limit on 
commercial lending, but rather, where should it be and what should its 
terms be?
  I agree with the Senator from Maryland that the committee did, 
indeed, address this; did come to the conclusion there should be some 
limits on commercial lending, and reached a compromise position that 
made it possible for us to unanimously report the bill with this limit 
in it.
  Mr. SARBANES. Would the Senator yield for a moment?
  Mr. BENNETT. Yes, I am happy to.
  Mr. SARBANES. I want to make the observation that I think there are 
some of my colleagues who believe there should not be any limits.
  Mr. BENNETT. I accept that correction.
  Mr. SARBANES. The committee crossed that threshold, as it were, by 
its decision. And I would reflect that here. I do think there are some 
of our colleagues in this body that do not think there should be 
limits. They do not concede the point that the Senator is making.
  Mr. BENNETT. I thank the Senator from Maryland. I think he is correct 
that there are some in the body who do not think there ought to be a 
limit.
  If I could just make one comment, the reason there is no limit now is 
because the original drafters of the legislation creating credit unions 
never conceived there would be any commercial lending by credit unions. 
It reminds me a little of the old story, ``Please Don't Eat the 
Daisies,'' where the kids said, ``Well, you never told us not to.'' And 
the mother said, ``It never occurred to me that you would, and 
therefore, I didn't give you those restrictions in the first place.''
  But now it has started. I think the committee has rightly and 
properly said, we want to keep credit unions focused in the area where 
they have traditionally been focused, providing the service they have 
traditionally provided. We are going to allow some commercial lending 
because they have gotten into that area.
  But there is empirical evidence that credit unions can get in trouble 
with their commercial lending. We want to take advantage of that 
evidence and put a limit on it. So the question is, Should the limit be 
12.25 percent? Should it be 7 percent? And should the $50,000 exemption 
continue?
  I realize in responding to the Senator from Maryland that the $50,000 
threshold does put some new unchartered territory on this issue. We do 
not have as much information as we would like. But I will share with 
the Senate the information that we do have.
  During 1992 and 1993, the NCUA required credit unions to collect 
information on business loans under the threshold, which at that time 
was $25,000 rather than $50,000. I think it goes to the issue that the 
chairman raised about the burden that would be placed on credit unions 
to deal with this kind of requirement. There has been a period in our 
history when it was there. The NCUA used its authority to put that 
requirement in place.
  During 1992, the only year for which we have complete information, 
total business loans both above and below the threshold were 1.62 
percent of the total outstanding loans. In other words, once again, the 
credit unions were saying, by their actions, ``We are not primarily 
involved in commercial lending.'' Of this 1.62 percent, loans above 
$25,000 constituted 1.42 percent, with loans under $25,000 constituting 
the remaining .20 percent.
  I think this tells us that the terms of this amendment can be adhered 
to. I think we have some past experience

[[Page S9012]]

that says this will not be a burden and particularly, again, this will 
not be a burden on the small credit unions who do not do this anyway. 
All we are really saying to them is we do not want you to do it, we do 
not want you to get into territory that could cause you difficulty.
  The question has been raised, How about buying a pickup truck? Is 
that a business loan or a personal loan? In the hearings some of the 
credit union representatives said to me, ``Senator, you have to 
understand, in a credit union every single commercial loan is backed by 
the personal guarantee of the individual members of the credit union.'' 
And I said--and I repeat here on the floor--``I have borrowed a lot of 
money in my lifetime. I borrowed it from commercial banks. I borrowed 
it for commercial reasons. And in every single instance, I have had to 
make a personal guarantee. In every single instance, the bank wanted my 
personal guarantee. Sometimes they wanted my wife's personal guarantee. 
Sometimes I had the feeling they wanted the promise of our first-born 
child if we didn't produce--even though this was a business loan--the 
repayment appropriately.''
  So the credit unions are not giving us anything specifically 
different when they say these are loans only made to members, and they 
have the members' personal guarantee. That is standard business 
practice everywhere across the board.
  As I said before, for me, this is a public policy debate of, what is 
it we are trying to do in terms of shaping the direction of the 
financial services industry?
  As I have said many times before, the financial services industry 
regulatory framework was created at a time when everybody knew where 
they were--credit unions were a very specific niche. They knew what 
they did. Commercial banks were a very specific niche. They knew what 
they did. The same is true of insurance companies and stockbrokers and 
savings and loans. Everybody had a clear understanding and nobody 
competed across those lines.
  Today, the competition runs across lines everywhere--insurance 
companies hand out checkbooks. I told a story before when my father 
died, we notified the life insurance company of his death and awaited a 
check of the face value of his insurance policy. Instead, we got a 
checkbook with a notice saying, ``This money has been deposited in this 
account as of the date of your husband's death''--it was addressed to 
my mother--``Here is a checkbook. You may write checks on that account 
and interest will accrue from the date of your husband's death.'' In 
other words, don't be in a big hurry to take your money away from the 
insurance company; use it as you would a checking account.
  When I purchased some stocks in one situation and I wanted to redeem 
those stocks under the old regulatory pattern that I was familiar with, 
I had to go down to the broker and the broker would give me a check. 
``No, no, no, no, no,'' the broker says, ``we will give you a checkbook 
and you can write checks up to the value of your margin account against 
the margin value of your stocks''--clearly crossing the lines between 
banks, brokers, and insurance companies and so on.
  Now, we are beginning to say we have to create a new regulatory 
structure for the new reality of the financial services world. We 
recognize that everybody is in everybody else's business. All we are 
debating here on this floor is to what degree do we want credit unions 
to get out of their traditional business into the commercial lending 
business. I am not sure that says they should make no commercial loans. 
I think that is appropriate, particularly for the larger and more 
stable institutions to which the chairman has referred. But as a matter 
of policy, I think we are saying, I hope we are saying in this 
amendment, we want credit unions to stay where they have been 
traditionally.
  If we say, ``No, the credit unions should get into commercial lending 
in a big way,'' then at some point we are going to have to address the 
issue of taxation. We have not done that in this bill. We should not do 
that in this bill. It would not be appropriate in this bill. But as a 
public policy matter, if credit unions are going to get into commercial 
lending in a major way, the Congress is going to have to address the 
reality of the tax subsidy that they currently enjoy. I would just as 
soon avoid that question for awhile. I think keeping the credit unions 
in a more limited area of commercial lending will help us do that.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Let me address something here. Let's put this in 
perspective. For the first time, this committee has limited, limited 
severely--there were no limits before now--when you said you can't do 
more than 12\1/4\ percent of your assets. If every institution were to 
do that--which they are not and no one says they are, not even the 
proponents of this legislation claim that they are going to be doing 
this--you still would amount to less than 3 percent of all of the 
commercial loans, if every credit union maximized its commercial loan 
potential, and they are not doing that. There is no effort to do so.
  To come in and arbitrarily say, ``No, no, now we will take a 
limit''--you place a limit of 12\1/4\ percent--``but this is not good 
enough, so we will lower to 7. In addition, now we will take the small 
loans that 5,000 of these institutions make and we will require you to 
have a person with 2 years' business lending experience on staff to 
make even the smallest of loans.''
  I wonder if my friend knows that is one of the provisions in this 
amendment.
  Now, let's take a look--you will hear that this lending cap is to 
``Save the taxpayer.'' That is hokum. If you took all of the 
``chargeoffs'' on bad loans, it is .23 percent from commercial banks. 
And guess what? Credit unions are at .19 percent.
  Again, we are for the first time imposing strict standards that 
credit unions never had before. Now my gosh, if we came with the same 
bill that the House put here, then I would be here to join my colleague 
in saying: ``No, we need to make sure that they are well capitalized. 
No, we will not let banks that are not adequately capitalized and that 
are in trouble make loans. No, we are going to see to it that you have 
the kind of loan offices that commercial banks have.''
  Why do we want to weight this down? How many angels on the head of a 
pin? That is the type of debate we are having. Should it be 7 percent? 
Well, why did we come up with 12\1/4\? Because there would be some 
disruption, but credit unions could handle it. Now we want to go in and 
create a situation where you will have 177 credit unions that now make 
8,700 loans, $360 million, and they will have to begin to disengage. 
Will some of the commercial banks like that? Sure, sure they will.
  Let's understand what this will do. Some of the small bankers, you 
can go back and say, ``Look what we did, we got them out of the 
business.'' That is what it comes down to. I just suggest, if the 
Senator's amendment is serious, why not go to 6 percent or 5 percent?
  What about the tax issue? I have heard more mutterings about that. 
There is a genuine effort because people don't like the competition. In 
some cases they perceive it as unfair, and, indeed, where a small 
community bank is paying taxes and he is side by side with a local 
credit union that is every bit as large and they are doing a good job 
and they are not paying taxes, I understand and I feel for that person.
  I am cosponsoring the legislation offered by our good friend from 
Colorado, Senator Allard, who has introduced a way to begin to help 
some of the banks. Maybe we have to look at other ways in which we can 
help community banks. But let's not unfairly go from where we had no 
cap whatever with a good-faith effort, working with the administration, 
working with the National Credit Union, working with the credit unions 
themselves. We came to 12\1/4\ percent and somebody says, ``No, we can 
do better; we will make it 7 percent.'' There is no rationale, no tie-
in, to the amount of the commercial loans. If you had a staggering loss 
coming from commercial loans, I would say yes, do it. There is no 
evidence of it. The record does not support that. So why are we doing 
it?
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. HAGEL. Mr. President, may I respond to my friend and chairman. He 
made some good points, legitimate

[[Page S9013]]

questions, as did the ranking member of the Senate Banking Committee.
  Let me first assure my friend from New York what this amendment is 
about. It is not about mischief-making. It is not about burdening 
credit unions. It is about things like open, honest accounting. I just 
don't understand why anyone would reject or object to a clear 
understanding of what the commercial loan portfolio is for any credit 
union. Why would you object to taking any loan, a commercial loan, 
under $50,000, and putting it in an appropriate accounting category in 
a portfolio? It is not about burdening the accounting process. It is 
about open, honest accounting.
  When my friend talks about burdening these small credit unions by 
forcing them to bring in professionals who have had a minimum of 2 
years in commercial lending, you mention my amendment, did I understand 
my amendment. I understand it, I think, fairly well, and I will read 
you from what we say in here. We talk about the NCUA's general counsel 
position on this, as has stated that the requirement that we put in 
this amendment could be met by hiring contract assistants on a case-by-
case basis. Now, this should be, like any financial institution, about 
solid accounting. I don't know of anybody who doesn't agree with that 
or who would not want that, so that the members of a credit union know 
exactly how large the commercial portfolio is of the credit union they 
belong to.

  There are a couple of other things I want to address, including the 
issue of large credit unions who would have to scale back within a 
month or two, or would have to cash in their loans. I read, Mr. 
President, from the Banking Committee document here on page 10 of the 
report. It talks about the four exemptions; the four exemptions are 
pretty clear. You know about these: ``Loans for such purposes as 
agriculture, self-employment, small business, large up-front 
investment, maintenance. . . .'' And it goes on and on. These are all 
areas that are exempt from my amendment.
  Let's also talk about what this bill is doing and what the House bill 
did in response to the Supreme Court decision. We now, in effect, have 
no common bond anymore at all. There is no common bond at all. Now, if 
there is no common bond left in the credit union policy philosophy--
getting somewhat to what my colleague and friend from Utah has been 
talking about--then is it not appropriate to probe somewhat, saying, 
well, if we all want to live with the 1934, 1937 statute that says no 
taxes, but also no common bond, and no this, no that--I am not sure 
that is a very wise thing to do.
  If we are going to have some changes--and markets change and the 
financial service industry is dynamic, as demands change, needs change, 
supply changes--then it is appropriate to focus on some of these areas 
I believe we have focused on. The chairman is right. His mark that came 
out of committee was much better, much more responsible, much more 
accountable than the House version. He is exactly right.
  What Senator Bennett and I and others are saying is that we need to 
continue to focus on some of these areas of great concern, because when 
you open up credit unions to where they are now going to be opened up, 
where there is absolutely no common bond, and then you say, well, you 
can go forward and lend commercially, yet, don't bother us with the 
facts, we are not going to count any commercial loan less than $50,000, 
and we really don't have a good accounting as to how much is in the 
commercial loan portfolio, then I am not sure how accountable and 
responsible that is.
  So those are just a couple of items that I wanted to address. These 
are important issues. These are important questions. This is an 
important issue. With that, I appreciate an opportunity to further 
explain some of the dynamics of our amendment.
  I yield the floor.
  Mr. BENNETT addressed the Chair.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. Mr. President, I will make just one comment on the 
statement of my friend, the chairman of the committee. I agree with him 
absolutely that there are no massive failures. We do have the one 
example that occurred in the State of Rhode Island, and it is reflected 
in the additional views of Senator Reed of Rhode Island when he wrote, 
with respect to the bill that came out of the committee, that he was 
concerned that the cap adopted by the committee is higher than the 
level of commercial lending that credit unions are currently engaged 
in, and he is concerned that it might lead to a repeat of the problems 
they had in Rhode Island.
  I agree completely with the Senator from New York that we do not face 
a crisis here. My support of the amendment stems from my conviction 
that the amendment would help us avoid a crisis in the future. The 
amendment would establish a cap that is above the level of activity 
that is currently going on, with the exception of a very few major 
credit unions who have 3 years in which to work things out. It would 
establish a cap above where things currently are, allowing people 
plenty of room to round off their present activity. But it would send 
the public policy message that says: We want credit unions to remain in 
their traditional niche in the financial services area. And it is for 
that reason that I have decided to support this amendment, because that 
is where I want credit unions to remain.
  As I said earlier in my statement, all of the people who call me to 
talk about this bill insist that credit unions don't make commercial 
loans now. These are the members of the credit unions who are calling 
in who are unaware of the fact that their credit unions are making 
commercial loans. Therefore, I can't understand why they get upset when 
we say we are putting in a limit. It is not arbitrary in the sense that 
it is a limit above current levels; it is a limit above where people 
are currently operating and is simply sending the message that we don't 
want the current situation to change. That, after all, is the primary 
purpose of this bill.
  Without this bill, the Supreme Court changes the current situation 
and changes it drastically. The bill is crafted to say: No, we don't 
want to change; we want the present situation with respect to credit 
unions to be protected. Therefore, we are going to pass a bill that 
will change the law to protect where we are. Our amendment simply says, 
with respect to commercial lending and the levels of commercial 
lending, we will protect where we are.
  Now, I recognize there are those who disagree. I recognize that the 
committee decided to put the cap at a slightly higher level than one 
that would protect where we are, that would allow some growth from 
where we are in commercial lending. I don't think the Republic will 
fall if we allow that growth to occur. But I do think that if the 
thrust of this legislation is to keep in place the current situation of 
credit unions, our amendment is the logical way to keep in place the 
current situation with respect to commercial loans.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I don't think it is altogether accurate 
to say that the current bill seeks only to keep in place the exact 
current situation. As the Treasury pointed out in a letter from 
Secretary Rubin to the leadership, ``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.'' So that, in 
effect, we made very substantial changes on the safety and soundness 
issue, and the Treasury Secretary later in his letter, when he was 
discussing the very issue of the safety and soundness of credit unions 
business lending, came back and made reference to these changes: ``. . 
. 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.''
  So we did, in effect, make some significant changes on the safety and 
soundness issue. The Treasury has referenced those changes in analyzing 
the question of credit unions' business lending and thereby reached its 
conclusion that that did not pose a safety and soundness issue.
  Mr. BENNETT addressed the Chair.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. Mr. President, I agree with the Senator from Maryland 
that

[[Page S9014]]

the bill does represent a significant step forward in the regulatory 
framework with credit unions. I think his clarifying remarks are 
correct and welcome.
  The point I was making, which I think is still a valid one, is from 
the standpoint of the consumer, from the standpoint of the credit union 
member. The great angst on the part of credit union members, when the 
Supreme Court decision came down, was reflected in their visits with me 
repeatedly in my office. It was that: We are going to lose everything 
we have and you must pass this bill to protect what we have.
  I heard that over and over again in town meetings throughout the 
State of Utah, and over and over from people who called. From the 
standpoint of the credit union member, they are pleading for 
legislation that says: Let us keep what we have. Do not allow this 
decision to take away from us that which we have come to enjoy and get 
benefit from.
  My reference was to the reaction on the part of the consumer and the 
credit union member rather than on the part of the regulator.
  I think what we have done in the committee does that and, at the same 
time, as the Senator from Maryland points out, creates some stability 
for the credit union situation that was not there prior to this act.
  Mr. SARBANES. Mr. President, very briefly, if we were seeking to 
leave the consumer or the user of the credit union exactly in the 
posture in which they now find themselves prior to the Supreme Court 
decision, we would have no limitation on credit union business lending, 
because that was the existing state of affairs.
  So in that sense, the problem of an issue was raised. There was an 
effort to respond to that problem. But if one is to use the argument 
that all we should do in this legislation is to return to the status 
quo--that that is the whole purpose of the legislation--then we have no 
limitation, because the status quo was without limitation.
  Mr. BENNETT. Mr. President, the Senator is once again correct in 
terms of the regulatory situation that existed. I am talking about the 
market situation that existed, and our amendment would not change the 
market situation. It would not change the amount of commercial lending 
the credit unions are doing.
  Mrs. HUTCHISON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas.
  Mrs. HUTCHISON. Mr. President, I would like to speak on behalf of the 
Hagel amendment, because I, too, am very concerned about the safety and 
soundness of our nation s credit unions.
  Mr. President, I was State treasurer of Texas and dealt with banks 
and certainly credit unions, as well as other kinds of financial 
institutions.
  I think the banking system that we have, while it could use some 
improvement--and perhaps there is going to be legislation in the future 
that is going to have a few more areas of deregulation--nevertheless, I 
think the banking system that has niches for the different banking 
institutions and the balancing of those niches has served us well.
  I think the credit unions have particularly been a breath of fresh 
air in our banking system, because they have been able to offer 
something that banks and savings and loan associations and other 
finance institutions have not been able to offer. They have had unique 
characteristics in that they have been member-owned and member-operated 
institutions.
  Credit unions do not operate for profit and, therefore, do not pay 
taxes. Credit unions have limitations on their membership, generally 
based on affinity among the members. They rely on volunteer boards of 
directors that come from their membership. They have been able, because 
of the lack of taxes and because of this affinity, to give great 
services to their members. They have been able to offer mortgages, 
automobile loans, and personal loans that have been very favorable to 
their members. And they have served a terrific purpose.
  I want credit unions to stay strong in order to continue giving these 
kinds of services to their members. We are expanding the types of 
membership they can have. It is certainly going to be a bigger arena. 
But, nevertheless, I don't think we should take that next step into 
allowing a risky commercial loan portfolio without the requisite 
reserves that are required by banks and which I think are important for 
safety and soundness.
  The Hagel amendment limits commercial loan activity to 7 percent of 
assets. That is what the bill requires for the reserves for a well 
financed and strong credit union. We want to make sure that the 
deposits of credit union members are not put more at risk than the 
reserves that are required to be kept, particularly when you get into 
commercial lending, which is much more risky than the home mortgages 
and automobile loans and the personal loans that credit unions have 
made.
  I remember what happened when Congress started trying to eliminate 
the differences among the financial institutions. And that is what 
caused the S&L crisis. We had S&Ls going into real estate lending 
without the requisite reserves. All of us paid a heavy price for that. 
I do not want to jeopardize the strength of our credit union.
  I hope that when we pass this amendment, if we pass this amendment, 
it will provide for the strengthening of the credit union. I will 
support this bill. I think it is a wonderful bill in many respects, 
because it is going to give more people more access to credit unions. 
But I think we have to make sure, as we do it, that we protect the 
safety and soundness of the deposit of credit union members, as well as 
the credit union industry itself.
  The last thing I want is to come back here at the end of my next term 
and have to look at a credit union crisis because we didn't take the 
very cautious step of requiring this same reserve requirement as the 
limit on commercial loans.
  That is it in a nutshell.
  I think the fact that Senator Hagel's amendment matches the reserves 
with the amount of commercial loans that will be available is a very 
correct decision. It is the right thing to do. It will keep the safety 
and soundness of credit unions, and it will allow more people to have 
access to those commercial loans, as well as access to the credit 
unions in general. But mainly we want to make sure that everyone is 
protected and that we don't run into any trouble in the future.
  I hope very much that we will pass this bill. I hope we will pass the 
Hagel amendment so that we have a win all the way around--giving more 
access to more people to join the credit union; giving more people 
access to the lower interest home mortgages, car loans, personal loans, 
but making sure that we protect those deposits so that the credit 
unions will be able to continue to give a little bit higher rate of 
interest to those that it is paying; and so that the deposits will be 
safe; so that the credit union itself will be safe; so that we will not 
have to face a financial crisis in the future that Congress would have 
to address with taxpayer dollars as we have seen with the S&L crisis.
  I thank Senator Hagel and the others for their leadership. I think 
this is a good, sound move. I hope we can pass this amendment and then 
pass the bill that will create bigger and better credit unions in our 
country.
  Thank you, Mr. President.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Mr. President, let me address something, because the 
more you get into this, you begin to learn.
  Soundness and safety: It is an issue that we are all concerned about, 
because we have been here. We have gone through this. And we have seen 
some extraordinary situations, which cost the taxpayers. That is why 
the committee, the ranking member, and the Republicans and Democrats 
working together, said we have a structure for the first time of 
provisions that will address that--we have done that--risk-based 
capital, based upon soundly capitalized institutions--6 percent for 
some, and 7 percent for the others-- and giving to the administration 
the ability to close these places down.

  Now, look, when we start talking about commercial loans posing a 
problem historically and looking at where we are today, they haven't. 
That is a canard. Indeed, if we take a look and see what it constitutes 
in terms of their total portfolios, it is under 2 percent. All of their 
loans are under 2 percent without any limitation.

[[Page S9015]]

  So let me suggest to you, I think when we come in and say we are 
going to limit business lending no matter what, we are saying to each 
credit union, those that do--forget about the thousands that don't--
under no circumstances are you going to go up over 12.25. To say that 
safety and soundness is going to be protected because somehow we are 
limiting commercial loans, that doesn't square up with the facts. It 
just does not. If, indeed, the credit union commercial loan failure 
rate has been less than those same loans made by commercial banks, how 
can you say that limiting this activity will provide greater safety and 
soundness?
  That is the record. The failure rate has been less from credit unions 
than it has from commercial banks in commercial lending, and they loan 
less, including the loans for under $50,000. And why are we opposed to 
counting those loans for less than $50,000? I will tell you why. 
Because you are going to keep honest people honest. Maybe I shouldn't 
say this because the guy who is the entrepreneur who wants that loan 
will come to his credit union. OK, they say it is a commercial loan, 
and you are going to begin getting into businesses or classifying 
whether it is personal or whether it is commercial. So they said, look, 
up to $50,000, we know the people; they are dealing within the 
institution. It is a member. We are not going to get into the business 
of classifying whether it is commercial or not. We are going to say, 
presumptively, any loan up to $50,000 gets an exemption. We don't go 
through this business of having to classify these loans then have staff 
making loans meet certain experience levels which this amendment does.
  The present situation is that for making those business loans over 
$50,000, you must have 2 years of lending experience.
  Now, why did the National Credit Union Administration do that? 
Because they recognized the need as credit unions got into loans of 
higher cost and more exposure. It is prudent to have somebody on staff 
who has that experience. That is why they did it.
  Now the consequence of this amendment will be a burden where credit 
unions are going to have to hire loan officers to make small, 
commercial loans of $25,000, $20,000, $15,000, or $30,000. Do you 
really think that this isn't going to have an adverse impact on the 
small credit union that would have to do this? Heretofore, small 
business loans were on the basis of knowing that member, knowing that 
he or she has a good record, knowing that there is a good business 
investment opportunity.
  Now, look, in addition to that, we have tightened those standards and 
said credit unions can't even make business loans unless they hit 
certain criteria of capital. We didn't have any capital standards 
before. Yet, I think when one says this is safety and soundness, it is 
not. The record doesn't indicate that.
  What it is--and I respect those who say we want to limit their 
ability to develop this business and say under no circumstances will it 
be more than what your capital is--that is what it is doing. It is 
limiting the ability of credit unions to involve themselves in 
commercial lending.
  I think including the $50,000 loans will be going too far. That is 
why the credit union people and people who represent small businesses 
urge that we not support this amendment because what it will do is make 
it harder to get loans. I have a letter from the Small Business 
Survival Committee. I am going to ask it be made a part of the record. 
The American Small Business Association similarly asked us not to 
restrict the availability of commercial credit any further.
  Times are booming today, but they may not always be booming. Then 
where do people go? Now you can go to your local bank, and they seem to 
have plenty of money to go around. What happens when things tighten up? 
Then we are going to make it difficult, if not impossible, for people 
who would have had the ability, if necessary, to go to their credit 
unions and to get maybe that $25,000 small business loan.
  I ask unanimous consent these two letters be printed in the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                                    Small Business


                                           Survival Committee,

                                    Washington, DC, July 20, 1998.
       Dear GOP Senator: The Small Business Survival Committee 
     (SBSC) continues to strongly urge the Senate to fully support 
     the Credit Union Membership Access Act, H.R. 1151. Every day, 
     over a thousand Americans are turned away from credit union 
     membership because of the Supreme Court ruling which 
     nullified President Reagan's modification of the 1934 Federal 
     Credit Union Act. A large proportion of these individuals are 
     workers in small businesses who find themselves locked out by 
     the outdated and arbitrary ``common bond'' requirement. It 
     only makes sense that federal laws written in 1934 be 
     reformed for our modern economy.
       However, placing restrictions on ``member business loans,'' 
     as supported by the banking industry, only serves to impede 
     the growth of the small business sector. SBSC will key vote 
     any amendments on the Senate floor which further restrict 
     access to capital through new regulations on member business 
     loans. A vote for these restrictions is a vote against small 
     business.
       The banking industry has invested great quantities of its 
     time and resources lobbying for more taxes and regulations on 
     credit unions. Rather than lobbying to restrict what they 
     traditionally do not do themselves (provide loans for small 
     businesses), a more productive approach may be to advocate 
     lifting arcane and unnecessary laws on themselves--
     particularly for the survival of small community banks.
       In the area of member business loans, SBSC urges the Senate 
     to emulate House language which studies the issue for a year 
     to determine what, if any, action is needed. Inadvertently 
     denying capital to plumbers, farmers, churches, and down-
     sized credit union members who wish to start a business are 
     not the type of credit union reforms that should be advanced 
     by a pro-small business, pro-family Congress.
       SBSC urges the Senate to send the Credit Union Membership 
     Access Act, as passed out of the Senate Banking Committee, to 
     the President for signing without restrictive amendments. 
     Thank you for taking SBSC's views into account.
           Sincerely,
                                                   Karen Kerrigan,
     President.
                                  ____

                                                    American Small


                                       Businesses Association,

                                   Washington, DC, April 28, 1998.
     Hon. Alfonse M. D'Amato,
     U.S. Senate,
     Washington, DC.
       Dear Chairman D'Amato: Protecting the rights of small 
     businesses remains a fundamental priority of the American 
     Small Business Association (ASBA). In this regard, on behalf 
     of America's small businesses we ask for your support and 
     immediate consideration of the Credit Union Membership Access 
     Act.
       Prompted by the February 1998, Supreme Court decision to 
     limit the expansion of federal credit unions, the U.S. House 
     of Representatives overwhelmingly approved (411-8) the Credit 
     Union Membership Access Act (H.R. 1151) on April 1, 1998. If 
     enacted by the Senate, this legislation would allow federal 
     credit unions to derive their membership from a variety of 
     occupations. This is essential to small business. These 
     organizations count on the presence of multi-group credit 
     unions to keep rates and loan fees affordable and competitive 
     and to provide access to capital many would otherwise be 
     without.
       According to the Small Business Administration (SBA), small 
     business employees constitute more than 52 percent of the 
     private sector workforce. Generally defined as organizations 
     having fewer than 500 people, SBA further reports that 99.7 
     percent of all businesses fall into this category. In fact, 
     they represent the largest and fastest growing portion of the 
     economy in the United States. Multiple-group credit unions 
     ensure the availability of financial services to these 
     organizations and to many low-income residents. They are 
     member-owned, not-for-profit cooperatives which encourage 
     savings and investment in those who might otherwise not 
     consider it an option. Should the Senate not pass the Credit 
     Union Membership Access Act, the Supreme Court ruling will 
     immediately limit access for these individuals.
       The Credit Union Membership Access Act is pro-consumer and 
     pro-competition. It preserves the right to choose for 
     millions of Americans and ensures that small businesses will 
     have the ability to offer their employees the same benefits 
     already available to those in the largest of corporations. On 
     behalf of America's small businesses, we ask for your 
     immediate consideration and support of this important 
     legislation.
           Sincerely,
                                                     Blair Childs,
                                             Legislative Director.

  Mr. D'AMATO. I yield the floor.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. I just want to again reiterate on the safety and 
soundness issue that the Department of the Treasury was charged by the 
Congress in the Economic Growth and Paperwork Reduction Act of 1996 to 
undertake a major study of credit unions, and the Department did that. 
This is the report from the Treasury Department which was submitted to 
us on December 11 of 1997. So they took some 15 months to do it.

[[Page S9016]]

  In his letter to the leadership, Secretary Rubin underscored that the 
safety and soundness provisions in this bill, which in effect largely 
track what the Secretary recommended, were 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 and went on then to find that the business lending provisions 
posed no difficulty, that they represented an adequate response to 
safety and soundness concerns about credit unions' business lending.
  I won't take a back seat to anyone in my concern about safety and 
soundness, but I think that has been addressed in this legislation. The 
Treasury, which did this extensive study and made these quite broad 
recommendations, took a look at the bill and has concluded that the 
bill represents a very major and significant legislative reform of 
credit union safety and soundness safeguards, and in light of those 
provisions that are in the bill thought that they were adequate to any 
concerns with respect to safety and soundness about credit unions' 
business lending.
  We have the people who did this comprehensive study--they took 15 
months--make their recommendations, some of which were quite 
significant. The committee responded to that, and in the light of what 
the committee has done, the Treasury has taken the official position 
that concerns about credit union business lending have been addressed 
adequately in this legislation.
  Mr. ENZI. Mr. President, I rise in support of the amendment that is 
sponsored by the Senator from Nebraska. I support this amendment which 
would place limitations on the amount of commercial lending by credit 
unions. I am concerned that if the credit unions concentrate on 
commercial loans, they will lose their current individual customer 
focus. They may lose the special identity that separates them from 
banks and thrifts. I fear that if the special identity of the credit 
union is lost, Congress may feel the need to treat them identically to 
banks and thrifts. That could lead to levying taxes on credit unions.
  Currently, credit unions are tax exempt because they are considered 
cooperatives. In order for a credit union to effectively serve its 
members, particularly in light of H.R. 1151, which has the potential to 
greatly increase the membership of the credit unions, it should 
concentrate on consumer lending. This will encourage it to maintain 
focus on its member owners. Money loaned to businesses isn't available 
for consumer lending, meaning that there will be fewer mortgages, car 
loans and other forms of consumer credit for the members.
  I am particularly pleased that this amendment also includes the 
deletion of the exemption of a loan less than $50,000 from being 
defined as a member business loan. As an accountant, I am concerned 
about the consequences of not requiring full and complete disclosure of 
lending by credit unions. I place great emphasis and value on the 
accuracy of financial institutions' records. I have asked several 
credit unions how much commercial lending they engage in now, and none 
have been able to state precisely the amount because of this strange 
exemption that currently exists in the regulations. This causes me 
great concern, because the most stringent safety and soundness 
provisions are ineffective if accurate records and accurate 
recordkeeping practices do not exist. I feel it is of utmost importance 
to require that all member business loans be designated as such, not 
just those above $50,000. Markets and financial institutions perform 
best when there is transparency and accuracy of information. We have 
seen the consequences of that not being available.

  The United States has become the model for financial markets, in part 
because of the transparent accounting methods that are required of 
financial institutions and publicly traded companies. I believe credit 
unions should also be obligated to be transparent in their loan 
activities. It is only common sense to delete this exemption for 
commercial loans less than $50,000. There is absolutely no reason for 
inaccurate accounting.
  In conclusion, this amendment will require credit unions to remain 
focused on consumer lending. Credit unions were intended to serve the 
basic needs of families and individuals since the Federal Credit Union 
Act in the 1930s. This amendment will help credit unions remain unique 
institutions, setting them apart from other financial service 
providers.
  I believe a vote for this amendment is a vote for credit union 
members. I yield the floor.
  Mr. REED. Mr. President, I rise to express my views on credit union 
commercial lending, as well as my support for the motion to table the 
Hagel amendment.
  Mr. President, I generally support the ability of credit unions to 
engage in commercial lending. Indeed, I am aware that for many members, 
credit union loans are the only available sources of capital for 
business investment. Also, when considering banking industry 
consolidation and the potentially adverse implications to small 
business lending, I believe that commercial lending by credit unions 
has an important role.
  However, Mr. President, commercial lending can significantly increase 
the risk profile of credit unions. This is evidenced by recent National 
Credit Union Administration (NCUA) data which illustrates that the 
delinquency rate on credit union business loans--3.1 percent--is more 
than three times the delinquency rate on credit unions' overall loan 
portfolio--0.97 percent.
  More importantly, in 1991, my home state of Rhode Island experienced 
a credit union crisis that resulted from the failure of a state-
chartered private deposit insurance corporation. This crisis affected 
one in five citizens and was predicated in part on excessive and risky 
commercial lending by privately-insured credit unions. Indeed, 13 of 
the state's credit unions were permanently closed, and the state had to 
seek federal assistance to repay depositors.
  In view of these facts, I was pleased that the Banking Committee 
adopted an amendment to limit commercial lending by credit unions to 
12.25 percent of outstanding loans. However, Mr. President, as 
reflected in my additional views to the Committee Report to H.R. 1151, 
I do not think this cap goes far enough. Specifically, I have argued 
that the cap is inadequate because it is significantly higher than the 
level of commercial lending that credit unions are currently engaged 
in--0.75 percent of outstanding loans. I have also argued that because 
loans under $50,000 are counted toward the 12.25 percent cap, credit 
unions could engage in commercial lending to a much greater extent than 
the limit imposed in the bill.
  In response to concerns over commercial lending, Senators Hagel and 
Bennett have introduced this amendment to limit commercial lending to 
seven percent of outstanding loans. In addition, the amendment would 
count loans under $50,000 toward the cap and codify NCUA requirements 
that loan officers have at least two years of commercial lending 
experience. I would like to commend Senators Hagel and Bennett for 
their recognition of this issue and their attempt to address commercial 
lending concerns.
  However, I believe the Hagel amendment goes too far. My specific 
concern is that it both significantly reduces the commercial lending 
cap, while also eliminating the $50,000 exemption. Taken together, 
these provisions could impose undue burdens on credit unions with 
outstanding commercial loans.
  Because loans under $50,000 are not considered ``commercial" under 
current regulations, the NCUA does not keep data on these loans. As a 
result, we simply do not know what percentage of outstanding loans 
would be characterized as ``commercial'' under the Hagel amendment. 
Thus it is possible, and likely, that the percentage of commercial 
loans could increase dramatically if this amendment were passed, which 
could put many credit unions that would otherwise satisfy a seven 
percent cap in violation of the amendment, forcing them to withdraw 
from commercial lending.
  As I indicated in our Committee's report, I believe the cap should 
bear a reasonable relationship to the amount of commercial lending that 
credit unions are currently engaged in. To the extent that the Hagel 
amendment creates uncertainty regarding existing commercial lending, we 
must be careful not to establish an overly-restrictive cap. While I 
expressed concerns

[[Page S9017]]

about the $50,000 exemption in my additional views, those concerns were 
tied to the higher lending cap of 12.25 percent.
  Mr. President, a preferred approach to the Hagel amendment would be 
to reduce the aggregate lending cap, while retaining the $50,000 
exemption. This approach would eliminate the uncertainty associated 
with the Hagel amendment, while establishing a meaningful limit on the 
future expansion of commercial lending.
  Mr. MACK addressed the Chair.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. MACK. Mr. President, I rise today to speak on the pending 
legislation, H.R. 1151, the Credit Union Membership Access Act. My 
comments will be addressed to the overall bill as well as the 
individual amendments that have been offered or will be offered.
  On May 11, 1933, during the 73rd Congress, the Federal Credit Union 
Act was introduced. I have an interesting connection to this 
legislation. The Federal Credit Union Act was introduced by Senator 
Morris Sheppard of Texas. Senator Sheppard was my grandfather. I happen 
to be standing at the desk that he used while he was in the Senate.
  The impetus for Federal legislation was the fact that in 1933, 
commercial banks had little interest in consumer lending. Simply 
stated, the small borrower was not a desired customer of commercial 
banks 65 years ago. Additionally, America was a country comprised of 
very large employers. It made sense for these large groups of 
individuals with a common bond, to join together to form credit unions 
to meet their credit needs. So back in the 1930s, when credit unions 
were formed, credit union members were typically groups of city 
workers, postal employees, and employees of the telephone company.
  Over the next 60 years, however, we saw the number of large companies 
decline, and today, most people work for very small companies. In fact, 
in my state of Florida, 99% of all businesses have less than 1000 
employees. Additionally, 97% of all companies in Florida employ fewer 
than 100 people.
  Since 1933, when my grandfather introduced the Federal Credit Union 
Act, the world has fundamentally changed. The credit unions of today 
are different from those of times past.
  I might also add, so are commercial banks. Today, commercial banks 
aggressively try to entice individuals of all incomes to do business 
with their financial institutions. They have aggressively reached out 
to consumers. To make my point, all one has to do is look at the mail 
you receive and realize how many credit card applications you have 
received. There is an aggressive outreach on the part of commercial 
banks to be engaged in lending to the average consumer today.
  The credit unions of today are different from those of times past.
  Now there are multibillion-dollar credit unions that in many cases 
dwarf the size of thousands of commercial banks and thrifts. Some of 
these multi-billion dollar credit unions have hundreds of employee 
groups and are located in multiple States. In many of these instances, 
these large credit unions cannot be differentiated from commercial 
banks--they offer home equity loans, have large credit card portfolios, 
loan money to small businesses, offer safe deposit boxes, and sell 
mutual funds. In fact, a credit union in Alaska even serves as a 
Federal Reserve depository.
  Mr. President, Congress has always supported credit unions. I, too, 
strongly believe there is a role for credit unions. By trying to 
improve this bill, no one, including me, is attempting to eliminate the 
credit union charter.
  Small, community based credit unions are vital to our communities 
because they provide individuals access to credit. Credit unions have 
played a very important role in extending credit to people who need 
financial help.
  However, in spite of my support of the credit union charter, I remain 
troubled by several provisions in the Senate Banking Committee passed 
bill that is before us today. I must admit, the bill we are debating 
today is far better than the bill the Senate Banking Committee received 
from the House. With the addition of caps on commercial lending and by 
including the Department of Treasury's prompt corrective action 
language, we will be able to ensure the safety and soundness of the 
healthy Credit Union Share Insurance Fund. I am pleased with this 
progress, but much more progress must be made if I am to support this 
bill in the end.
  My overriding apprehension about the pending legislation deals with 
the issue of fairness. Most credit unions pay their members higher 
interest rates on checking and savings accounts and offer lower 
interest rates on mortgages, student loans, and credit cards than most 
commercial banks. Credit unions on average, charge lower fees and 
require lower minimum deposits. There is one simple reason for this 
capacity of credit unions to pay higher rates and charge lower fees: 
they are exempt from federal income taxes. This is an unfair 
competitive advantage.
  During the Senate Banking Committee's discussion on this bill, the 
committee adopted a provision that directs the Department of Treasury 
to conduct a study of the differences between credit unions and other 
federally insured depository institutions with respect to the 
enforcement of all financial laws and regulations. Treasury will also 
compare the impact of all Federal laws, including Federal tax laws, as 
they are applied to credit unions and other federally insured 
depository institutions. This study will identify the regulatory and 
tax advantages credit unions have over banks, and suggest ways Congress 
can address these differences. This study will be a start, but by no 
means will it level the playing field. Upon completion of the study, I 
hope the Senate will hold hearings on how to reduce the inequities 
which exist among federally insured depository institutions.
  As I stated earlier, the Senate bill is far better than the House 
passed bill, but I still have some real concerns regarding provisions 
in the legislation. Specifically, my primary problem is the inclusion 
of language similar to the Community Reinvestment Act (CRA). Imposing 
the same onerous burdens on credit unions would help to level the 
playing field; however, I do not support the Community Reinvestment Act 
as it has evolved, and I oppose subjecting credit unions to these 
requirements. In fact, I would prefer to see the entire Community 
Reinvestment Act repealed.
  Because of CRA, banks are now often forced to make unsound and risky 
loans in economically disadvantaged areas. If they do not make these 
high risk investments, they are accused of discrimination. I strongly 
believe that most of these allegations are false.
  In contrast to banks, credit unions, by their nature, already lend to 
their members. It is ludicrous to impose CRA on credit unions.
  Think about it for a moment. Credit unions were established for 
individuals with a common bond. It makes no sense whatsoever that the 
institution in which you are a member would turn around and 
discriminate against you. It just doesn't make sense.
  In a letter to the National Credit Union Administration (NCUA), I 
asked several questions as to whether or not there have been any 
meritorious discrimination complaints against credit unions. In his 
response, the chairman stated there was no evidence of credit unions 
being guilty of discriminating against their members. Given the credit 
union chief regulator's response, I think it makes no sense to impose 
the burdens of CRA on credit unions.
  Therefore, I encourage my colleagues to support the amendment of 
Senator Phil Gramm to delete these onerous provisions from the bill. 
What looks harmless today will quickly evolve to burdensome, costly, 
and unnecessary regulations in the future.
  The same concern with CRA is also addressed by Senator Shelby's 
amendment to exempt banks with less than $250 million in assets from 
the Community Reinvestment Act. I strongly support the amendment of 
Senator Shelby now, just as I did in the Banking Committee's markup.
  Be assured that exempting small banks from CRA is not about opening 
the door to allow them to discriminate. Not only is discrimination 
wrong, it is illegal. Fair lending laws like the Fair Housing Act, the 
Equal Credit Opportunity Act, and the Home Mortgage Disclosure Act are 
still the law of the land. I believe these laws protect the American 
people, and as I mentioned, laws such as CRA are an unnecessary burden 
on business.

[[Page S9018]]

  My final concern with this legislation deals with the large increase 
in the number of commercial loans that credit unions are making. I 
support the Hagel-Bennett amendment because it accomplishes two things. 
First, it limits the amount credit unions can lend to their members for 
small commercial ventures, such as agriculture or small business start 
ups.
  Again, the reason we are tightening commercial lending is not because 
we are trying to vent some distrust with respect to how credit unions 
make their loans.
  But from my experience, having been in the business of commercial 
lending for almost 16 years, these are two very complicated and risky 
areas of lending.
  As I say, I support the Hagel-Bennett amendment, because it 
accomplishes two things: Well-managed, well-capitalized credit unions 
can lend up to 7 percent of their capital; exempts from the 7 percent 
cap credit unions which were chartered for the purpose of commercial 
lending.
  Second, the Hagel-Bennett amendment addresses the manner in which 
credit unions make commercial loans. Many credit union loan officers 
are not trained to evaluate commercial loans. The Hagel-Bennett 
amendment requires credit union employees who make or administer 
commercial loans to have at least 2 years of experience in the area of 
commercial lending. This provision is already part of the NCUA's 
regulations on member business loans, and the Hagel-Bennett amendment 
merely codifies this regulation.
  Be aware that much of what I am saying is the result of my experience 
as a member of the Senate Banking Committee when the Resolution Trust 
Corporation was established to bail out the savings and loan industry. 
I believe that if we do not take precautions now, such as those 
outlined in the Hagel-Bennett amendment, we could be looking at 
significant losses and exposure to the taxpayers in the future.
  In closing, I stress my support of the vital role credit unions play 
in today's financial services marketplace. Do not mistake my desire to 
improve this legislation with an agenda to end credit unions. I 
strongly feel that credit unions should exist. There are 268 credit 
unions in my State of Florida, with just under 3\1/2\ million members. 
My goal today is to ensure that every credit union is a viable, safe 
and sound institution, one unburdened by unnecessary regulatory 
requirements.
  Mr. President, I cannot support H.R. 1151 in its present form. I hope 
that my colleagues will support both the Gramm and Hagel-Bennett 
amendments which ensure the safety and soundness of credit unions. I 
also urge my colleagues to support the Shelby amendment which will 
level the playing field between commercial banks and credit unions.
  Thank you. Mr. President, I yield the floor. 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. D'AMATO. 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. D'AMATO. Mr. President, on behalf of the majority leader and the 
minority leader, I ask unanimous consent that following the 5:30 p.m. 
vote, there be 2 minutes for debate to be equally divided on the Hagel 
amendment and that a vote then occur on the motion to table the 
amendment with no second-degree amendment in order prior to the vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. D'AMATO. I do not know how many Members would like to speak to 
this, but I would think, given the time situation that we have, that 
those Members on either side who would like to either speak on the bill 
or state their support or opposition to the amendment that is now 
pending, that they should attempt to do so. Because at 3:30, I believe, 
Senator Shelby will be coming down to the floor in order to offer his 
amendment, and we will then lay aside this amendment for the purposes 
of discussing the amendment put forth by my colleague from Alabama. 
Then thereafter, from 4:30 to 5:30, Senator Gramm of Texas is scheduled 
on the floor where we will then entertain the Gramm amendment, which 
will be the pending business and which will be the vote that we take up 
at 5:30. I believe at that point my colleague, the ranking member of 
the committee from Maryland, Senator Sarbanes, will make a motion to 
table. And with that the votes will begin.
  So my suggestion, to those colleagues who would like to be heard on 
this amendment or on the overall bill, is that they use this time to 
come to the floor within a half hour because I think the schedule will 
then begin to get somewhat crowded.
  If no one is seeking recognition, I yield the floor and suggest the 
absence of a quorum.
  The PRESIDING OFFICER (Ms. Collins). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SHELBY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3338

(Purpose: To amend the bill with respect to exempting certain financial 
       institutions from the Community Reinvestment Act of 1977)

  Mr. SHELBY. Madam President, I send an amendment to the desk on 
behalf of myself and Senators Gramm, Mack, Faircloth, Grams, Allard, 
Enzi, Hagel, Helms, Nickles, Murkowski, Brownback, Sessions, Inhofe, 
Coats, and Thomas.
  The PRESIDING OFFICER. Without objection, the pending amendment will 
be set aside. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Alabama (Mr. Shelby), for himself, Mr. 
     Gramm, Mr. Mack, Mr. Faircloth, Mr. Grams, Mr. Allard, Mr. 
     Enzi, Mr. Hagel, Mr. Helms, Mr. Nickles, Mr. Murkowski, Mr. 
     Brownback, Mr. Sessions, Mr. Inhofe, Mr. Coats, and Mr. 
     Thomas proposes an amendment numbered 3338.

  Mr. SHELBY. Madam 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:

       At the end of title II, add the following new section:

     SEC. 207. COMMUNITY REINVESTMENT ACT EXEMPTION.

       The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et 
     seq.) is amended by adding at the end the following new 
     section:

     ``SEC. 808. EXAMINATION EXEMPTION.

  ``(a) In General.--A regulated financial institution shall not be 
subject to the examination requirements of this title or any 
regulations issued hereunder if the institution has aggregate assets of 
not more than $250,000,000.
  ``(b) Adjustments.--The dollar amount referred to in subsection (a) 
shall be adjusted annually after December 31, 1998, by the annual 
percentage increase in the Consumer Price Index for Urban Wage Earners 
and Clerical Workers published by the Bureau of Labor Statistics.''.

  Mr. SHELBY. Madam President, this amendment that I have offered this 
afternoon would authorize a small bank exemption in the Government-
mandated credit requirements of the Community Reinvestment Act, known 
as CRA. Community banks by their very nature serve the needs of their 
communities. They do not need, I believe, a burdensome Government 
mandate to force them to allocate credit or to originate profitable 
loans.
  Friday, I spoke in this Chamber about the regulatory burden of the 
CRA on small community banks in the United States. I cited then 
statistics that show small banks are less efficient than large 
institutions and suffer from excessive regulations.
  My colleagues should know that the amendment I have just offered 
would exempt only 11.2 percent of bank assets nationwide. This is 
nearly the same amount of assets as one of the largest financial 
institutions in America, BankAmerica. Can you imagine that? All the 
small banks of America, with $250 million in deposits or assets or 
less, have 11.2 percent of the assets, and one bank, and probably 
several others, has a lot more than all of these banks put together.
  I thought it might be helpful to hear from a small bank with less 
than $80 million in assets. They have written to me to complain about 
the regulatory burden of the CRA. This institution is probably typical 
of small community

[[Page S9019]]

banks nationwide. And the institution officer asked to remain anonymous 
for obvious reasons, for they are worried about repercussions from 
overzealous Federal regulators or bureaucrats. I would feel the same 
way. But the CEO of the small bank in my State wrote as follows:

       As a local community bank, we willingly and proudly provide 
     banking services to all segments of the population. However, 
     the Community Reinvestment Act is overly burdensome, costly 
     and makes it difficult for us to compete and to offer our 
     customers the service they deserve. Presently, [I have] an 
     employee in the bank who spends 35 percent of his time just 
     making sure we are in compliance with the Community 
     Reinvestment Act. These duties include: (1) Quarterly reports 
     to the board of directors detailing the community activities 
     of our officers and directors; (2) Plotting each loan on a 
     map of the county; (3) Reviewing all loans on a weekly basis 
     for the purpose of breaking down income levels by number and 
     total dollar volume; (4) Reviewing all loan denials and 
     approvals weekly for the purpose of ensuring compliance with 
     CRA; (5) Providing an on-going self-assessment of the bank's 
     CRA plan and performance.

  I have dozens of letters similar to these, but the one from which I 
just read articulates the burden as well as any of them.
  Opponents of our amendment suggest here that the CRA regulations have 
been reduced and are not burdensome. The CRA regulations may have been 
reduced, but the burden is still there. Bankers have to study hundreds 
of pages' worth of guidance manuals and attend seminars to assure CRA 
compliance. In fact, some banks have staff whose only job is to ensure 
CRA compliance. Of course, compliance costs with small bankers are not 
the only costs of the CRA. The very mandate of credit allocation 
increases the cost of banks in and of itself, and I would like to take 
a moment to explain here this afternoon why the Community Reinvestment 
Act is nothing more than a Government-mandated credit allocation, much 
like the mandated credit allocation in East Asia that has caused the 
currency crisis, among other things. The chart would show this.
  What are the small bank performance standards? I will go through 
these. According to the Code of Federal Regulations, CFR, section 
25.26, the ``Performance criteria'' for small banks depend on (i) 
bank's loan-to-deposit ratio; (ii) percentage of loans located in the 
bank's assessment area; (iii) bank's record of lending for borrowers of 
different income levels and businesses and farms of different sizes; 
(iv) geographic distribution of the bank's loans; (v) bank's record of 
taking action in response to written complaints about its performance 
in helping to meet credit needs in its assessment areas.
  Mandate (i) judges all small banks around the country on their loan-
to-deposit ratio. However, the loan-to-deposit ratio for one bank may 
not be appropriate for another bank. One banker told me his record of 
``community lending'' was questioned by a Federal bank regulator based 
on a low loan-to-deposit ratio. The banker responded, ``My bank is in 
the middle of a retirement community. There are not too many senior 
citizens applying for community development loans.'' How does the 
Federal Government know what the appropriate loan-to-deposit level is 
for Winfield, AL, or Lafayette, LA, or some other town in America?
  Mandate (ii) judges all small banks around the country based on the 
loans made in a specific assessment area. Why should the Federal 
Government dictate to any business who his customers should or should 
not be? What if there is no loan demand in that area?
  Mandate (iii) judges all small banks on their lending based on the 
``different income levels.'' The performance criteria in Section 25.26 
never mentions credit worthiness or the consideration of risk. When the 
free market allocates capital and credit, risk is always the 
distinguishing factor--and it should be.
  Mandate (iv) forces all small banks to lend not only in a specific 
assessment area, but under a geographic distribution established by the 
Federal Government. One banker told me the regulator was challenging 
his geographic distribution of lending and asked the banker why he had 
not made loans in a certain area. The banker responded, ``I can't make 
any community loans there. Nobody wants to build in the middle of a 
lake.'' There was a large lake there, but the bureaucracy didn't know 
it or recognize it. The point is simple: Federal regulators do not know 
the small communities across America like the people that live there, 
and work there every day.
  Mandate (v) judges a bank's record of responding to its customers. 
Businesses across America do this voluntarily without the Federal 
Government judging its performance. It is called customer service. The 
responsiveness of a business to its customer's needs is usually 
measured by the success of the business. In the free market, no 
business will stay in operation if it does not satisfy the needs of its 
customers.
  The costs of Government-mandated credit allocation results in 
increased cost to consumers. First, CRA raises the costs of inputs to 
banks by forcing them to comply with the regulatory burden of CRA--we 
are entering the 21st century and bankers are still forced to stick 
pins in maps on the walls of the bank in order to indicate where loans 
are made. Second, making loans according to a Federal formula increases 
the risks, and therefore the costs, of borrowing to consumers.
  The Federal Reserve Bank of Richmond published its 1994 Annual Report 
on ``Neighborhoods and Banking'' where it reported its findings on the 
costs of CRA. The report found:

       [T]he regulatory burden (of CRA) would fall on bank-
     dependent borrowers in the form of higher loan rates and on 
     bank-dependent savers in the form of lower deposit rates. And 
     to the extent that lending induced by the CRA regulations 
     increases the risk exposure of the deposit insurance funds, 
     taxpayers who ultimately back those funds bear some of the 
     burden as well.

  The Fed report goes on to say: ``* * * CRA imposes a tax on banks * * 
*''
  The costs and risks associated with CRA are ultimately shouldered by 
the consumer. We know that. There is no justification for Congress to 
articially increase the costs of borrowing to the consumer. By 
maintaining the status quo of CRA, Congress actually hampers investment 
and growth by increasing loan rates and lowering deposit rates. 
Congress should adopt policies that help reduce the cost of borrowing, 
that help reduce the regulatory burden. Congress should adopt a small 
bank exemption to the Community Reinvestment Act. That would, again, 
only exempt 11.2 percent of the assets in banks in America, but it 
would be a God save for the community banks all over America.

  Mr. THOMAS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized.
  Mr. THOMAS. Madam President, what is the pending business?
  The PRESIDING OFFICER. The pending amendment is the amendment offered 
by the Senator from Alabama, Senator Shelby.
  Mr. THOMAS. Madam President, I want to speak generally about credit 
unions and also on the amendment, if I may.
  I wanted to talk about credit union legislation because it is one of 
the most important things we will be doing, certainly, this year. I 
have spent many hours meeting with Wyoming citizens on both sides of 
the credit union legislation. In fact, in the last year and a half, I 
have had 32 meetings relative to this bill. So there is a great deal of 
interest in it. It is the kind of involvement that we ought to have in 
public issues. It is democracy, certainly, at work.
  I also have some kind of perspective to it, in that I helped organize 
a credit union, back when I was with the Wyoming Farm Bureau a number 
of years ago, a very small one designed to work with the employees 
there at the Farm Bureau.
  I think, having worked with not only the Farm Bureau but the Rural 
Electric Association, I am aware of the value of cooperatives, the 
value of people being able to come together and do some things for 
themselves, the ability to tailor the services that are needed in a 
particular place to that particular need. Certainly, Wyoming is one of 
the smallest--indeed, it is the smallest State in the Union with regard 
to population. We do have different needs than occur in New York or 
occur in Pennsylvania. So as we talk about services and distribution of 
services, it makes a good deal of difference.
  I also think credit unions have fitted themselves to these needs, as 
have community banks. They have fitted themselves, too. I believe there 
is an increasingly clear definition between

[[Page S9020]]

some of the international banks and some of the community banks. It 
used to be everything was a bank was a bank was a bank. Now I think 
that has changed, and properly so. We need both kinds of banks.
  Wyoming has 39 credit unions and about 145,000 members in Wyoming. 
That represents about a quarter of our State population. So it is a 
unique and needed service. The median asset level in Wyoming credit 
unions is only $6.9 million. The smallest credit union has assets of 
about a half million dollars; the largest, $86 million. So we do have a 
unique situation. Things happen on a smaller scale there, and we need 
to continue to have that opportunity to serve. The things that are 
debated here, in credit unions, the changes that have taken place, the 
reason for the lawsuit, has very little to do with the kinds of 
operations we have in our State.
  I support the final passage of this bill. Perhaps the most important 
provision is to grandfather the millions of credit union members who 
were added to the multiple-group credit unions before the February 28 
Supreme Court decision. As we know, these types of memberships were 
invalidated. No one wants to see the present credit union members lose 
their accounts, and this will ensure that they do not.
  Another important provision is to enhance the supervisory oversight 
of federally chartered credit unions to make sure they are sounder, 
safer, and more efficient.
  I think we would not be debating this legislation today if the 
regulatory authority, the National Credit Union Administration, had 
used its regulatory power to do more of those things to carry out the 
original intent of the Federal Credit Union Act of 1934. Arguably, the 
NCUA has been more of an advocate than a regulator. I think that has to 
change.
  As with every other federally chartered organization or institution, 
Federal credit unions must serve within that niche that is prescribed 
for them by law. I have told my friends in the credit unions that there 
are certain advantages to the way they are structured, certain 
advantages go to them as being cooperatives and being member-owned. 
That is good, and I endorse that.
  On the other hand, there have to be, then, some limitations to the 
kinds of things that they can do. I think commercial lending should not 
go unlimited. I support the amendment of the Senator from Nebraska 
which would allow for commercial lending, which they are seeking. I 
also support the Shelby amendment which exempts small community banks 
from the requirement of the Community Reinvestment Act. I hear all the 
time of the amount of the administrative and regulatory time spent in a 
very small bank; more time reporting than there is in lending.
  So I hope that not only the banks, but the credit unions can get out 
from under that basic paperwork requirement. The expenses of meeting 
these costs, as the Senator from Alabama just indicated, are, of 
course, passed on to the owners and depositors.
  I am supportive of the efforts to relieve those unnecessary mandates. 
That is what we ought to be doing whenever we can. I believe this is an 
appropriate place to do that.
  Clearly, banks and credit unions have a proper, legitimate, rightful, 
and important place in our financial system. We simply need to define 
what those roles are.
  Our challenge is to successfully address the Supreme Court's ruling 
in a way that will allow consumers access to credit and financial 
institutions, have fairness among them, and strengthen the regulatory 
and safety aspects of them. I believe this bill will do that.
  I support the unique status of credit unions, and I believe the bill 
before us, with amendments, maps out an appropriate role for the 
future.
  Madam President, I yield the floor.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Madam President, I would like to address the Shelby 
amendment, which is before this body, and also make reference to the 
amendment offered by my good friend and colleague from Nebraska, 
Senator Hagel.
  I rise in opposition to the Shelby amendment. The Shelby amendment 
would exempt, as we all know now, banks of less than $250 million in 
assets from the requirements of the Community Reinvestment Act.
  As I stated before when we were debating this issue on Friday, I 
disagree with the substance of this amendment, but before I turn to the 
substance, let me suggest what I know the chairman of the Banking 
Committee and the ranking member, Senator Sarbanes, have said over and 
over again with regard to this amendment, and that is, to those who 
might be inclined to support this amendment, the adoption of this 
amendment will result in the collapse of the credit union bill. That is 
a fact. A vote for it will certainly achieve that result.
  The amendment offered by Senator Shelby goes outside the issues at 
play in the credit union bill and seeks, in a very controversial 
manner, to reduce the responsibilities of banks to their communities.
  As a number of my colleagues have noted previously, the 
administration has already stated very emphatically that it will veto 
any legislation that has this CRA exemption contained within it. Let 
there be no mistake, a vote in favor of the Shelby amendment is a vote 
against the credit union legislation.
  Let me briefly address a few of the issues that surround this 
amendment.
  The supporters of this amendment make two seemingly powerful 
arguments in its favor. The first argument they make is that the CRA 
creates a regulatory burden so onerous that the imposition of it on 
community banks places them at a disadvantage versus the credit unions 
against whom the banks must compete.
  The second argument offered by those who support this amendment is 
that this amendment, the Community Reinvestment Act itself, forces 
banks to make unprofitable loans and thus constitutes Government 
interference of the worst kind.
  Neither of these amendments bears up against careful scrutiny.
  First, with respect to regulatory burden, the bank regulators, under 
the leadership of the Comptroller of the Currency, significantly 
reduced the regulatory burden on banks when the new CRA enforcement 
rules went into effect on January 1, 1996.
  At that time, the new rules received extensive breaks from bankers, 
large and small, as being workable. Richard Mount stated, on behalf of 
the Independent Bankers Association of America, which represents only 
small community banks:

       The new rules should alleviate the paperwork nightmare of 
     CRA for community banks and allow them to concentrate on what 
     they do best--reinvest in their communities.

  Given the changes made in 1996, there is little reason to believe 
that a CRA exemption for small banks would result in reduced costs 
sufficient enough to make a difference in their competition with credit 
unions.
  What is perhaps more important, Madam President, is the question of 
whether CRA actually is a means for the Government to engage in credit 
allocation and whether CRA forces banks to make unprofitable loans. 
Again, I do not think the facts bear out these statements.
  Some have suggested that the Community Reinvestment Act was enacted 
in 1977 solely because banks enjoyed a protected advantage in 
communities, that CRA was the tradeoff for continuing those protective 
statutes. These people argued that with the advent of increased 
financial competition, and particularly with the passage by Congress of 
the Interstate Banking and Branching Act that ended the exclusive 
rights of banks to service particular communities, the basis for CRA no 
longer exists.
  While those were important factors in the passage of CRA, the 
overriding concern, Madam President, was that the banking industry, 
which enjoyed then and enjoys today the benefit of taxpayer-backed 
deposit insurance, was using that benefit to make loans available only 
to affluent communities, and were allowing less affluent communities, 
from Appalachia to Bridgeport, CT, to wither on the vine.
  The hearing record in 1977 clearly shows that by most surveys banks 
were returning only pennies in loans for every dollar of deposit that 
came from low- and moderate-income areas. The

[[Page S9021]]

solution to that real and uncontested problem was that regulators take 
steps to ensure that banks serve their entire communities, not just 
select parts.
  However, there is nothing in CRA that allows the regulators to have 
the banks waive basic fundamental underwriting practices. The 
regulators cannot permit the banks to jeopardize safety and soundness 
in order to demonstrate compliance with the act.
  In other words, Madam President, CRA loans have to make money. They 
must make money. As bank regulators stated in their joint agency rule 
on CRA:

       The agencies firmly believe that institutions can and 
     should expect lending and investments encouraged by CRA to be 
     profitable. . . . As in other areas of bank and thrift 
     operations, unsafe and unsound practices are viewed 
     unfavorably.

  Or as Mario Antoci, chairman of the American Savings said:

       Lending in the inner city has turned out to be the most 
     profitable part of our business over the past few years.

  Madam President, the Community Reinvestment Act has proven, I think, 
to be one of the most useful financial initiatives enacted by the 
Federal Government in a generation.
  Community groups estimate that CRA has brought more than $1 trillion 
into underserved communities across our Nation from our small rural 
towns to our largest cities. It is done so in a manner that not only 
benefits the community in which the investment is made, but also allows 
the lending institution to expect the same profit that they would 
receive on other loans.
  This is a law, Madam President, that works. And it is a law where 
benefits can be seen in every new home that gets built or new business 
that gets started in a neighborhood or town that used to be neglected 
by the banking industry prior to 1977.
  If there are specific problems with the implementation of CRA, if 
there are certain activities that should be considered that are not 
considered, then the appropriate way to address those specific concerns 
is to work with the regulators to improve the way that the law is being 
administered.
  But to exempt 86 percent of America's banks from a requirement to 
serve their entire community, while still extending them the benefit of 
deposit insurance which is backed by the dollars of everyone in that 
community, is simply wrongheaded in the approach to helping the banking 
industry.
  At the end of the day, Madam President, the best thing that Congress 
can do to help community banks is to provide the means for all American 
communities to grow, thus expanding the demand for bank loans and 
products. CRA helps all of us achieve that goal and, therefore, I urge 
my colleagues to vote against this amendment.
  Lastly, Madam President, I will come back to the point I made at the 
outset. I urge my colleagues to think about this: Even if the idea of 
CRA should be reworked and redone, even if you think it deserves a 
legislative approach, if it ends up being adopted on this credit union 
bill, it will bring down this piece of legislation. That would be a 
great disservice to the millions of people who are looking to this 
Chamber to follow what was done in the other Chamber, and that is to 
pass these reforms that are necessary for credit unions to succeed. For 
those reasons, Madam President, I urge that this body reject the Shelby 
amendment.
  Mr. MURKOWSKI addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alaska.
  Mr. MURKOWSKI. Madam President, I thank the Chair.
  I rise to share some of my concerns regarding H.R. 1151, the Credit 
Union Membership Access Act.
  First, let me state that I support the concept of H.R. 1151; that is, 
to prevent a current credit union member from being forced to 
disaffiliate, and also to allow a credit union an opportunity to 
reasonably expand its membership to help ensure the safety and 
soundness of the institution.
  I will support passage of H.R. 1151. However, in light of the 
realization of the tax-exempt status that Congress affords credit 
unions, I think it would be irresponsible for this body to not fully 
debate a serious problem that exists with this legislation; and it is 
the Community Reinvestment Act requirements.
  Madam President, we can talk about interpretation. We can talk about 
administering the act. But the realization is that the act calls for 
specific action by community banks. And the consequences of that are 
not only costly, but in some instances rather--well, they are rather 
amusing. Let us put it that way.
  I know of one bank in Los Angeles with numerous branches throughout 
the city. And those banks are primarily located in areas of high 
concentration of Chinese residents, both from the mainland previously, 
or their families, and Taiwan. So a good portion of the banks' 
customers clearly are Chinese.
  The Community Reinvestment Act mandates that these particular 
branches advertise in Hispanic areas of Los Angeles, advertise in areas 
where there are large concentrations of black residents, and move 
beyond, if you will, the traditional area that they serve with their 
branch system.
  This particular institution has been cited as being in violation of 
the Community Reinvestment Act because it did not have a certain 
percentage of Hispanic depositors and borrowers. So they were forced to 
go out and advertise in those particular areas, which they did. They 
still did not generate any business.
  If you go into this Chinese bank, so to speak, the tellers can speak 
English and Chinese. They are meeting, if you will, a minority service, 
but they are in violation, technically, of the Community Reinvestment 
Act.
  I could go on and on with numerous examples, but here, clearly, is an 
example where the Community Reinvestment Act is out of sync with 
reality.
  Community banks, for the most part, are small. Many of them are 
locally owned. Over half of the banks have only one or two branches. 
And they have excellent records of serving their communities because 
they are different than the money center banks. They are there to serve 
the community. They have to be there, and they have to do that or they 
would not survive. They have to serve the community.
  It is interesting to note that of the 8,970 small community banks, 
there are only 9--only 9--that have a substantial noncompliance CRA 
rating. Let me repeat that. Of the 8,970 small community banks in 
America, only 9 have received a substantial noncompliance rating. In 
other words, almost 9,000 small banks must spend hundreds of millions 
of dollars to comply with a Federal mandate simply because a bare 9 
community banks had records that the regulators in Washington, DC, 
deemed bad. Well, that makes no sense, Madam President. It is just 
totally unrealistic.
  Because community banks by their very nature serve the needs of their 
community, community banks do not need a burdensome Government mandate 
to order them to do what they have already been doing a good job of for 
decades.
  The difference is the large banks don't have a difficulty in meeting 
the CRA requirements. The large banks have personnel. They have 
resources and they can easily absorb the costs of these additional CRA 
mandates. The small banks don't have these resources. It is very 
difficult for them to absorb the high cost of the Community 
Reinvestment Act, and even the credit unions express concern over 
additional costs, additional Federal mandates.
  How costly are the CRA requirements? Let's just take a look at this 
chart, because I think it shows adequately that this is a very 
meaningful cost. If we look at the chart, we see the financial burden 
of the CRAs to small community banks is costly, costly in both dollars 
as well as man-hours. If we look at compliance with the Community 
Reinvestment Act, what it costs the community banks--14.4 million 
employee hours; 6,900 full-time employees; $1,256 per $1 million in 
assets--the total cost of the CRA to community banks is over $1 billion 
a year.
  One of the curious things about the manner in which this debate is 
going on, it is my understanding that Senator Gramm has put in an 
amendment to exempt the credit unions from the CRA requirements. The 
CRA requirements are in the Banking Committee bill to exempt the credit 
unions from CRA requirements.
  Senator Shelby's amendment is simply to exempt small banks from the

[[Page S9022]]

same CRA requirements. Now, is that not an equitable situation? I am 
surprised that the President has come down and suggested that if this 
passes, the Shelby amendment, it is grounds for vetoing the bill. What 
is the logic in that? What is the equity? What is the fairness? What we 
are trying to do here is to serve America's consumers. The way to do 
that is lower costs.
  If it costs the small community banks $1 billion a year, that cost 
has to be passed on. What many in this body don't recognize is the 
difficulty that the small community bank has in meeting these 
requirements as compared to its competitor, whether a Bank of America 
or Citicorp or any of the major institutions. This is just another cost 
of doing business that they can assimilate. But the small country 
banker on the corner has a real problem with this in spite of what some 
of the debate has suggested here today.
  The regulatory costs of the CRA impairs the ability of small banks to 
serve the needs to their local community. As this chart shows, it costs 
real money--$1 billion--to comply with the CRA. Banks must comply with 
the Truth in Lending Act. That requirement, which everyone supports, 
takes less than half the man-hours of the CRA and costs nearly half of 
what CRA costs. The banks must also meet the important Equal Credit 
Opportunity Act which prevents discrimination in lending, a worthy 
goal. Yet the cost of complying with the Equal Credit Opportunity Act 
is barely one-fifth of the onerous costs of the CRA.
  I am a cosponsor of the Shelby amendment which exempts small banks, 
exempts small banks with $250 million in assets from CRA. Personally, I 
don't feel that goes far enough. I believe a $500 million threshold is 
a more appropriate figure.
  Why is an exemption for small banks with $500 million in assets more 
appropriate? Well, there is a good reason. That is the threshold we 
established 12 years ago to distinguish small banks from large banks in 
the 1986 reform of the Tax Code. We recognized back then that the small 
banks, banks with less than $500 million, should be allowed a deduction 
for reserve for bad debts but denied a similar reserve deduction for 
large banks. It only makes sense to use a definition already so well 
established. Obviously, by the attitude prevailing here with regard to 
the equity, I am not going to pursue that, but I think that is an 
appropriate threshold as you look at where you cut off a small bank 
from a large bank.
  I believe the Shelby amendment is a modest amendment that all of our 
colleagues should support. It is equitable. To have the threat of the 
White House come down, that they will veto this if it prevails, is 
absolutely unrealistic, and it is certainly unfair.
  I think it is time we sent a message to the White House with regard 
to the merits of the debate on issues of equity and fairness. To 
suggest that the White House simply comes down with a threat--this 
Senator from Alaska is not buying. If there are any financial 
institutions in America that do not need to have a Federal community 
reinvestment mandate imposed upon them, it is America's small community 
bankers. They are not making loans in Indonesia. They are not making 
loans in South Korea. Their loans are in their communities. That is how 
they survive. Why exempt the credit unions and penalize small banks, 
small banks who pay taxes?
  Make it fair. Make it equitable. Exempt both. That is the correct 
action that should be taken by this body. I hope there are enough 
Members who will stand up for what is right and equitable.
  Mr. ENZI. Mr. President, I rise in support of the amendment sponsored 
by the senior Senator from Alabama.
  The amendment, which authorizes an exemption for banks with less than 
$250 million in assets, would allow small banks to escape the 
burdensome, federal government mandate of the Community Reinvestment 
Act of 1977, commonly known as CRA. In 1977, Congress felt that the 
regulated and insured financial institutions should be required to 
demonstrate that their deposit facilities help meet the credit needs of 
the local communities in which they are chartered.
  However, I have seen the CRA become a burdensome federal government 
mandate on private financial institutions resulting in nothing more 
than excessive paperwork requirements. Small community banks naturally 
serve the needs of their communities, otherwise they would not survive. 
In Wyoming, where many towns have only one or two banks and maybe a 
credit union, the financial institutions must reach out to everyone in 
the community in order to be successful.
  We must also realize that several things have changed since the 
passage of the community Reinvestment Act became law in 1977. Until 
1994, when Congress passed the Reigle-Neal Interstate Banking and 
Branching Efficiency Act, banks were not allowed to acquire another 
bank in another state. The Reigle-Neal Act forced small community banks 
to be more aggressive to meet the needs of their community in order to 
compete with outside banks, thus supplanting the need for the CRA.
  Second, we now have less government intervention on the rate of 
interest payable on savings deposits and demand deposits. Before the 
Depository Institutions Deregulation and Monetary Control Act of 1980, 
there was a ceiling on the interest rates on savings deposits and a 
prohibition on the payment of interest on demand deposits to consumers. 
We do not have these restrictions now. These laws, passed after the 
Community Reinvestment Act of 1977, have promoted a healthy competition 
for deposits and credit, thus causing financial institutions to 
increasingly reach out to the communities they serve.
  I believe it is prudent and right to exempt small banks from CRA 
requirements. They are the very institutions that comply every day with 
the Community Reinvestment Act just by the very nature of their 
business. And they are the institutions that are most burdened by the 
required paperwork because of their limited resources.
  I urge my colleagues to support the amendment.
  Mr. D'AMATO. Madam President, I have spoken to this issue before, so 
I am going to try to make my remarks very succinct. That is difficult 
for me, I realize that, but there are others waiting. The Senator from 
Kansas has been on the floor for 2 hours and the Senator from 
Massachusetts is waiting to speak also.
  I share the concerns that my colleagues have raised regarding the 
fairness of what would appear to be overreaching in certain cases 
involving our community banks. I believe we need to have a full and 
thorough hearing to look at this question and examine it. Not just one 
hearing, but a comprehensive study and a series of hearings to see if 
we cannot advance the goals. Because I don't think there is anyone, 
anyone, who is opposed to the goals of ensuring that there is capital 
available in our rural areas and our small communities. Capital that 
might not otherwise be there were it not for CRA.
  The question is, Is that capital being made available? How effective 
is CRA? Or has there been an unexpected consequence from the impact of 
the legislation and the compliance requirements? And has that 
consequence been so overwhelming as to keep the small banker from doing 
his job? Those are legitimate questions. We should review this 
important issue in its entirety and we should examine it.
  But we should not offer an amendment now that would in any way make 
it impossible for this bill to go forward. That is exactly what would 
take place. There is no way, no way, that we could get sufficient votes 
nor would the administration enact legislation if the CRA provision was 
stripped out. I say ``stripped out'' because that is, indeed, what the 
amendment would do. The Shelby amendment would literally strip it out.
  There is no way for evaluating if a bank had proven itself year after 
year and earned a relaxation in its examination schedule so it would be 
reviewed less frequently or even periodically. That is the kind of 
thoughtful consideration that we need to do.
  This doesn't say, well, let's look at giving better tax treatment to 
the smaller community banks so that they can do their job. And, for 
example, Senator Allard has worked long and hard on developing a 
proposal that would do that. That is the kind of thing we have to do. 
But to come in here now and suggest that we simply strip out CRA for 
all community banks would be wrong.
  And you can say that you favor credit unions, but if you vote for 
this

[[Page S9023]]

amendment, what you are doing is taking a chance that credit unions 
will have irreparable damage done to them. So I am going to urge my 
colleagues to support the motion to table Senator Shelby's legislative 
effort. As well intended as it may be, it should not be here.
  Mr. HOLLINGS. Mr. President, I rise today in support of H.R. 1151, 
the Credit Union Membership Access Act. I have always supported federal 
credit unions because of their vital role in providing access to 
credit, particularly for consumers of moderate means. This bill would 
allow credit unions to continue to offer this outstanding level of 
service.
  The Supreme Court's recent decision in the AT&T case cast a shadow of 
uncertainty over credit union membership. The decision threatens to 
disrupt the financial affairs of millions of hard-working families by 
forcing credit unions to limit future memberships and placing current 
memberships in jeopardy. This legislation responds to the Court's 
decision by clarifying the credit union field of membership. It 
protects existing credit union members and membership groups, while 
allowing approporiate expansion. In addition, it further protects 
consumers by ensuring the safety and soundness of credit unions through 
improved regulatory safeguards.
  H.R. 1151, as reported by the Senate Banking Committee, is critical 
to consumers across the nation. Credit unions serve many families who 
have trouble obtaining credit elsewhere. In particular, credit unions 
are absolutely essential in the area of small consumer loans. For those 
in need of a loan to purchase a new car, put down a rent deposit, or 
buy a new washer and dryer, the local credit union is a valuable 
resource. In today's world of mega-mergers, credit unions continue to 
be there to provide affordable and personal financial services.
  Both the House of Representatives and the Senate Banking Committee 
approved H.R. 1151 by overwhelming margins. These votes are evidence of 
the strong support behind this legislation. I urge my colleagues to 
support H.R. 1151 in a similar fashion.


                           Amendment No. 3336

  The PRESIDING OFFICER. Under the previous order, the hour of 4:30 
p.m. having arrived, the question recurs on amendment No. 3336 offered 
by the Senator from Texas, Mr. Gramm. There will now be 1 hour of 
debate, divided in the usual form, prior to the motion to table the 
amendment.
  Mr. D'AMATO. Madam President, I ask unanimous consent that 10 minutes 
of additional time be granted, and if the Senator from Texas would 
yield, we could take it out of our time. The Republicans would get 10 
minutes equally divided. I see the Senator from Kansas who has been 
here 2 hours. Senator Thurmond has come to the floor and 2 other 
Members are here. If we can divide 10 minutes, 5 minutes on each side, 
I make that request.
  Mr. KERRY. Madam President, reserving the right to object, would it 
be possible, I ask my colleague from New York, to work out an agreement 
where we might have a little more time on each side? Or I assume we are 
able to speak to either amendment during the time of the other 
amendment.
  Several Senators addressed the Chair.
  Mr. SARBANES. Madam President, as I understand it, we are now in a 
time-constrained period of 1 hour on the Gramm amendment, equally 
divided; is that correct?
  The PRESIDING OFFICER. That is correct.
  Mr. SARBANES. Thirty minutes to Senator Gramm and Senator D'Amato, 
who supports Senator Gramm, and 30 minutes on this side; is that 
correct?
  The PRESIDING OFFICER. That is correct. The Senator from New York has 
a unanimous consent request that would seek to delay that period.
  Mr. D'AMATO. I withdraw my request, Madam President. Let's start it 
from there.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The time is under the control of the Senator 
from Texas and the Senator from Maryland, under the previous order.


                      Unanimous-Consent Agreement

  Mr. D'AMATO. Madam President, I ask unanimous consent that at 9:45 on 
Tuesday, the Senate resume consideration of the Shelby amendment, and 
there be 15 minutes of debate equally divided prior to a motion to 
table. I further ask consent that no amendments be in order prior to 
the vote. This has been cleared by both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Madam President, I yield 6 minutes to the Senator from 
Massachusetts, Senator Kerry.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized 
for 6 minutes.
  Mr. KERRY. Madam President, thank you. I thank the Senator from 
Maryland.


                           Amendment No. 3338

  Madam President, I want to speak just for a moment, if I may, with 
respect to the Shelby amendment. This amendment concerns me greatly and 
I think should concern all Senators who have invested the amount of 
time and energy in the past years to guarantee that we will provide 
adequate access to credit to those parts of America that have 
historically been very difficult to reach, difficult to provide jobs, 
and difficult for people to gain access to credit.
  There is a fundamental reason that in 1977 Congress, in its wisdom, 
decided to pass the Community Reinvestment Act. All the Community 
Reinvestment Act asks is that banking institutions, demonstrate that 
they are making adequate efforts to try to provide credit to all of the 
people within their communities--that they are reinvesting in their 
communities. There is a reason that happened. It is very simple. They 
weren't doing it. Large financial institutions were growing, and were 
accepting deposits from people within a community, but the banks were 
not giving back to the people within that community. They were finding 
other places to invest for more lucrative, faster returns, safer 
returns, and the community suffered as a consequence of that. So you 
could have communities where you had rows of houses but they weren't 
homes. There is a distinction between a house and a home.
  What we have learned is that, over the years, the almost $400 billion 
worth of investments that have been made back into communities have 
made homes out of what were just houses, have provided people the 
capacity to be able to improve their own lives, to create their own 
jobs, within the community. And that helps the community. In point of 
fact, it reduces taxes. It reduces the social burden on the rest of the 
people within those communities who have to pick up the slack if the 
larger financial institutions are not doing so.
  What is astonishing about the Shelby amendment is that what it seeks 
to pass off as simply taking away those institutions with $250 million 
or less in assets is, in fact, an exemption for perhaps 85 percent of 
all the lending institutions in this country. The vast majority of the 
lending institutions in this country would be exempted from a 
requirement to show that they are involved in their community.
  The fact is, I know this well, because as the ranking member of the 
Small Business Committee, we have spent a considerable amount of time 
trying to analyze access to credit for small businesses, which we know 
are over 95 percent of the businesses in the country and which provide 
a majority of the jobs in the country. These are some of the people who 
also benefit by virtue of the CRA.
  The fact is that there is nothing that requires a lending institution 
to make a bad loan. In fact, those loans are specifically outlawed. 
They are specifically covered under the regulations. And the regulatory 
process requires the same standards of due diligence and the same 
standards of assuming credit. It simply requires them to make certain 
they are making some of those loans in the place where they do 
business.
  The fact is that the CRA has been a remarkable catalyst, and those 
$400 billion have had a remarkable impact in the United States. Study 
after study shows that CRA portfolios perform well and that banks are 
profiting as a result.
  It would be one thing if the banks came in here and said they were 
losing money, but they are not losing money, they are profiting as a 
result of the investments made under the CRA. That

[[Page S9024]]

is precisely why banks are now starting to sell CRA loans on Wall 
Street--in order to raise more capital to make more CRA loans.
  I might add that we have heard some complaints about the 
administrative burden of CRA on small banks. A number of years ago, 
Madam President, those complaints were made to our committee. They were 
made to the Small Business Committee and others. There have been a 
series of efforts within the banking community, and in fact a 
considerable amount of progress has been made to reduce the overlap of 
regulations and reduce the administrative burden of CRA.
  I am told that there is a 30-percent reduction in the level of 
administrative effort to comply with CRA regulations. But all we are 
asking people to do is, in effect, report publicly on what they say 
they are going to do anyway. There are people who tell you: ``We don't 
want to do this because it is a regulatory burden. But trust us; we are 
going to be out there in the community making these loans anyway.''
  If that is true, they are going to have all the records of the loans 
they are making. They are going to have all of the analyses of how this 
effects the community. They are going to have all of the analyses of 
those to whom they are lending.
  The only additional requirement when you finish with all the folderol 
and hype is the requirement that they make it public and that they do 
it in a regular and orderly fashion.
  But it's more than just the application of an economic model. CRA 
makes a difference in the lives of real people. In Massachusetts, there 
have been more than $1.6 billion in commitments made by financial 
institutions to assist low income neighborhoods. These funds have been 
invested in home ownership, affordable housing development, minority 
small business development, and new banking facilities and services. 
It's making a difference in Boston's inner city neighborhoods, from 
Roxbury and Jamaica Plain to the South End.
  Stacy Andrus, from Jamaica Plain, Massachusetts, was a restauranteur 
struggling to make ends meet and retain her clientele in a competitive 
environment. She knew she had to be creative just to keep pace. Stacy 
began toasting chips out of pita bread to serve as finger food before 
the meals. Well, as you might expect, the pita chips soon became the 
most popular item on the menu. Like so many small business owners who 
know they've latched onto a great idea, Stacy wanted to expand her 
operation, to bring her concept to scale. But capital and credit are 
scarce in Jamaica Plain. Stacy couldn't find the help she needed until 
she started working with the Jamaica Plain Neighborhood Development 
Corporation. This corporation works within a network of small business 
assistance providers that use CRA programs at local banks to secure 
financing for small businesses. With their help, Stacy obtained a 
$60,000 loan from BankBoston. As a result, her small business has 
expanded rapidly: She has leased a production plant in Jamaica Plain; 
put former welfare recipients on the payroll; and 900 bags of chips are 
rolling off the assembly line every day. Thanks to CRA, Stacy Andrus 
has made her Pita chips the top-selling gourmet snack food in Boston 
and she has major airlines interested in serving her chips to first 
class customers. But without CRA, the community of Jamaica Plain would 
not receive the benefits from the economic development that these 
investment have generated.
  CRA is also giving low-income communities a shot at home ownership, 
making the American Dream a reality for those who believed it was out 
of reach. Julie Orlando, a single mother of three, wanted to buy a home 
for her family in Leominster, Massachusetts. Julie's income, though, 
was less than 80 percent of the medial family income for the area. In 
the days before CRA, Julie wouldn't be considered a likely candidate to 
own a home. But because the Fidelity Cooperative Bank was involved in 
the CRA coalition, Julie was able to obtain a $72,000 mortgage with no 
points. The city of Leominster provided additional assistance to Julie 
and her family. Because the Fidelity Cooperative Bank participated in a 
CRA coalition, Julie and her two children can live the American Dream 
of owning their first home. That is exactly the type of assistance that 
the CRA was designed to provide. Let me tell you, Julie's success story 
is typical. It's indicative of the kind of progress we can make when we 
leverage market forces to work in disadvantaged communities.
  Mr. President, I believe the Shelby amendment will roll back the 
advances being made in cities and rural areas around the country. To 
eliminate these regulations for more than 85 percent of banks in the 
United States and 75 percent of banks in Massachusetts will close the 
door of home ownership and small business growth for thousands of low-
income neighborhoods across the country.
  I believe that is the wrong direction for this country. The United 
States is experiencing economic growth that surpasses our wildest 
expectations. The stock market is pushing 9,000. Unemployment is low 
and we are, for the first time in fourteen years, starting to see 
growth in real wages. We have reason to be proud. We don't, however, 
have reason to rest on our laurels. In this time of prosperity, our job 
must be to expand the winner's circle, to empower every community to 
participate in this economic expansion. That means we must not allow 
any community to be denied access to credit and capital. Destroying the 
development of CRA will mean access denied for our inner cities and 
rural areas. It would dismantle one of the most effective methods for 
investment in our neighborhoods and set back hard-fought development in 
disadvantaged areas of this country. That is why I oppose the Shelby 
amendment and urge my colleagues to vote against it.
  I hope colleagues will oppose the Shelby amendment.
  Mr. GRAMM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Madam President, how much time do I have?
  The PRESIDING OFFICER. The Senator has 26 minutes remaining.


                           Amendment No. 3336

  Mr. GRAMM. Madam President, we will vote at 5:30 on an amendment I 
have offered, an amendment that is supported by every Republican on the 
Banking Committee. This amendment would strike an unwise and, I 
believe, unfair provision that was put into this credit union bill in 
the House.
  What I would like to try to do in a few moments is to explain what 
credit unions are and how they work. I would like to explain why this 
provision is unwise and unfair. I would like then to read for my 
colleagues the language of this provision to show, by the very words of 
the provision, how it is unworkable and how it is subject to tremendous 
variance in interpretation. Then, contrary to what others might say 
about a provision called ``community reinvestment,'' I would like to 
give some real examples of abuses that are not of benefit to the 
community but rather to special interests.
  Those are basically the points that I want to cover.
  Credit unions are voluntary organizations. They are not for-profit 
organizations. They are organizations that were established under 
Federal law or State law, many during the Great Depression, whereby 
people of modest means pooled their savings and then, from that pool of 
savings, they made loans to others who had joined the pool, often 
making it possible for people to borrow money in small amounts that 
would not have been available through other, commercial sources. And in 
the process, credit unions brought credit literally to millions of 
American families of modest means.
  Recognizing this in their charter, they, as other cooperatives that 
were born during the Great Depression, were granted tax exemption. They 
are totally voluntary organizations tied together by a common bond.
  We have written a bill in the Senate and House because of a court 
ruling which jeopardizes the current status of credit unions.
  In the House of Representatives, a provision was added to this bill 
to require for the first time ever in the history of this country that 
Federal credit unions, and not only Federal credit unions but State 
credit unions as well, be forced to make loans and grant services at 
subsidized rates to people who are not members of the credit union. 
This is following a principle that has been established with the 
Community Reinvestment Act for banks, and I

[[Page S9025]]

want to argue that it does not fit the model of credit unions, and that 
it has certainly been abused in its use for banks.
  I personally will vote for the Shelby amendment to exempt small banks 
from CRA, but my amendment deals with a different subject. We should 
not be imposing with Federal power a mandate that voluntary, nonprofit 
organizations, chartered for the sole purpose of promoting the private 
interests of their members and the cooperative interests of their 
members, provide services, loans and other services, to people who are 
not members of the credit union, people who had an opportunity to join 
but chose not to join. And might I point out, it generally costs 
nothing more than a deposit of five dollars to join a credit union, yet 
these people to be served under these mandates in the bill chose not to 
join.
  Let me read the language. In three different instances this bill 
imposes these new Federal mandates. First of all, it imposes on credit 
unions ``a continuing and affirmative obligation to meet the financial 
services needs of persons of modest means.'' It then requires that the 
Federal Government conduct a periodic review of the records of each 
insured credit union to see that each and every credit union is 
``providing affordable,''--and ``affordable'' is undefined and 
undefinable--``credit union services to all individuals of modest means 
within the field of membership of the credit union.''
  Let me remind my colleagues that not only does the bill mandate that 
the credit union be ``providing,'' not offering to provide but actually 
providing, its services, meaning that they must be offered and accepted 
in order to meet the standard, but the bill mandates that the services 
and credit be ``affordable,'' an undefined and undefinable term.
  The bill then uses equally expansive terms to identify to whom these 
affordable services and loans are to be provided: ``All individuals . . 
. within the field of membership of the credit union.'' That is far 
different from the number of people who chose to join a credit union. 
If a credit union represents a common bond of people who work for a 
company or people who live in a community, a credit union is very 
successful if 20 percent of the people who had the opportunity to join 
the credit union actually chose to do it.
  If this House provision remains in the bill, we will be mandating 
that the hard-earned savings of credit union members be used to provide 
subsidized services to people who had an opportunity to join the credit 
union but who chose not to afford themselves that opportunity.
  This provision also requires that the evaluation of the credit union 
made by the Federal examiners be made public.
  With regard to community credit unions, the provision requires that 
the credit union meet the credit needs and credit union service needs 
of the entire field of membership, and that procedures for remedying a 
failure be established--again, for the first time ever in the history 
of this country requiring voluntary nonprofit organizations to grant 
subsidized services to people who are not members of those 
organizations.
  And, finally, a third time the legislation mandates, and again in 
words that are undefinable, that the credit union, as a condition tied 
to its federal deposit insurance, insurance that it pays for out of its 
capital provided by its members in a self-financing system, must be 
satisfactorily providing affordable credit union services to all 
individuals of modest means within its field of membership--again, not 
people who joined the credit union. And, as before, the terms 
``satisfactorily'' and ``affordable'' are undefined and totally 
undefinable.
  What is this really about? I want to use, I am afraid, somewhat harsh 
language to describe what this is about, there are not any other terms 
which really describe it. We must begin by recognizing that we had to 
pass a bill to deal with a court decision with regard to credit unions. 
Then we are seeing a rider added to this bill, in essence an effort to 
hold this bill hostage, these CRA provisions that for the first time 
will force credit unions to use their resources for something other 
than promoting the well-being of their members. These so-called 
community reinvestment provisions are often abused and often can turn 
into something very different than the term ``community reinvestment'' 
would suggest.
  I want to give you three examples of the kind of problems that are 
happening on a regular basis with regard to the application of CRA to 
banks. We do not want these things to happen to credit unions, and 
someday we are going to stop them from happening to banks. I would like 
to begin that soon.
  The first has to do with California First Bank. California First Bank 
sought to merge in 1989 with Union Bank. When the merger was announced, 
protesters showed up and filed a protest under the Community 
Reinvestment Act opposing the merger of California First Bank and Union 
Bank. They met with the leadership of the California First Bank, and 
after delaying that merger, an agreement was entered into in return for 
removing the protest to the merger. California First Bank agreed to 
increase purchases from women and minority-owned vendors to 20 percent 
of total purchases. They agreed to make charitable contributions in the 
amount of 1.4 percent of net income in 1989 and 1.5 percent of net 
income in 1990. They made a commitment that 60 percent of employees 
placed in middle and senior management positions within 5 years would 
be minorities and women. And finally, they agreed, as a condition for 
the removal of this protest, that they would appoint three minority and 
women directors to the bank.
  Sumitomo Bank in California is a bank that I do not know, but I 
assume it is an affiliate bank of the Japanese bank operating in 
California. I suspect that it has specialized in providing services, 
corresponding bank services to companies that do business in Japan and 
Japanese companies that do business in the United States. Sumitomo Bank 
had an action filed against them under the Community Reinvestment Act, 
and as a result of this filing, they were ultimately forced into the 
following agreement. And I would like to ask you, if this were a bank 
from one of our States that was operating in the Dominican Republic and 
a group of professional protesters came into the bank and protested its 
operations and demanded and received the following things, what would 
we call it?
  This Japanese affiliate bank was required under this agreement to 
make $500 million of CRA-related loans over 10 years; to spend 2 
percent of income on charitable or not-for-profit organizations, two-
thirds of the money going to inner-city organizations; appoint minority 
board members to the bank; appoint a paid five-member minority advisory 
board to consult with management; and give 20 to 25 percent of outside 
contracts to minority-owned vendors.
  I submit that, while it is a harsh word to say, if an American bank 
in the Dominican Republic had been forced to do these things, we would 
have called it extortion. Yet this is happening every year in America.
  Let me give another example. When NationsBank and the Bank of America 
recently sought to merge, both banks had excellent CRA reports. They 
had been graded annually, and they had historically invested 
substantially in the inner-city areas that they served. Yet, despite 
the fact that both banks had excellent CRA reports, a group of 
professional protesters opposed the merger. Currently, they are 
endeavoring to hold up the merger, and one of the protesters was 
recently quoted as saying, ``We will close down their branches and 
ensure they fail in California. This is going to be a street fight and 
we are prepared to engage in it.''
  Madam President, what has really happened to CRA provisions for banks 
is that we have literally set up a procedure whereby professional 
protesters lodge a complaint in the name of community reinvestment 
every time banks seek official approval of any action, and based on 
those complaints, in holding up that action, they are able to force 
companies to sign agreements to set quotas in purchasing, quotas in 
hiring, quotas in promotion, and they literally force the bank to 
donate money to organizations of which they themselves, on occasion, 
are part or beneficiaries.
  I submit that community reinvestment, while the name is a wonderful 
name, and we all support it, has really turned into a system that is 
terribly abused. It has become virtually a system of legalized 
extortion whereby a

[[Page S9026]]

small number of professional protesters are able to go into a bank and 
literally threaten that bank with the inability to do its business 
unless they are, in some form, in some fashion, paid off.
  I think this is fundamentally wrong. It is very difficult to get 
banks to talk about it, obviously, because when people have been 
extorted, it is hard to get them to go public. But the plain truth is, 
I think if people look at what is happening to NationsBank and Bank of 
America, even though both of them have excellent records, and in the 
reports that are filed annually have consistently received high 
ratings, yet they are being shaken down by protesters who are trying to 
hold up their merger, asking for additional concessions.
  When we look at what California First Bank and this Japanese 
affiliate were forced to do, in terms of payments of cash, in terms of 
hiring people to serve on ``advisory boards,'' it reminds me of an 
immigrant merchant working with his family. This immigrant merchant is 
trying to eke out a living in a little store, when these big heavies 
walk into his store and say: You know, you need protection. You need 
somebody to make sure that somebody doesn't come in here and tear up 
your business or hurt you. And you give us 5 percent of what you earn 
and we will protect you.
  I think it is fundamentally wrong, when we have established terms 
that are so undefined as ``affordable,'' terms such as ``satisfactorily 
providing affordable,'' so that we are literally allowing American 
business to be shaken down. I don't want this to happen to credit 
unions. I don't like the fact that it is happening to banks. I believe 
that we will ultimately fix this problem. I think we should.
  Some people are going to say that the credit unions are not actively 
opposing the CRA mandates in the bill. The credit unions were told that 
if they opposed this provision in the bill that they might not get the 
bill, that it might be held up. So needless to say, I am not surprised 
under those circumstances that they have not come forward to say that 
they oppose these mandates.
  But I believe these mandates should be stricken. I think that they 
have no role in the credit union bill. I think it is fundamentally 
wrong, to require that voluntary nonprofit organizations, established 
to provide cooperative financial services to people who voluntarily 
come together in a credit union--it is wrong to force them to take 
their money and their services and, in essence, give them to people who 
are not members of their credit union.
  I think it is fundamentally wrong. Striking those mandates is what my 
amendment is about. I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Madam President, how much time is left to the proponents 
of the measure?
  The PRESIDING OFFICER. The proponents have 6 minutes 44 seconds; the 
opponents have 19 minutes 30 seconds.
  Mr. D'AMATO. Madam President, I would like to take up to 5 minutes.
  I support the Senator's efforts, the efforts of the Senator from 
Texas, Senator Gramm. As strenuously as I have argued against the 
inclusion of legislation that would affect community banks and CRA, I 
do not believe this is the time for us to go forward and place the same 
CRA provisions, which are so controversial as they relate to community 
banks, on the backs of credit unions.
  We want to see that credit unions are soundly run. We want to protect 
the taxpayers. We want to see that credit unions can do their business, 
and that business is to make the small loans that others traditionally 
are not willing to make. I am going to ask that a letter from the 
National Credit Union Association, written by Robert E. Loftus, 
Director, Public and Congressional Affairs be printed in the Record in 
a minute, but I want to read this part out, relating to inquiries we 
made as to what obligations the CRA portions of our bill would require. 
He says, ``Our investigations have not produced any evidence that 
credit unions are guilty of redlining or other discriminatory 
practices.''
  Madam President, I ask unanimous consent the letter from Mr. Loftus 
dated June 1, 1998, be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                   National Credit


                                         Union Administration,

                                     Alexandria, VA, June 1, 1998.
     Mr. Phil Bechtel, Chief Counsel,
     Ms. Madelyn Simmons, Professional Staff Member,
     Committee on Banking, Housing, and Urban Affairs, U.S. 
         Senate, Washington, DC.
       Dear Phil and Madelyn: Thank you for your efforts in 
     obtaining Banking Committee approval of H.R. 1151. NCUA 
     greatly appreciates the work you and the Banking Committee 
     staff put into crafting a compromise bill.
       I am writing in response to your request that NCUA analyze 
     the effects on credit unions of the community service 
     requirement in section 204 of H.R. 1151. Of course, NCUA's 
     ultimate disposition of this issue lies in the hands of the 
     NCUA Board; these comments reflect only staff views and not 
     the Board's position.
       Consistent with the language of the bill, NCUA will strive 
     to focus on performance and ``not impose burdensome paperwork 
     or recordkeeping requirements.'' Our goal will be, to the 
     maximum extent possible, to rely on records credit unions 
     already maintain in order to minimize the costs of evaluating 
     service to low- and moderate-income members. We believe that 
     this approach is appropriate, as our investigations have not 
     produced any evidence that credit unions are guilty of 
     redlining or other discriminatory practices.
       If the final version of H.R. 1151 requires NCUA to 
     implement a community service requirement, one possible 
     approach might be that taken in a recent proposed regulation. 
     A proposal before the NCUA Board in March (attached) would 
     have required credit unions applying for a new or expanded 
     community charter to document their plans to serve all 
     segments of the community. We believe that the proposed 
     regulation might provide a framework for implementation of 
     section 204.
       Implementation of section 204 will be a time-consuming and 
     difficult process, as the Board will have to agree on the 
     meaning of terms such as ``periodically'' and ``criteria'' 
     after a public comment period which will run for several 
     months. Staff expects that developing the community service 
     regulation will be the most challenging part of implementing 
     H.R. 1151. Although there will be some additional cost, until 
     a regulation is in place, it will be impossible for staff to 
     estimate the amount of the costs to the agency and credit 
     unions.
       Thank you again for your efforts on behalf of credit unions 
     and their members. I assure you that the NCUA Board will 
     implement the final version of the legislation with all due 
     speed. If you have further questions, please feel free to 
     contact me.
           Sincerely,

                                             Robert E. Loftus,

                                              Directir. Public and
                                            Congressional Affairs.

  Mr. D'AMATO. Madam President, there is no evidence that people are 
not getting credit that they should be getting. This legislation is ill 
conceived, to place these burdens on these small credit unions and 
credit unions that are by their nature nonprofit and voluntary. I don't 
understand this. To paraphrase the statement that has been used often, 
``This is a solution in search of a problem.'' We don't even have a 
problem and we are coming up with a solution.
  Let's look and see what the National Credit Union Administration 
says. These are the people who are going to draw the rules enforcing 
this vague open-ended legislation. Listen to what they say about 
implementing the legislation that imposes the CRA requirements:

       This will be a time-consuming and difficult process, as the 
     Board will have to agree on the meanings of terms such as 
     ``periodically'' and ``criteria.''

  This legislation, as it is written, is ambiguous. This is not the 
time for my colleagues to be putting this kind of legislation into law. 
This proposed legislation is wrong. The letter from the National Credit 
Union Administration goes on and says:

       . . . after a public comment period which will run for 
     several months. Staff expects that developing the community 
     service regulation will be the most challenging part of 
     implementing H.R. 1151.

  My gosh, there you have the people who are going to administer these 
CRA provisions, as well-intentioned as they might be, saying that 
developing the community service regulation will be the most 
challenging part of implementing H.R. 1151. The National Credit Union 
Administration is saying that this is going to be the most difficult 
part of the law. Furthermore, there is no community service problem 
that is outstanding. I don't think we want to engage in this type of 
legislation.

[[Page S9027]]

  Last but not least, let me say what we should be doing and what the 
administrator of the credit unions, the National Credit Union 
Administration, should be doing is concentrating on seeing to it that 
those few credit unions that may have trouble with their capital 
standards, et cetera, are subject to the prompt corrective action 
provisions in the bill so that the taxpayers are protected.
  Let's protect the taxpayers, and let's see to it that credit unions 
do what they have done best, and that is to be available to the 
community that often has had difficulty getting credit. That is what 
this is about. That is what this legislation should be about.
  As strongly as I am opposed to an attempt to strip out CRA from 
community banks, it is ill conceived to place these kinds of 
legislative prerogatives and requirements on credit unions that are not 
even adequately defined and that the National Credit Union 
Administration itself says will be the most difficult to undertake.
  I yield the floor.
  Mr. SARBANES. Madam President, what is the time situation?
  The PRESIDING OFFICER. The Senator from Maryland controls 19 minutes, 
20 seconds, and the Senator from Texas controls 2 minutes, 29 seconds.
  Mr. BYRD. Madam President, will the distinguished Senator from 
Maryland yield me just 15 seconds so that I might make a request?
  Mr. SARBANES. Certainly, I yield to the Senator.
  Mr. BYRD. I thank the Senator.
  Madam President, I ask unanimous consent that upon the disposition of 
the two rollcall votes this afternoon, I be recognized to introduce a 
bill and to speak thereon.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BYRD. I thank the Chair.
  Mr. SARBANES. Madam President, a lot has been said here this 
afternoon. I regret some of the rhetoric. I don't think it advances a 
rational discussion of the issue, to talk about extortion and piracy, I 
must say, because I think there are very important issues here with 
respect to CRA, and I want to cover both of them since a lot of the 
arguments that are used on the amendment pending before us which would 
remove from the bill a sort of modified version of CRA which would be 
placed on credit unions, which was in the bill as it came over to us 
from the House of Representatives--a lot of those arguments really 
relate to CRA as it applies to banks, and that application is being 
used to make an argument with respect to credit unions.
  First of all, it had been asserted earlier that the rationale for CRA 
which Senator Proxmire advanced back at the time of its passage in 1977 
has all eroded, but the fact of the matter is, when that argument was 
made, one of the major points that Senator Proxmire advanced for the 
application of CRA was omitted from the list of considerations; namely, 
that deposit insurance is available to these institutions and the 
importance of deposit insurance.
  This was underscored, of course, because in the 1980s Federal 
insurance for the savings and loans cost us $132 billion, without 
counting the indirect costs that were incurred in interest payments in 
order to finance the direct payments which were necessary.
  Many of those who are arguing against are against any CRA requirement 
for any federally insured financial institutions, and I think it is 
important to understand that. Of course, I come from a very different 
point of view.
  The fact of the matter is that CRA does not require a bank to make 
subsidized loans. It doesn't require it to make uncreditworthy loans. 
It doesn't require it to lend to a particular individual. It is not an 
allocation of credit.
  What it requires it to do is pay attention to its community so it 
can't simply take money out of the community and, in effect, not be in 
the posture of putting money back into the community, which is, of 
course, what the act says community reinvestment is.
  Federal Reserve Chairman Alan Greenspan has pointed out:

       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 area X or loan product Y, that is not credit 
     allocation. That, indeed, is enhancing the market.

  What this has enabled us to do is to draw into the mainstream of 
economic life communities that had previously been neglected. It has 
worked well, and there is every reason that it also should apply to the 
credit unions who, of course, also get the benefit of a Federal 
guarantee standing behind their insurance fund.
  With respect to these sharp statements about how CRA has been used by 
community groups, let me quote on the record some of the statements 
that banks and bankers have said about it.
  The Bank of America says:

       Over the past several years, Bank of America, in 
     partnership with community organizations, has developed CRA 
     lending into a profitable mainstream business * * *. We have 
     taken what began as a compliance function and turned it into 
     a business line that makes economic as well as social sense.
       We believe we have demonstrated over the past several years 
     that when institutions develop CRA programs as a business 
     tool, and provide lending products with flexible but prudent 
     underwriting criteria, low-income lending can be safe, sound 
     and profitable.

  ``* * * low-income lending can be safe, sound and profitable.''
  I ask unanimous consent that this public statement by Bank of America 
be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

              Bank of America Voices Support of CRA Reform


     Says Low-Income lending can be ``Safe, Sound, and Profitable''

       San Francisco, March 9, 1995.--Bank of America said today 
     that it supports ongoing efforts to reform the Community 
     Reinvestment Act by increasing its focus on lending 
     performance.
       ``Over the past several years, Bank of America, in 
     partnership with community organizations, has developed CRA 
     lending into a profitable mainstream business,'' said BofA 
     Executive Vice President Donald A. Mullane. ``We have taken 
     what began as a compliance function and turned it into a 
     business line that makes economic as well as social sense.
       ``We believe we have demonstrated over the past several 
     years that when institutions develop CRA programs as a 
     business tool, and provide lending products with flexible but 
     prudent underwriting criteria, low-income lending can be 
     safe, sound and profitable.''
       The bank reported earlier this week that it provided $5.9 
     billion in CRA loans in the western U.S. during 1994.
       ``As we have said repeatedly during the public debate on 
     the future of CRA, we believe it continues to play a valuable 
     public policy role by promoting more innovative and 
     widespread reinvestment activities by the financial services 
     industry.''
       BofA made its comments in a letter to Rep. Marge Roukema, 
     who chairs the House Banking Subcommittee on Financial 
     Institutions and Consumer Credit. The subcommittee is holding 
     hearings this week on the effectiveness of the CRA and on 
     ongoing efforts by regulators to revise the 17-year-old law.
       Mullane, as co-chair of the national Consumer Bankers 
     Association's Community Reinvestment Committee, provided a 
     written statement to Roukema's committee representing the 
     national trade association's position on CRA reform. He said 
     BofA's letter was written to clarify the bank's position as 
     an individual institution.
       ``Our industry is not a monolith and there is a wide 
     divergence of opinion regarding the effectiveness of the 
     CRA,'' Mullane said. ``We respect those differences and 
     believe in a full and open dialogue on the future of this key 
     banking regulation.
       ``But we want to be clear that Bank of America has been and 
     continues to be a strong advocate of the CRA process, and we 
     support current efforts by federal banking regulatory 
     agencies to revise CRA regulations so that they focus more on 
     actual lending performance than paperwork.''
       Regarding specific elements of CRA reform, Mullane said 
     Bank of America:
       Supports the collection of race and gender data on small 
     business and consumer loan applications, as advocated by 
     community organizations, but only if it is required of all 
     small business lending providers, not just those institutions 
     currently regulated by CRA. Banks provide only approximately 
     30 percent of small business loans in the country, Mullane 
     said, and without full reporting by all providers, such data 
     would give a distorted view of the small business lending 
     market.
       Supports a ``safe harbor'' provision protecting 
     institutions with a CRA rating of ``outstanding'' from 
     protests during mergers and acquisitions.
       Believes that CRA should apply equally to all banks, 
     regardless of size. CRA should also provide new market-based 
     incentives to encourage nonbank financial service providers 
     to engage in community development lending and investments.

  Mr. SARBANES. Madam President, I ask unanimous consent that a letter

[[Page S9028]]

from LaSalle Talman Bank in Chicago be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                          LaSalle Talman Bank,

                                       Chicago, IL, March 3, 1995.
     Hon. Marge Roukema,
     House of Representatives, Chairwoman, House Subcommittee on 
         Financial Institutions & Consumer Credit, Rayburn House 
         Office Building, Washington, DC.
       Dear Representative Roukema: Through our subsidiary, the 
     LaSalle Talman Home Mortgage Corporation, we are the largest 
     residential mortgage lender in both the Chicago metropolitan 
     area and the state of Illinois.
       Our orientation and focus of lending has been consistent 
     with the mandates of the Community Reinvestment Act (CRA). In 
     fact, it predates the actual introduction of the CRA in 1977. 
     For the record, our institution was also providing voluntary 
     mortgage disclosure data before the passage of the Home 
     Mortgage Disclosure Act (HMDA).
       CRA has proved to be a positive force here in Chicago. It 
     has been the instrument that has provided millions of dollars 
     in investment that has financed home purchase, rehabilitation 
     and home improvement, and new construction in once 
     underserved communities.
       CRA is not bad business or ``have to'' business. CRA allows 
     discretion and choice to the lender. It allows for reasoned 
     negotiation and workable solutions. It has provided a forum 
     where financial institutions, corporations, and community 
     organizations can work in a spirit of cooperation to meet 
     community credit needs.
       Today we are disturbed by news coming from Washington, 
     viz., that efforts are underway to repeal or undermine the 
     Community Reinvestment Act.
       There is a need to revise some aspects of the CRA, and 
     recent hearings and rule changes were to do that. That has 
     not happened. Changes are needed. Repeal is not!
       Chicago, and indeed all of our nation's cities, need the 
     positive force of CRA. Without CRA the prospects of a return 
     to the terrible social turmoil and destructive results of 
     pre-CRA days becomes a very real possibility.
       I express my support for the continuance of the Community 
     Reinvestment Act.
           Sincerely,
                                                  Thomas J. Gobby,
                                            Senior Vice President.

  Mr. SARBANES. Madam President, this letter states:

       Through our subsidiary, LaSalle Talman Home Mortgage 
     Corporation, we are the largest residential mortgage lender 
     in both the Chicago metropolitan area and the state of 
     Illinois.
       . . . CRA has proved to be a positive force here in 
     Chicago. It has been the instrument that has provided 
     millions of dollars in investment that has financed home 
     purchase, rehabilitation and home improvement, and new 
     construction in once underserved communities.
       CRA is not bad business or ``have to'' business. CRA allows 
     discretion and choice to the lender. It allows for reasoned 
     negotiation and workable solutions. It has provided a forum 
     where financial institutions, corporations, and community 
     organizations can work in a spirit of cooperation to meet 
     community credit needs.

  The objective is to meet these community credit needs. We have 
discovered now a path down which we can go and which, in the course of 
meeting the community needs, the financial institutions benefit and 
profit from it.
  Reference was made to the Sumitomo Bank of California. I ask 
unanimous consent that a statement of Sumitomo released in March 1997 
be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

          Sumitomo Bank Announces 1997 Community Outreach Plan

       San Francisco, March 6.--At a press conference today, 
     Sumitomo Bank of California (Nasdaq: SUMI) announced its 1997 
     Community Outreach Plan. A full text of the Bank's statement, 
     as provided by Tsuneo Onda, President and CEO, is provided 
     below.
       ``In January of 1993, Sumitomo Bank of California announced 
     its Ten-Year Community Reinvestment Act (CRA) Goals. At the 
     time, it was widely praised by advocacy groups as the most 
     comprehensive and largest commitment of its type.
       ``I am proud to announce that just four years into the 
     plan, our Bank has made great progress. In terms of lending, 
     the most significant of the goals, we have already made $349 
     million of CRA loans since 1993, just under seventy percent 
     of our $500 million ten-year goal. This includes loans to 
     low- to moderate-income home buyers, Small Business 
     Administration loans, and loans in redevelopment and 
     enterprise zones, among others. I believe that this is an 
     outstanding accomplishment, especially in light of the fact 
     that our Bank has actually declined in size over that period.
       ``Encouraged by our success to date, we have decided to 
     reaffirm our commitment by expanding our original Goals. 
     Based on our progress, we will strive to achieve our original 
     $500 million CRA loan goal within six years, four years 
     earlier than originally targeted. Not stopping there, we will 
     double our 1993 goal, targeting a total of $1.0 billion in 
     CRA loans over the original ten-year time-frame. In addition 
     to the loan goal, we will expand our Community Advisory Board 
     from five to ten members, and will aim for greater diversity 
     in our use of vendors and in our philanthropic support of 
     community organizations. Our goals are extremely challenging, 
     but we feel they are consistent with our business plans and 
     we will do our best to achieve them.
       ``Community outreach will be the key to achieving our 
     goals, and that is why we have named our new plan the ``1997 
     Community Outreach Plan.'' As a start, we are in the process 
     of creating a new CRA unit, specifically dedicated to 
     ensuring the achievement of our goals. This new unit will 
     concentrate on identifying ways to expand and improve our 
     involvement with a more diverse customer base, including 
     those with whom we have not previously established business 
     relationships.
       ``Perhaps our most important effort will be in the 
     communities themselves. Our goals can best be achieved 
     through a cooperative effort between our Bank and the people 
     in the communities we serve. We believe that the 
     establishment of working relationships with minority-owned 
     financial institutions that are already doing business in 
     these communities will be one important aspect of our 
     outreach efforts. In that regard, we are presently developing 
     a relationship with a African American-owned bank located in 
     South Central Los Angeles. In addition, we have sought and 
     received the support of a broad range of community groups. As 
     we develop concrete projects with these groups, we will be 
     making additional announcements.
       ``In closing, I believe that our 1997 Community Outreach 
     Plan is a mutually beneficial plan that will greatly assist 
     all the communities we serve, while helping our Bank achieve 
     our own business goals.''

  Mr. SARBANES. Madam President, in this statement they reaffirm their 
CRA commitment and announce an expansion of their CRA goals. Sumitomo 
itself came in and said they were proud to announce that, just 4 years 
into the plan, the bank had made great progress. They then quote some 
figures of how they come close to meeting their various goals:

       Encouraged by our success to date, we have decided to 
     reaffirm our commitment by expanding our original Goals. 
     Based on our progress, we will strive to achieve our original 
     . . . goal within six years, four years earlier than 
     originally targeted. . . .

  They doubled their goal. So they recognize that it was working, that 
it was mutually beneficial. They closed by saying this ``will greatly 
assist all the communities we serve, while helping our Bank achieve our 
own business goals.''
  Recently The Enterprise Foundation, which of course was founded by 
Jim Rouse, one of the great visionaries, in my judgment, in our Nation 
with respect to community development, urban planning, affordable 
housing, they described in a publication ``Community Reinvestment, Good 
Works, Good Business''--``Good Works, Good Business''--they cited 
programs in Florida, Missouri, Iowa, California, Nebraska, New York, 
Minnesota, and New Jersey as examples, cited the banks, the programs 
they were carrying out under CRA. And they went on to say:

       Many banks have discovered that community lending is good 
     business. These banks would continue to meet their 
     obligations regardless of federal requirements. But others 
     need encouragement, and CRA has proven effective at providing 
     this. CRA has helped banks discover new markets and profit 
     opportunities that they otherwise might have overlooked.

  We had all these complaints about paperwork, overregulation. The 
regulators undertook a major effort to slim that down, with great 
success. The various banking associations, after that was completed, 
appraised the process through which we had gone in order to simplify 
and streamline this process. So it is working. It is bringing in these 
communities. It is drawing people into the financial mainstream. And it 
seems to me a reasonable requirement.
  Let me make just one final point, because the point is being asserted 
that, well, these banks that would be exempted under the amendment 
offered by Senator Shelby hold a small portion of the assets of all 
banks nationally. But what you have to understand is that 85 percent of 
all banks in the country would be eliminated from the CRA by the Shelby 
amendment. In six States, over 95 percent of the banks fall into this 
category. In nine other States, over 90 percent of the banks fall into 
this category. There are 30 States in which 80 percent of the banks 
fall into this category.
  Many are rural States. CRA is often perceived as benefiting the urban 
areas

[[Page S9029]]

of our country. However, rural areas, no less than urban areas, benefit 
from CRA.
  I ask unanimous consent to have printed in the Record a letter from a 
coalition of rural and farm groups in opposition to the Shelby 
amendment.
  There being no objection, the material 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 to 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; United Methodist Church, General Board of 
           Church and Society.

  Mr. SARBANES. That letter says, in part:

       Rural Americans need 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.

  Madam President, I ask unanimous consent that a letter from more than 
40 community groups with respect to CRA and with respect to both the 
Shelby and the Gramm amendment be printed in the Record as well.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

         Vote Against the Anti-Community Reinvestment Amendments 
           to H.R. 1151
                                                    July 13, 1998.
       Dear Senator: The credit union bill (H.R. 1151) is 
     currently scheduled for consideration by the full Senate this 
     Friday (July 18). We understand that Sen. Shelby will offer 
     an amendment that would have the effect of substantially 
     curtailing coverage for banks under the Community 
     Reinvestment Act (CRA). Additionally, Sen. Gramm is planning 
     to offer another amendment to strike provisions in H.R. 1151 
     intended to ensure that credit unions serve persons of modest 
     means within their fields of membership and consistent with 
     safe and sound operation. We urge you to vote against both of 
     these amendments.
       CRA is a 1977 law that was enacted to combat the practice 
     of redlining by taxpayer-backed federally insured banks and 
     savings institutions. The Shelby amendment offered 
     unsuccessfully in the Senate Banking Committee exempts banks 
     with under $250 million in assets from all CRA requirements 
     (more than 85% of all banks). Should this amendment be 
     adopted, it would mean that the vast majority of insured 
     depository lenders would be free to redline or otherwise 
     discriminate with impunity against the residents of certain 
     urban and rural geographies.
       CRA is a law that works! Almost $400 billion is estimated 
     to have been committed by banks for affordable housing, small 
     business lending, and community development in under-served 
     urban and rural communities since 1977. These commitments 
     have opened up opportunities for modest income families, 
     small firms and small family farmers to purchase a home, and 
     start up and expand their businesses. CRA has helped to 
     ``jump start'' the market in these under-served areas.
       CRA has produced substantial benefits at no cost to the 
     taxpayer. Former Federal Reserve Board Governor Lawrence 
     Lindsey said that CRA accounts for billions of dollars being 
     invested annually in low-income areas without employing a 
     large bureaucracy. For these reasons, US News and World 
     Report refers to CRA as an ``ideal government initiative.'' 
     Community reinvestment lending has helped to take the place 
     of dwindling federal resources for community development.
       The Shelby amendment is a solution in search of a problem. 
     The recently adopted CRA regulations were specifically 
     designed to streamline the examination process for small 
     banks and thrifts. Under the revised rules, banks and thrifts 
     with an asset size of less than $250 million are exempt from 
     all reporting requirements and are no longer subject to 
     process-based documentation requirements. Instead, examiners 
     now look at a small bank's loan-to-deposit ratio, percentage 
     of portfolio in local loans, distribution of loans across 
     geographies and income levels, and responses to any 
     complaints about its CRA performance. As a result, federal 
     regulators report that they no longer receive complaints from 
     small banks about the examination process for CRA.
       Small banks have praised the new CRA regulations, adopted 
     in 1995. The Independent Bankers Association of America 
     (IBAA) ``hailed the final interagency CRA rules . . . as a 
     big step in regulatory burden reduction for community 
     banks.'' The IBAA ``[commended the regulators for instituting 
     a meaningful, streamlined tiered examination system that 
     recognizes the differences between community banks and their 
     large regional and multinational brethren.'' (IBAA, press 
     release, April 19, 1995).
       ``Small Banks Give Thumbs-Up To Streamlined CRA Exams.'' 
     This headline from the February 1, 1996 American Banker 
     reflects the positive experience that small banks have had 
     since the new regulations have gone into effect. For example, 
     the same article cites the experience of one small bank after 
     its first CRA exam under the new rules. The bank's CRA 
     officer said, ``We are done with it, and it was definitely 
     less burdensome. We only had one examiner . . . She got here 
     on Wednesday at 1 p.m. and left the following day at noon . . 
     . It was a lot less time consuming. They are not requiring 
     a lot of documentation.''
       Please do not allow this important law to be weakened. We 
     urge you to vote against the Shelby and Gramm anti-CRA 
     amendments.
       Association of Community Organizations for Reform Now 
     (ACORN).
       Alliance to End Childhood Lead Poisoning.
       Americans for Democratic Action.
       Center for Community Change.
       Consumers Union.
       Corporation for Enterprise Development.
       Employment Support Center.
       The Enterprise Foundation.
       The Greenlining Institute.
       Housing Assistance Council.
       International Brotherhood of Teamsters.
       Jesuit Conference.
       Leadership Conference on Civil Rights.
       Local Initiatives Support Corporation.
       McAuley Institute.
       National Association for Community Action Agencies (NACCA).
       National Association for the Advancement of Colored People 
     (NAACP).
       National Community Capital Association.
       National Community Reinvestment Coalition.
       National Congress for Community Economic Development.
       National Council of La Raza.
       National Fair Housing Alliance.
       National Family Farm Coalition.
       National Housing Trust.
       National League of Cities.
       National Low Income Housing Coalition.
       National Neighborhood Housing Network.
       National Neighborhood Coalition.
       National People's Action.
       National Puerto Rican Coalition.
       Neighborhood Housing Services of New York City, Inc.
       NETWORK: A National Catholic Social Justice Lobby.
       Organization for a New Equality (ONE).
       Ralph Nader.
       Seedco.
       Southern California Association of Non-Profit Housing.
       Surface Transportation Policy Project.
       U.S. Conference of Mayors.
       U.S. Public Interest Research Group (PIRG).
       Union of Needletrades, Industrial & Textile Employees 
     (UNITE).
       United Auto Workers Union (UAW).
       United Church of Christ, Office for Church in Society.
       Woodstock Institute.

  Mr. SARBANES. Madam President, let me just very quickly focus on the 
credit unions only. This debate has tended to overlap both areas. It is 
done

[[Page S9030]]

by the proponents of the amendment and, of course, we have responded 
too, because, in part, your attitude is going to be affected by how you 
see CRA functioning and whether you perceive it as bringing beneficial 
impacts or whether you perceive it as being harmful or not. I submit 
there is strong evidence that it has brought significant beneficial 
impacts, and many of the studies have supported that.
  What is being applied to the credit unions in this legislation is not 
the full CRA provision. But this does require the credit union 
regulator, the National Credit Union Administration, to review the 
record of each insured credit union in providing credit union services 
to all individuals of modest means within the field of membership of 
the credit union.
  It would not require them to go outside of the field of membership. 
They could not be required to give a loan to someone who was not a 
member of the credit union because that is a requirement of credit 
unions in terms of their loan policy. But they would have to try to 
draw in, make an effort to draw in people who were within the field of 
membership. They would have to concern themselves with trying to bring 
both low- and moderate-income as well as the sort of very top of the 
line within their field of membership.
  The NCUA has directed a focus on the actual performance of the credit 
union not to impose burdensome paperwork or record-keeping 
requirements. This provision included in the House bill that was sent 
to us has been crafted to respond to the situation of credit unions. It 
is an effort to encourage them to meet the financial service needs of 
all their members and to reach out to those in the field of membership 
who have not yet joined and gotten the benefit of the credit union's 
services.
  It is really a modest proposal. It has been suggested that the credit 
unions are not fiercely opposing it because they have somehow or other 
been coerced into that position--that is certainly not my 
understanding--just as it has been suggested that we need to get people 
to talk to some of these bankers who favor the CRA.
  We are told, ``Well, now we have these people who are against it. We 
cannot identify them because if we identify them then they are going to 
get into a lot of trouble.'' Well, I have people I can identify who 
would tell you that CRA has worked, that it has made an important 
impact, that the financial institution has found it not to be a burden 
but has found it actually to be profitable, that it has developed a 
better relationship in terms of their service area in terms of 
providing needed financial services. In effect, we are gaining public 
benefits from it, from an industry which received very significant 
public benefits in the sense of the insurance, the backup to the 
insurance, the Federal Government guarantee, access to low-cost credit 
through the Federal Reserve window and the Federal Reserve payment 
system.
  This is enabling us to make very significant progress. The estimates 
in terms of the money that has gone into previously neglected 
communities is in the hundreds of billions of dollars. This is an 
effort to make capitalism work in a broader expanse, both 
geographically and in terms of the individuals who then are drawn in to 
play a part in the system.
  I know some harsh language has been quoted earlier by community 
groups. I do not begin to try to justify or excuse that harsh language, 
although I must say some pretty harsh language has been used here on 
the floor of the Senate which I also regret. But we ought to look at 
this as an opportunity. This is turning into a win-win situation. It 
enables us then to sort of say, look, this economic system can work for 
everybody.
  Those of you who are sort of complaining that you are shut out of 
this economic system, we have found ways to make this system--to open 
it up so it works for everybody. The institutions make a profit. They 
do good. They do well by doing good. People who otherwise would be 
fighting the system are drawn into the system. They become a part of 
the workings of this, of our financial structure and, therefore, become 
able to make a contribution to our society.
  It has brought enormous benefits in so many areas of the country. As 
I said, the Chicago Bank says, ``It's a positive force here in Chicago. 
It has been the instrument that has provided millions of dollars in 
investment that has financed home purchases, rehabilitation, and home 
improvement and new construction in once underserved communities.''
  That is what we are trying to accomplish.
  The Shelby amendment, of course, would eliminate all of that, take us 
back a significant step. The Gramm amendment would prevent the 
extension of this concept of serving the community to the credit 
unions. I oppose it and I very much hope my colleagues would oppose it 
as well.
  The PRESIDING OFFICER. The Senator from Texas has 2\1/2\ minutes.
  Mr. GRAMM. Madam President, I only have a limited amount of time. Let 
me be quick.
  No one is against community investment. Everyone is for community 
investment, and virtually every financial institution in America 
engages in it, and engages in it as much as they can in terms of 
prudent investments.
  Our colleague talks about financial institutions taking money out of 
the community and then the government, through CRA, making them put it 
back into the community. I want to remind my colleagues that credit 
unions do not take money out of the community. Credit unions are 
voluntary organizations which people can choose to join or not to join. 
They cannot take money away, because they can only loan their money to 
their own members.
  Our colleague objects to talk about being forced to grant credit, at 
a subsidized rate, to people that are not members of the credit union. 
But in three different places in the bill it requires that credit 
unions are ``satisfactorily,'' whatever that means, ``providing 
affordable,'' whatever that means, credit to the entire field of 
membership. Not trying to do it, not offering to, but doing it, 
something that clearly is open to any kind of subjective evaluation by 
a regulator. In fact, Senator D'Amato has read from the Federal agency 
that regulates credit unions, how burdensome this is going to be.
  Two final points: Our colleague quotes someone from this Sumitomo 
Bank, about how happy they are. Well, I think you would be saying that, 
too, if in 1993 you had been forced, under the CRA, to give 2 percent 
of your income away, to appoint people to your board that you didn't 
choose to appoint, to set up an advisory board and pay them, the very 
people who are protesting your bank under CRA, make then now a part of 
your organization, and, finally, if had been forced to engage in 
quotas. So I am not surprised that this bank is saying how great 
everything is now. They don't want the same people back in their place 
of business.
  Finally, I appreciate the fact that the Senator gave us the wonderful 
record of the Bank of America in California under CRA, but it doesn't 
seem to have done Bank of America any good. I quote a CRA protester who 
at this moment has lodged a complaint with this financial institution 
against its merger with NationsBank. Despite all their good work, he 
says, ``We will close down their branches and assure they fail in 
California. This is going to be a street fight and we are prepared to 
engage in it.''
  What tyrant in history has not claimed that he was serving the public 
interest when he took private property --not one ever in the history of 
the world.
  Mr. SARBANES. Madam President, I can't control the comments of the 
street protester, just like I can't control the comments of some of my 
colleagues on the Senate floor, since this is a free country with free 
speech.
  Mr. GRAMM. I can protect private property, and that is why I am in 
the Senate.
  Mr. SARBANES. Madam President, I move to table the Gramm amendment 
and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table the Gramm amendment.
  The yeas and nays have been ordered.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from New Mexico (Mr. 
Domenici), and the Senator from Arizona (Mr. McCain) are absent on 
official business.

[[Page S9031]]

  I also announce that the Senator from North Carolina (Mr. Helms) is 
absent because of illness.
  I further announce that, if present and voting, the Senator from 
North Carolina (Mr. Helms) would vote ``no.''
  Mr. FORD. I announce that the Senator from New Mexico (Mr. Bingaman) 
and the Senator from Oregon (Mr. Wyden) are necessarily absent.
  I also announce that the Senator from Iowa (Mr. Harkin) is absent due 
to a death in the family.
  I further announce that, if present and voting, the Senator from Iowa 
(Mr. Harkin) would vote ``aye.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 44, nays 50, as follows:

                      [Rollcall Vote No. 236 Leg.]

                                YEAS--44

     Akaka
     Baucus
     Biden
     Bond
     Boxer
     Breaux
     Bryan
     Byrd
     Cleland
     Conrad
     Daschle
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Ford
     Glenn
     Graham
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerrey
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moseley-Braun
     Moynihan
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Roth
     Sarbanes
     Torricelli
     Wellstone

                                NAYS--50

     Abraham
     Allard
     Ashcroft
     Bennett
     Brownback
     Bumpers
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Collins
     Coverdell
     Craig
     D'Amato
     DeWine
     Enzi
     Faircloth
     Frist
     Gorton
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchinson
     Hutchison
     Inhofe
     Kempthorne
     Kyl
     Lott
     Lugar
     Mack
     McConnell
     Murkowski
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                             NOT VOTING--6

     Bingaman
     Domenici
     Harkin
     Helms
     McCain
     Wyden
  The motion to lay on the table the amendment (No. 3336) was rejected.
  Mr. GRAMM. I move to reconsider the vote.
  Mr. LOTT. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. LOTT. Madam President, we had considered doing the memorial 
resolution between these votes, but we decided, after discussion with 
Senator Daschle, the most appropriate thing would be to go to this next 
vote and then have the memorial resolution read.
  I would like to ask Senators to remain in the Chamber and take their 
seats so that we can hear this memorial resolution. It is not that 
long, but it is very appropriate. I think the Senators will like to 
hear it. Perhaps at that point Senator Daschle, who was not able to 
speak this morning, will want to make a statement, and others, and then 
we will go on to other issues.
  I also want to remind Senators that at 11:50 tomorrow morning, 
Senators are asked to assemble in the Chamber. We will recess at that 
time to go en bloc to the Rotunda to pass through and around the 
coffins of the officers that will be there in the Rotunda. We will be 
back then at about 12:15, and we will go forward with legislative 
business. Then again tomorrow afternoon, at approximately 2:30, we will 
go for the memorial services beginning at 3 o'clock with the President 
and the Vice President in the Rotunda.
  I just wanted Senators to be aware of that. So we will have the 
resolution read. We would like to ask you to stay, if you can, 
immediately following this vote. This next vote will be the last 
recorded vote tonight, although we may try to move to an appropriations 
bill. This will be the last vote tonight. The next vote will be in the 
morning at 10 o'clock on the Shelby amendment, followed by final 
passage on the credit union issue.
  I yield the floor.
  Mr. BYRD addressed the Chair.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. BYRD. Madam President, there is an order that has been entered 
which would allow me to speak immediately upon the disposition of the 
two rollcall votes. I would ask unanimous consent that that order be 
moved to the conclusion of the reading of the resolution.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3337

  The PRESIDING OFFICER. Under the previous order, the Hagel amendment 
is now before the Senate. There are 2 minutes equally divided.
  Mr. HAGEL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska is recognized.
  Mr. HAGEL. I thank the Chair.
  Madam President, I am a supporter of credit unions. I have been a 
member of a credit union. I have been on the board of a credit union. I 
support the original charter for their original purpose. But if we are 
going to change the rules and allow tax-exempt credit unions to get 
more and more into commercial lending and have essentially unlimited 
access to new members, with the common bond being realistically 
eliminated, then additional safety and soundness measures are going to 
have to be required. My amendment strengthens the safety and soundness 
of credit unions with open and honest accounting. It brings some market 
fairness to the relationship between tax-exempt credit unions and tax-
paying small community banks, and it refocuses on the original intent 
of credit unions--on consumer loans and services.
  I encourage my colleagues to vote against tabling the Hagel-Bennett 
amendment. Vote no.
  I thank the Chair.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. I am moving to table this amendment because we have had 
for years no limitations on credit unions and their loans commercially. 
And, by the way, with all that with no limitations, only 1.3 percent 
were made for commercial purposes. Now we impose 12.25 percent. We 
limit them. And to say that we are not doing something when we place 
restrictions on them and you want to go further, I think this is wrong, 
it is ill conceived, and that is why I will move to table.
  I yield the remainder of my time.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. The Secretary of the Treasury has written to the 
leadership after Treasury did a thorough study of credit unions. The 
Secretary says, ``The bill's safety and soundness provisions would 
represent the most significant legislative reform of credit unions' 
safety and soundness since the creation of the share insurance fund.'' 
And then he specifically addresses business lending and says, ``The 
provisions in this legislation represent an adequate response to safety 
and soundness concerns about credit unions' business lending.''
  The PRESIDING OFFICER. The time of the opponents has expired. The 
Senator from Nebraska has 7 seconds.
  Mr. HAGEL. I yield my time back to my distinguished colleagues. They 
need some help with their argument.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table.
  Mr. D'AMATO. I move to table.
  I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table the Hagel amendment. The yeas and nays have been ordered. The 
clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from New Mexico (Mr. 
Domenici) is necessarily absent.
  I also announce that the Senator from North Carolina (Mr. Helms) is 
absent because of illness.
  I further announce that if present and voting, the Senator from North 
Carolina (Mr. Helms) would vote ``no.''
  Mr. FORD. I announce that the Senator from New Mexico (Mr. Bingaman) 
and the Senator from Oregon (Mr. Wyden) are necessarily absent. I also 
announce that the Senator from Iowa (Mr. Harkin) is absent due to a 
death in the family.
  I further announce that, if present and voting, the Senator from Iowa 
(Mr. Harkin) would vote ``aye.''
  The PRESIDING OFFICER (Mr. Allard). Are there any other Senators in 
the Chamber who desire to vote?

[[Page S9032]]

  The result was announced--yeas 53, nays 42, as follows:

                      {Rollcall Vote No. 237 Leg.

                                YEAS--53

     Abraham
     Akaka
     Baucus
     Biden
     Boxer
     Breaux
     Bryan
     Bumpers
     Burns
     Campbell
     Chafee
     Cleland
     Collins
     Conrad
     Coverdell
     Craig
     D'Amato
     Dodd
     Dorgan
     Durbin
     Faircloth
     Feingold
     Feinstein
     Ford
     Glenn
     Gorton
     Grassley
     Hatch
     Hollings
     Inouye
     Johnson
     Kempthorne
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Levin
     Lieberman
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Reed
     Reid
     Roth
     Sarbanes
     Snowe
     Specter
     Stevens
     Torricelli
     Wellstone

                                NAYS--42

     Allard
     Ashcroft
     Bennett
     Bond
     Brownback
     Byrd
     Coats
     Cochran
     Daschle
     DeWine
     Enzi
     Frist
     Graham
     Gramm
     Grams
     Gregg
     Hagel
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Kerrey
     Kyl
     Leahy
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Nickles
     Robb
     Roberts
     Rockefeller
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Thomas
     Thompson
     Thurmond
     Warner

                             NOT VOTING--5

     Bingaman
     Domenici
     Harkin
     Helms
     Wyden
  The motion to lay on the table the amendment (No. 3337) was agreed 
to.
  Mr. D'AMATO. I move to reconsider the vote.
  Mr. SARBANES. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. LOTT addressed the Chair.
  The PRESIDING OFFICER. The majority leader is recognized.

                          ____________________