[Congressional Record Volume 144, Number 108 (Tuesday, August 4, 1998)]
[House]
[Pages H7037-H7052]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   CREDIT UNION MEMBERSHIP ACCESS ACT

  Mr. LEACH. Mr. Speaker, I move to suspend the rules and concur in the 
Senate amendment to the 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 Clerk read as follows:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

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

                    TITLE I--CREDIT UNION MEMBERSHIP

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

                 TITLE II--REGULATION OF CREDIT UNIONS

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

        TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS

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

                   TITLE IV--MISCELLANEOUS PROVISIONS

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

     SEC. 2. FINDINGS.

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

     SEC. 3. DEFINITIONS.

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

     SEC. 101. FIELDS OF MEMBERSHIP.

       Section 109 of the Federal Credit Union Act (12 U.S.C. 
     1759) is amended--
       (1) in the first sentence--
       (A) by striking ``Federal credit union membership shall 
     consist of'' and inserting ``(a) In General.--Subject to 
     subsection (b), Federal credit union membership shall consist 
     of''; and
       (B) by striking ``, except that'' and all that follows 
     through ``rural district''; and
       (2) by adding at the end the following new subsections:
       ``(b) Membership Field.--Subject to the other provisions of 
     this section, the membership of any Federal credit union 
     shall be limited to the membership described in 1 of the 
     following categories:
       ``(1) Single common-bond credit union.--1 group that has a 
     common bond of occupation or association.
       ``(2) Multiple common-bond credit union.--More than 1 
     group--
       ``(A) each of which has (within the group) a common bond of 
     occupation or association; and
       ``(B) the number of members of each of which (at the time 
     the group is first included within the field of membership of 
     a credit union described in this paragraph) does not exceed 
     any numerical limitation applicable under subsection (d).
       ``(3) Community credit union.--Persons or organizations 
     within a well-defined local community, neighborhood, or rural 
     district.
       ``(c) Exceptions.--
       ``(1) Grandfathered members and groups.--
       ``(A) In general.--Notwithstanding subsection (b)--
       ``(i) any person or organization that is a member of any 
     Federal credit union as of the date of enactment of the 
     Credit Union Membership Access Act may remain a member of the 
     credit union after that date of enactment; and
       ``(ii) a member of any group whose members constituted a 
     portion of the membership of any Federal credit union as of 
     that date of enactment shall continue to be eligible to 
     become a member of that credit union, by virtue of membership 
     in that group, after that date of enactment.
       ``(B) Successors.--If the common bond of any group referred 
     to in subparagraph (A) is defined by any particular 
     organization or business entity, subparagraph (A) shall 
     continue to apply with respect to any successor to the 
     organization or entity.
       ``(2) Exception for underserved areas.--Notwithstanding 
     subsection (b), in the case of a Federal credit union, the 
     field of membership category of which is described in 
     subsection (b)(2), the Board may allow the membership of the 
     credit union to include any person or organization within a 
     local community, neighborhood, or rural district if--
       ``(A) the Board determines that the local community, 
     neighborhood, or rural district--
       ``(i) is an `investment area', as defined in section 
     103(16) of the Community Development Banking and Financial 
     Institutions Act of 1994 (12 U.S.C. 4703(16)), and meets such 
     additional requirements as the Board may impose; and
       ``(ii) is underserved, based on data of the Board and the 
     Federal banking agencies (as defined in section 3 of the 
     Federal Deposit Insurance Act), by other depository 
     institutions (as defined in section 19(b)(1)(A) of the 
     Federal Reserve Act); and
       ``(B) the credit union establishes and maintains an office 
     or facility in the local community, neighborhood, or rural 
     district at which credit union services are available.
       ``(d) Multiple Common-Bond Credit Union Group 
     Requirements.--

[[Page H7038]]

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

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

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

     SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT 
                   UNIONS.

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

     SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.

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

     SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.

       Section 205(b) of the Federal Credit Union Act (12 U.S.C. 
     1785(b)) is amended--
       (1) in paragraph (1), by striking ``Except with the prior 
     written approval of the Board, no insured credit union 
     shall'' and inserting ``Except as provided in paragraph (2), 
     no insured credit union shall, without the prior approval of 
     the Board'';
       (2) by redesignating paragraph (2) as paragraph (3); and
       (3) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Conversion of insured credit unions to mutual savings 
     banks.--
       ``(A) In general.--Notwithstanding paragraph (1), an 
     insured credit union may convert to a mutual savings bank or 
     savings association (if the savings association is in mutual 
     form), as those terms are defined in section 3 of the Federal 
     Deposit Insurance Act, without the prior approval of the 
     Board, subject to the requirements and procedures set forth 
     in the laws and regulations governing mutual savings banks 
     and savings associations.
       ``(B) Conversion proposal.--A proposal for a conversion 
     described in subparagraph (A) shall first be approved, and a 
     date set for a vote thereon by the members (either at a 
     meeting to be held on that date or by written ballot to be 
     filed on or before that date), by a majority of the directors 
     of the insured credit union. Approval of the proposal for 
     conversion shall be by the affirmative vote of a majority of 
     the members of the insured credit union who vote on the 
     proposal.
       ``(C) Notice of proposal to members.--An insured credit 
     union that proposes to convert to a mutual savings bank or 
     savings association under subparagraph (A) shall submit 
     notice to each of its members who is eligible to vote on the 
     matter of its intent to convert--
       ``(i) 90 days before the date of the member vote on the 
     conversion;
       ``(ii) 60 days before the date of the member vote on the 
     conversion; and
       ``(iii) 30 days before the date of the member vote on the 
     conversion.
       ``(D) Notice of proposal to board.--The Board may require 
     an insured credit union that proposes to convert to a mutual 
     savings bank or

[[Page H7039]]

     savings association under subparagraph (A) to submit a notice 
     to the Board of its intent to convert during the 90-day 
     period preceding the date of the completion of the 
     conversion.
       ``(E) Inapplicability of act upon conversion.--Upon 
     completion of a conversion described in subparagraph (A), the 
     credit union shall no longer be subject to any of the 
     provisions of this Act.
       ``(F) Limit on compensation of officials.--
       ``(i) In general.--No director or senior management 
     official of an insured credit union may receive any economic 
     benefit in connection with a conversion of the credit union 
     as described in subparagraph (A), other than--

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

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

     SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.

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

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

       ``(a) In General.--On and after the date of enactment of 
     this section, no insured credit union may make any member 
     business loan that would result in a total amount of such 
     loans outstanding at that credit union at any one time equal 
     to more than the lesser of--
       ``(1) 1.75 times the actual net worth of the credit union; 
     or
       ``(2) 1.75 times the minimum net worth required under 
     section 216(c)(1)(A) for a credit union to be well 
     capitalized.
       ``(b) Exceptions.--Subsection (a) does not apply in the 
     case of--
       ``(1) an insured credit union chartered for the purpose of 
     making, or that has a history of primarily making, member 
     business loans to its members, as determined by the Board; or
       ``(2) an insured credit union that--
       ``(A) serves predominantly low-income members, as defined 
     by the Board; or
       ``(B) is a community development financial institution, as 
     defined in section 103 of the Community Development Banking 
     and Financial Institutions Act of 1994.
       ``(c) Definitions.--As used in this section--
       ``(1) the term `member business loan'--
       ``(A) means any loan, line of credit, or letter of credit, 
     the proceeds of which will be used for a commercial, 
     corporate or other business investment property or venture, 
     or agricultural purpose; and
       ``(B) does not include an extension of credit--
       ``(i) that is fully secured by a lien on a 1- to 4-family 
     dwelling that is the primary residence of a member;
       ``(ii) that is fully secured by shares in the credit union 
     making the extension of credit or deposits in other financial 
     institutions;
       ``(iii) that is described in subparagraph (A), if it was 
     made to a borrower or an associated member that has a total 
     of all such extensions of credit in an amount equal to less 
     than $50,000;
       ``(iv) the repayment of which is fully insured or fully 
     guaranteed by, or where there is an advance commitment to 
     purchase in full by, any agency of the Federal Government or 
     of a State, or any political subdivision thereof; or
       ``(v) that is granted by a corporate credit union (as that 
     term is defined by the Board) to another credit union.
       ``(2) the term `net worth'--
       ``(A) with respect to any insured credit union, means the 
     credit union's retained earnings balance, as determined under 
     generally accepted accounting principles; and
       ``(B) with respect to a credit union that serves 
     predominantly low-income members, as defined by the Board, 
     includes secondary capital accounts that are--
       ``(i) uninsured; and
       ``(ii) subordinate to all other claims against the credit 
     union, including the claims of creditors, shareholders, and 
     the Fund; and
       ``(3) the term `associated member' means any member having 
     a shared ownership, investment, or other pecuniary interest 
     in a business or commercial endeavor with the borrower.
       ``(d) Effect on Existing Loans.--An insured credit union 
     that has, on the date of enactment of this section, a total 
     amount of outstanding member business loans that exceeds the 
     amount permitted under subsection (a) shall, not later than 3 
     years after that date of enactment, reduce the total amount 
     of outstanding member business loans to an amount that is not 
     greater than the amount permitted under subsection (a).
       ``(e) Consultation and Cooperation With State Credit Union 
     Supervisors.--In implementing this section, the Board shall 
     consult and seek to work cooperatively with State officials 
     having jurisdiction over State-chartered insured credit 
     unions.''.
       (b) Study and Report.--
       (1) Study.--The Secretary shall conduct a study of member 
     business lending by insured credit unions, including--
       (A) an examination of member business lending over $500,000 
     and under $50,000, and a breakdown of the types and sizes of 
     businesses that receive member business loans;
       (B) a review of the effectiveness and enforcement of 
     regulations applicable to insured credit union member 
     business lending;
       (C) whether member business lending by insured credit 
     unions could affect the safety and soundness of insured 
     credit unions or the National Credit Union Share Insurance 
     Fund;
       (D) the extent to which member business lending by insured 
     credit unions helps to meet financial services needs of low- 
     and moderate-income individuals within the field of 
     membership of insured credit unions;
       (E) whether insured credit unions that engage in member 
     business lending have a competitive advantage over other 
     insured depository institutions, and if any such advantage 
     could affect the viability and profitability of such other 
     insured depository institutions; and
       (F) the effect of enactment of this Act on the number of 
     insured credit unions involved in member business lending and 
     the overall amount of commercial lending.
       (2) NCUA cooperation.--The National Credit Union 
     Administration shall, upon request, provide such information 
     as the Secretary may require to conduct the study required 
     under paragraph (1).
       (3) Report.--Not later than 12 months after the date of 
     enactment of this Act, the Secretary shall submit a report to 
     the Congress on the results of the study conducted under 
     paragraph (1).

     SEC. 204. NATIONAL CREDIT UNION ADMINISTRATION BOARD 
                   MEMBERSHIP.

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

     SEC. 205. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR 
                   CERTAIN REGULATIONS.

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

     SEC. 301. PROMPT CORRECTIVE ACTION.

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

     ``SEC. 216. PROMPT CORRECTIVE ACTION.

       ``(a) Resolving Problems To Protect Fund.--
       ``(1) Purpose.--The purpose of this section is to resolve 
     the problems of insured credit unions at the least possible 
     long-term loss to the Fund.
       ``(2) Prompt corrective action required.--The Board shall 
     carry out the purpose of this section by taking prompt 
     corrective action to resolve the problems of insured credit 
     unions.
       ``(b) Regulations Required.--
       ``(1) Insured credit unions.--
       ``(A) In general.--The Board shall, by regulation, 
     prescribe a system of prompt corrective action for insured 
     credit unions that is--
       ``(i) consistent with this section; and
       ``(ii) comparable to section 38 of the Federal Deposit 
     Insurance Act.
       ``(B) Cooperative character of credit unions.--The Board 
     shall design the system required under subparagraph (A) to 
     take into account that credit unions are not-for-profit 
     cooperatives that--
       ``(i) do not issue capital stock;
       ``(ii) must rely on retained earnings to build net worth; 
     and
       ``(iii) have boards of directors that consist primarily of 
     volunteers.
       ``(2) New credit unions.--
       ``(A) In general.--In addition to regulations under 
     paragraph (1), the Board shall, by regulation, prescribe a 
     system of prompt corrective

[[Page H7040]]

     action that shall apply to new credit unions in lieu of this 
     section and the regulations prescribed under paragraph (1).
       ``(B) Criteria for alternative system.--The Board shall 
     design the system prescribed under subparagraph (A)--
       ``(i) to carry out the purpose of this section;
       ``(ii) to recognize that credit unions (as cooperatives 
     that do not issue capital stock) initially have no net worth, 
     and give new credit unions reasonable time to accumulate net 
     worth;
       ``(iii) to create adequate incentives for new credit unions 
     to become adequately capitalized by the time that they 
     either--

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

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

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

       ``(aa) fails to submit an acceptable net worth restoration 
     plan within the time allowed under subsection (f); or
       ``(bb) materially fails to implement a net worth 
     restoration plan accepted by the Board.
       ``(E) Critically undercapitalized.--An insured credit union 
     is `critically undercapitalized' if it has a net worth ratio 
     of less than 2 percent (or such higher net worth ratio, not 
     to exceed 3 percent, as the Board may specify by regulation).
       ``(2) Adjusting net worth levels.--
       ``(A) In general.--If, for purposes of section 38(c) of the 
     Federal Deposit Insurance Act, the Federal banking agencies 
     increase or decrease the required minimum level for the 
     leverage limit (as those terms are used in that section 38), 
     the Board may, by regulation, and subject to subparagraph (B) 
     of this paragraph, correspondingly increase or decrease 1 or 
     more of the net worth ratios specified in subparagraphs (A) 
     through (D) of paragraph (1) of this subsection in an amount 
     that is equal to not more than the difference between the 
     required minimum level most recently established by the 
     Federal banking agencies and 4 percent of total assets (with 
     respect to institutions regulated by those agencies).
       ``(B) Determinations required.--The Board may increase or 
     decrease net worth ratios under subparagraph (A) only if the 
     Board--
       ``(i) determines, in consultation with the Federal banking 
     agencies, that the reason for the increase or decrease in the 
     required minimum level for the leverage limit also justifies 
     the adjustment in net worth ratios; and
       ``(ii) determines that the resulting net worth ratios are 
     sufficient to carry out the purpose of this section.
       ``(C) Transition period required.--If the Board increases 
     any net worth ratio under this paragraph, the Board shall 
     give insured credit unions a reasonable period of time to 
     meet the increased ratio.
       ``(d) Risk-Based Net Worth Requirement for Complex Credit 
     Unions.--
       ``(1) In general.--The regulations required under 
     subsection (b)(1) shall include a risk-based net worth 
     requirement for insured credit unions that are complex, as 
     defined by the Board based on the portfolios of assets and 
     liabilities of credit unions.
       ``(2) Standard.--The Board shall design the risk-based net 
     worth requirement to take account of any material risks 
     against which the net worth ratio required for an insured 
     credit union to be adequately capitalized may not provide 
     adequate protection.
       ``(e) Earnings-Retention Requirement Applicable to Credit 
     Unions That Are Not Well Capitalized.--
       ``(1) In general.--An insured credit union that is not well 
     capitalized shall annually set aside as net worth an amount 
     equal to not less than 0.4 percent of its total assets.
       ``(2) Board's authority to decrease earnings-retention 
     requirement.--
       ``(A) In general.--The Board may, by order, decrease the 
     0.4 percent requirement in paragraph (1) with respect to a 
     credit union to the extent that the Board determines that the 
     decrease--
       ``(i) is necessary to avoid a significant redemption of 
     shares; and
       ``(ii) would further the purpose of this section.
       ``(B) Periodic review required.--The Board shall 
     periodically review any order issued under subparagraph (A).
       ``(f) Net Worth Restoration Plan Required.--
       ``(1) In general.--Each insured credit union that is 
     undercapitalized shall submit an acceptable net worth 
     restoration plan to the Board within the time allowed under 
     this subsection.
       ``(2) Assistance to small credit unions.--The Board (or the 
     staff of the Board) shall, upon timely request by an insured 
     credit union with total assets of less than $10,000,000, and 
     subject to such regulations or guidelines as the Board may 
     prescribe, assist that credit union in preparing a net worth 
     restoration plan.
       ``(3) Deadlines for submission and review of plans.--The 
     Board shall, by regulation, establish deadlines for 
     submission of net worth restoration plans under this 
     subsection that--
       ``(A) provide insured credit unions with reasonable time to 
     submit net worth restoration plans; and
       ``(B) require the Board to act on net worth restoration 
     plans expeditiously.
       ``(4) Failure to submit acceptable plan within time 
     allowed.--
       ``(A) Failure to submit any plan.--If an insured credit 
     union fails to submit a net worth restoration plan within the 
     time allowed under paragraph (3), the Board shall--
       ``(i) promptly notify the credit union of that failure; and
       ``(ii) give the credit union a reasonable opportunity to 
     submit a net worth restoration plan.
       ``(B) Submission of unacceptable plan.--If an insured 
     credit union submits a net worth restoration plan within the 
     time allowed under paragraph (3) and the Board determines 
     that the plan is not acceptable, the Board shall--
       ``(i) promptly notify the credit union of why the plan is 
     not acceptable; and
       ``(ii) give the credit union a reasonable opportunity to 
     submit a revised plan.
       ``(5) Accepting plan.--The Board may accept a net worth 
     restoration plan only if the Board determines that the plan 
     is based on realistic assumptions and is likely to succeed in 
     restoring the net worth of the credit union.
       ``(g) Restrictions on Undercapitalized Credit Unions.--
       ``(1) Restriction on asset growth.--An insured credit union 
     that is undercapitalized shall not generally permit its 
     average total assets to increase, unless--
       ``(A) the Board has accepted the net worth restoration plan 
     of the credit union for that action;
       ``(B) any increase in total assets is consistent with the 
     net worth restoration plan; and
       ``(C) the net worth ratio of the credit union increases at 
     a rate that is consistent with the net worth restoration 
     plan.
       ``(2) Restriction on member business loans.--
     Notwithstanding section 107A(a), an insured credit union that 
     is undercapitalized may not make any increase in the total 
     amount of member business loans (as defined in section 
     107A(c)) outstanding at that credit union at any one time, 
     until such time as the credit union becomes adequately 
     capitalized.
       ``(h) More Stringent Treatment Based on Other Supervisory 
     Criteria.--With respect to the exercise of authority by the 
     Board under regulations comparable to section 38(g) of the 
     Federal Deposit Insurance Act--
       ``(1) the Board may not reclassify an insured credit union 
     into a lower net worth category, or treat an insured credit 
     union as if it were in a lower net worth category, for 
     reasons not pertaining to the safety and soundness of that 
     credit union; and
       ``(2) the Board may not delegate its authority to 
     reclassify an insured credit union into a lower net worth 
     category or to treat an insured credit union as if it were in 
     a lower net worth category.
       ``(i) Action Required Regarding Critically Undercapitalized 
     Credit Unions.--
       ``(1) In general.--The Board shall, not later than 90 days 
     after the date on which an insured credit union becomes 
     critically undercapitalized--
       ``(A) appoint a conservator or liquidating agent for the 
     credit union; or
       ``(B) take such other action as the Board determines would 
     better achieve the purpose of this section, after documenting 
     why the action would better achieve that purpose.
       ``(2) Periodic redeterminations required.--Any 
     determination by the Board under paragraph (1)(B) to take any 
     action with respect to an insured credit union in lieu of 
     appointing a conservator or liquidating agent shall cease to 
     be effective not later than the end of the 180-day period 
     beginning on the date on which the determination is made, and 
     a conservator or liquidating agent shall be appointed for 
     that credit union under paragraph (1)(A), unless the Board 
     makes a new determination under paragraph (1)(B) before the 
     end of the effective period of the prior determination.
       ``(3) Appointment of liquidating agent required if other 
     action fails to restore net worth.--
       ``(A) In general.--Notwithstanding paragraphs (1) and (2), 
     the Board shall appoint a liquidating agent for an insured 
     credit union if the credit union is critically 
     undercapitalized on average during the calendar quarter 
     beginning 18 months after the date on which the credit union 
     became critically undercapitalized.
       ``(B) Exception.--Notwithstanding subparagraph (A), the 
     Board may continue to take such other action as the Board 
     determines to be appropriate in lieu of appointment of a 
     liquidating agent if--
       ``(i) the Board determines that--

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

[[Page H7041]]

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

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

       ``(D) the Board may not delegate any determination under 
     subparagraph (C).
       ``(m) Corporate Credit Unions Exempted.--This section does 
     not apply to any insured credit union that--
       ``(1) operates primarily for the purpose of serving credit 
     unions; and
       ``(2) permits individuals to be members of the credit union 
     only to the extent that applicable law requires that such 
     persons own shares.
       ``(n) Other Authority Not Affected.--This section does not 
     limit any authority of the Board or a State to take action in 
     addition to (but not in derogation of) that required under 
     this section.
       ``(o) Definitions.--For purposes of this section the 
     following definitions shall apply:
       ``(1) Federal banking agency.--The term `Federal banking 
     agency' has the same meaning as in section 3 of the Federal 
     Deposit Insurance Act.
       ``(2) Net worth.--The term `net worth'--
       ``(A) with respect to any insured credit union, means 
     retained earnings balance of the credit union, as determined 
     under generally accepted accounting principles; and
       ``(B) with respect to a low-income credit union, includes 
     secondary capital accounts that are--
       ``(i) uninsured; and
       ``(ii) subordinate to all other claims against the credit 
     union, including the claims of creditors, shareholders, and 
     the Fund.
       ``(3) Net worth ratio.--The term `net worth ratio' means, 
     with respect to a credit union, the ratio of the net worth of 
     the credit union to the total assets of the credit union.
       ``(4) New credit union.--The term `new credit union' means 
     an insured credit union that--
       ``(A) has been in operation for less than 10 years; and
       ``(B) has not more than $10,000,000 in total assets.''.
       (b) Conservatorship and Liquidation Amendments To 
     Facilitate Prompt Corrective Action.--
       (1) Conservatorship.--Section 206(h) of the Federal Credit 
     Union Act (12 U.S.C. 1786(h)) is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (D), by striking ``or'' at the end;
       (ii) in subparagraph (E), by striking the period at the end 
     and inserting a semicolon; and
       (iii) by adding at the end the following new subparagraphs:
       ``(F) the credit union is significantly undercapitalized, 
     as defined in section 216, and has no reasonable prospect of 
     becoming adequately capitalized, as defined in section 216; 
     or
       ``(G) the credit union is critically undercapitalized, as 
     defined in section 216.''; and
       (B) in paragraph (2)--
       (i) in subparagraph (A), by striking ``In the case'' and 
     inserting ``Except as provided in subparagraph (C), in the 
     case''; and
       (ii) by adding at the end the following new subparagraph:
       ``(C) In the case of a State-chartered insured credit 
     union, the authority conferred by subparagraphs (F) and (G) 
     of paragraph (1) may not be exercised unless the Board has 
     complied with section 216(l).''.
       (2) Liquidation.--Section 207(a) of the Federal Credit 
     Union Act (12 U.S.C. 1787(a)) is amended--
       (A) in paragraph (1)(A), by striking ``himself'' and 
     inserting ``itself''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Liquidation to facilitate prompt corrective action.--
     The Board may close any credit union for liquidation, and 
     appoint itself or another (including, in the case of a State-
     chartered insured credit union, the State official having 
     jurisdiction over the credit union) as liquidating agent of 
     that credit union, if--
       ``(A) the Board determines that--
       ``(i) the credit union is significantly undercapitalized, 
     as defined in section 216, and has no reasonable prospect of 
     becoming adequately capitalized, as defined in section 216; 
     or
       ``(ii) the credit union is critically undercapitalized, as 
     defined in section 216; and
       ``(B) in the case of a State-chartered insured credit 
     union, the Board has complied with section 216(l).''.
       (c) Consultation Required.--In developing regulations to 
     implement section 216 of the Federal Credit Union Act (as 
     added by subsection (a) of this section), the Board shall 
     consult with the Secretary, the Federal banking agencies, and 
     the State officials having jurisdiction over State-chartered 
     insured credit unions.
       (d) Deadlines for Regulations.--
       (1) In general.--Except as provided in paragraph (2), the 
     Board shall--
       (A) publish in the Federal Register proposed regulations to 
     implement section 216 of the Federal Credit Union Act (as 
     added by subsection (a) of this section) not later than 270 
     days after the date of enactment of this Act; and
       (B) promulgate final regulations to implement that section 
     216 not later than 18 months after the date of enactment of 
     this Act.
       (2) Risk-based net worth requirement.--
       (A) Advance notice of proposed rulemaking.--Not later than 
     180 days after the date of enactment of this Act, the Board 
     shall publish in the Federal Register an advance notice of 
     proposed rulemaking, as required by section 216(d) of the 
     Federal Credit Union Act, as added by this Act.
       (B) Final regulations.--The Board shall promulgate final 
     regulations, as required by that section 216(d) not later 
     than 2 years after the date of enactment of this Act.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), 
     section 216 of the Federal Credit Union Act (as added by this 
     section) shall become effective 2 years after the date of 
     enactment of this Act.
       (2) Risk-based net worth requirement.--Section 216(d) of 
     the Federal Credit Union Act (as added by this section) shall 
     become effective on January 1, 2001.
       (f) Report to Congress Required.--When the Board publishes 
     proposed regulations pursuant to subsection (d)(1)(A), or 
     promulgates final regulations pursuant to subsection 
     (d)(1)(B), the Board shall submit to the Congress a report 
     that specifically explains--
       (1) how the regulations carry out section 216(b)(1)(B) of 
     the Federal Credit Union Act (as added by this section), 
     relating to the cooperative character of credit unions; and
       (2) how the regulations differ from section 38 of the 
     Federal Deposit Insurance Act, and the reasons for those 
     differences.
       (g) Conforming Amendments.--
       (1) Amendments relating to enforcement of prompt corrective 
     action.--Section 206(k) of the Federal Credit Union Act (12 
     U.S.C. 1786(k)) is amended--
       (A) in paragraph (1), by inserting ``or section 216'' after 
     ``this section'' each place it appears; and
       (B) in paragraph (2)(A)(ii), by inserting ``, or any final 
     order under section 216'' before the semicolon.
       (2) Conforming amendment regarding appointment of state 
     credit union supervisor as conservator.--Section 206(h)(1) of 
     the Federal Credit Union Act (12 U.S.C. 1786(h)(1)) is 
     amended by inserting ``or another (including, in the case of 
     a State-chartered insured credit union, the State official 
     having jurisdiction over the credit union)'' after ``appoint 
     itself''.
       (3) Amendment repealing superseded provision.--Section 116 
     of the Federal Credit Union Act (12 U.S.C. 1762) is repealed.

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

       (a) In General.--Section 202 of the Federal Credit Union 
     Act (12 U.S.C. 1782) is amended--
       (1) by striking subsection (b) and inserting the following:
       ``(b) Certified Statement.--
       ``(1) Statement required.--
       ``(A) In general.--For each calendar year, in the case of 
     an insured credit union with total assets of not more than 
     $50,000,000, and for each semi-annual period in the case of 
     an insured credit union with total assets of $50,000,000 or

[[Page H7042]]

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

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

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

     SEC. 303. ACCESS TO LIQUIDITY.

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

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

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

     SEC. 402. UPDATE ON REVIEW OF REGULATIONS AND PAPERWORK 
                   REDUCTIONS.

       Not later than 1 year after the date of enactment of this 
     Act, the Federal banking agencies shall submit a report to 
     the Congress detailing their progress in carrying out section 
     303(a) of the Riegle Community Development and Regulatory 
     Improvement Act of 1994, since their submission of the report 
     dated September 23, 1996, as required by section 303(a)(4) of 
     that Act.

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

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

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Iowa (Mr. Leach) and the gentleman from New York (Mr. LaFalce) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Iowa (Mr. Leach).
  Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. LEACH asked and was given permission to revise and extend his 
remarks.)

                              {time}  1145

  Mr. LEACH. Mr. Speaker, before the House today is the Senate 
amendment to H.R. 1151, the Credit Union Membership Access Act. If the 
House concurs in the Senate amendment, a step I strongly encourage, 
this important legislation will be cleared for the President for his 
expected signature, thereby ensuring that millions of Americans will 
not be forced out of the financial institution of their choice.
  This body originally approved the credit union bill on April 1 by a 
vote of 411-8 and the Senate last week acted by vote of 92-6. This 
legislation is in response to a 5-4 Supreme Court decision earlier this 
year which overturned the National Credit Union Administration's 
interpretation of the 1934 Federal Credit Union Act on what the 
appropriate common bond should be for Federal credit unions. If the 
Supreme Court decision were to stand, not only could millions of credit 
union members be kicked out of their financial institution, but the 
safety and soundness of the entire credit union system would have been 
jeopardized.
  The Senate amendment generally incorporates the House approach to the 
credit union issue, especially as it relates to the common bond issue, 
but

[[Page H7043]]

there are four major differences between the House and the Senate 
versions. First, the Senate amendment does not impose community 
reinvestment-like requirements on State and federally chartered credit 
unions. The House version would have. Second, the Senate amendment 
limits the total amount of member business loans to approximately 12 
percent of a credit union's assets. The House bill would have frozen 
current NCUA restrictions on commercial lending for one year. Third, 
the Senate amendment expands upon the prompt corrective action 
provisions contained in the House bill, which generally would have 
called on the regulator to issue regulations comparable to those 
imposed on banks and thrifts under the FDIC Act. The Senate version 
provides somewhat greater detail. Finally, the Senate amendment struck 
the House provisions limiting the economic benefit directors or 
officers could receive from a conversion of the credit union to a stock 
form of company. These Senate changes, while not in all instances 
improvements to the House position, are generally acceptable given that 
the broad approach of the House has been maintained.
  The Supreme Court case was brought by the banking industry because of 
a perceived difference in the regulatory and tax treatment of credit 
unions. There is particular angst among bankers that this legislation 
does not repeal the tax exempt status of credit unions. However, this 
issue was not broached in the Supreme Court and the Banking Committee 
from which this bill originated has no jurisdiction over Federal tax 
laws. Beyond this, this Congress has little appetite for imposing new 
taxes. But taxes aside, the competitive regulatory playing field 
between banks and credit unions is pretty well evened out under this 
legislation. For instance, the new capital standards and prompt 
corrective regulatory requirements imposed on credit unions under this 
bill are similar to those imposed on banks and will ensure the 
continued safety and soundness of operation of credit unions.
  In a financial services world where the big are getting bigger from 
the top down, consumers are increasingly showing their desire to 
maintain the option of being served by community-controlled 
institutions, whether they be community banks, savings and loans or 
credit unions.
  It is therefore critical that this Congress do everything in its 
power to ensure that smaller, community-controlled institutions are 
provided the means to compete and prosper in the marketplace.
  Credit unions, just one part on the cooperative movement side which 
have so advantaged American society, represent democracy at work in the 
marketplace. In protecting them, in legitimizing them, this legislation 
deserves support. I would strongly suggest a ``yes'' vote on accepting 
the Senate amendment. I would also strongly urge that the President 
sign this important legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. LaFalce asked and was given permission to revise and extend his 
remarks.)
  Mr. LaFALCE. Mr. Speaker, in February, the Supreme Court challenged 
the Congress to answer a difficult policy question, whether to uphold 
the narrow interpretation of the 60-year-old Federal Credit Union Act 
or expand the scope of the act to permit credit unions to serve a 
broader segment of the American public. Today we are giving a 
definitive answer to that question. I am pleased to say the answer is a 
resounding ``yes'' to credit union expansion, ``yes'' to preserving the 
membership rights of all current credit union members, and ``yes'' to 
making credit union services available to even greater numbers of 
American families.
  The Senate-passed bill we are considering today incorporates 
virtually every single one of the key elements of the bipartisan 
compromise that we passed on April 1 in the House of Representatives 
with an overwhelming 411-8 vote. First and foremost it protects the 
membership of every current credit union member and every group within 
a credit union. It also permits common bonds credit unions to continue 
to expand their field of membership by including new occupation and 
association based groups. The bill limits this expansion, however, 
first by requiring the creation of new separate common bond credit 
unions wherever feasible; secondly, by limiting the size of new groups 
to under 3,000 members; and, third, by requiring that these smaller 
groups be included within a credit union that is located within 
reasonable proximity to the group, thus reinforcing a geographic common 
bond. This proximity requirement is extremely important, one that I 
insisted upon, to ensure that we could maintain to the maximum extent 
feasible the closest practicable geographic common bond. These core 
elements of this legislation, I am proud to say, follow the basic 
outline of a set of proposals I circulated last November to encourage 
discussion of a compromise on the field of membership issue. And like 
my original proposal, this legislation balances expansion of credit 
union membership with preservation of the traditional credit union 
values of common bond and common community.
  While this legislation answers the question raised by the court and 
resolves several other key credit union issues, it does include two 
Senate changes that House Members should be aware of. It deletes House 
language reaffirming the credit union's obligation to serve persons of 
modest means within their field of membership. Let me emphasize that 
this House provision only restated a long-understood obligation of 
credit unions to serve all potential members, and it attempted to 
provide greater parity in regulatory treatment between credit unions 
and other financial institutions. The provision should not have been 
dropped, but the regulators should enforce its existing law, 
understanding that we simply attempted to reaffirm existing law.
  A second change in the Senate amendment is the weakening of current 
regulatory and voting requirements for credit union conversions to 
mutual savings institutions. Currently a credit union cannot convert 
its charter without an affirmative vote of the majority of all its 
members. The Senate changed this to require only a majority of the 
members who participate in a conversion vote. The Senate made no 
provision to assure adequate and effective notice for a conversion 
vote. Thus under the Senate provision, it is conceivable for a small 
fraction of a credit union's membership either by manipulation or 
inadequate notice to convert a credit union and deprive the 
overwhelming majority of members of their ownership rights and credit 
union services. This is an inappropriate change that could without very 
strict regulation and supervision facilitate the slow undoing of our 
credit union system. I intend to work with the gentleman from Iowa (Mr. 
Leach) to address this issue within another context, and I call for the 
maximum reasonable regulation and supervision permissible by the 
regulator.
  While these aspects of the bill continue to concern me, they are 
clearly outweighed by the significant improvements the bill makes in 
the Credit Union Act and by the need for immediate action to resolve 
the pressing issues raised by the Supreme Court. I believe this is one 
of the most important bills Congress will consider this year, an 
important victory for the credit unions and most importantly a 
tremendous victory for the American consumers.
  Mr. Speaker, I reserve the balance of my time.
  Mr. LEACH. Mr. Speaker, I yield 2 minutes to the honorable gentleman 
from Ohio (Mr. LaTourette) whose leadership on this issue has been 
unparalleled. It is his bill and to him a principal amount of the 
credit for its being brought to the floor is due.
  Mr. LaTOURETTE.  I thank the gentleman for yielding me this time. Mr. 
Speaker, today's floor activity brings to conclusion hopefully a long 
journey for H.R. 1151, the Credit Union Membership Access Act, although 
I suppose in legislative or dog years it is rather a quick journey. For 
that I take to the floor today and I want to thank a number of people, 
the gentleman from Georgia (Mr. Gingrich), the Speaker of the House, 
for getting behind this bill, the gentleman from Iowa (Mr. Leach) for 
his guidance and leadership throughout the course of this legislative 
process, the gentleman from New York (Mr. LaFalce), the gentlewoman 
from New Jersey (Mrs. Roukema) and

[[Page H7044]]

also the gentleman from Minnesota (Mr. Vento) for all of their hard 
work, and without a doubt the original cosponsor of this bill the 
gentleman from Pennsylvania (Mr. Kanjorski).
  In the early part of the year, those were lonely times. Although we 
were aided by powerful allies on both sides of the aisle, the minority 
whip the gentleman from Michigan (Mr. Bonior) on his side and such 
powerhouses on our side as the gentleman from New York (Mr. Solomon), 
the chairman of the Committee on Rules, and the gentleman from 
Louisiana (Mr. Livingston), the chairman of the Committee on 
Appropriations, it was a long process.
  Credit unions should also be thankful for the quick action, Mr. 
Speaker, taken by the more deliberative body on the other side of the 
Capitol which has a history of not moving as quickly as it has in this 
particular instance. I am particularly thankful to the chairman of the 
Senate Banking Committee. Although the rules of the House prohibit me 
from naming him by name, I would suggest that his surname rhymes with 
``tomato.''
  Although every bill has blemishes, Mr. Speaker, upon which each of us 
might wish to apply some astringent, H.R. 1151 in its current form is a 
good bill that needs to move forward before the end of this session. 
The reason that baseball is America's pastime is that it has no clock. 
It is over when the 27th out is recorded. Football and basketball have 
a clock. The clock is ticking on this session of the Congress. We need 
to get this bill on the President's desk. The millions of depositors 
and share account owners of credit unions need this matter resolved 
today.
  Concerns about CRA type requirements and charter conversions can be 
addressed in other legislation. The gentleman from New York (Mr. 
LaFalce) has already so eloquently addressed that in his statement. But 
today is the day, Mr. Speaker, that Clarence the angel who helped 
George Bailey in It's A Wonderful Life should get his wings and credit 
union members across this country should get relief.
  Mr. LaFALCE.  Mr. Speaker, I yield 3\1/2\ minutes to the 
distinguished gentleman from Pennsylvania (Mr. Kanjorski), the 
principal author of the original version of H.R. 1151.
  Mr. KANJORSKI. Mr. Speaker, in order to ensure that provisions of 
this legislation are understood and future lawsuits are prevented, I 
would like to engage in a colloquy with my distinguished colleague from 
Iowa.
  Is it the gentleman's understanding that the definition of a single 
common bond credit union does not preclude a credit union from having 
subgroups in its field of membership as long as the subgroups share the 
same common bond of association or occupation?
  Mr. LEACH. Mr. Speaker, will the gentleman yield?
  Mr. KANJORSKI. I yield to the gentleman from Iowa.
  Mr. LEACH. The gentleman is correct. The definition of a single 
common bond credit union does not preclude subgroups, but all such 
subgroups must have the same common bond of occupation or association.
  Mr. KANJORSKI. The bill includes language grandfathering persons and 
groups which were members of a credit union or eligible for membership 
in a credit union prior to the Supreme Court decision. Is it my 
understanding that these grandfather provisions apply to community 
credit unions as well as to multi-group and single group credit unions?
  Mr. LEACH. That is correct. Let me just add one thought, that I want 
to thank the gentleman personally for his leadership on this issue. He 
played a very extraordinary role.
  Mr. KANJORSKI. I thank the gentleman. I have a colloquy I would like 
to engage in with my colleague from New York. It is my understanding 
that if a business sells off or spins off an operating unit or 
subsidiary, both current and future employees of the operating unit or 
subsidiary remain eligible for membership in a credit union, is that 
correct?
  Mr. LaFALCE. Mr. Speaker, will the gentleman yield?
  Mr. KANJORSKI. I yield to the gentleman from New York.
  Mr. LaFALCE. That is my understanding, yes, I believe the gentleman 
is correct. The definition of a single common bond credit union does 
not preclude subgroups, but all such subgroups must have the same 
common bond of occupation or association. Furthermore, nothing in H.R. 
1151 was intended to preclude new employees of companies that have been 
spun off from a credit union's original sponsoring group from becoming 
eligible for membership in the original parent company's credit union.
  Mr. KANJORSKI. Mr. Speaker, I rise today to thank all of my 
colleagues and most especially the gentleman from Ohio (Mr. 
LaTourette). It is very seldom in this House that through the 
participation in the process of legislation, one forms a friendship and 
a common bond and not unlike a friendship I developed with a colleague 
many years ago in first coming to this House, I have found the 
beginning of that type of friendship with the gentleman from Ohio. I 
cherish it, I cherish the process and the experience we have had.

                              {time}  1200

  I also want to thank the chairman of the committee, the gentleman 
from Iowa (Mr. Leach), the ranking member, the gentleman from New York 
(Mr. LaFalce), the subcommittee chairman, the gentlewoman from New 
Jersey (Mrs. Roukema), and the ranking member, the gentleman from 
Minnesota (Mr. Vento). With all these individuals, and many more, it 
was their work product that brought this legislation forth today.
  It would be remiss of me also not to make mention of the chairman and 
ranking member of the Senate. They took our text basically as their 
markup vehicle, worked from it and kept 75 percent of it, and the 
portions they added were good portions except for the two minor parts 
that the gentleman from New York (Mr. LaFalce) identified, and we will 
work with him in the future to correct them.
  Finally, Madam Speaker, the people who really should be thanked the 
most are the 70 million members of the credit movement across this 
country. Truly in a very cooperative effort they came together, 
contacted their representatives in this body and the Senate, and 
prevailed upon them to pass this enlightening legislation. I would say 
it was a victory of David over Goliath. Indeed it proves that a 
cooperative effort in America can win, and I would like to apologize to 
Abraham Lincoln, but I would like to say that today in the spirit of 
credit unions, it is of the people, by the people and for the people, 
that they, through this legislation, shall not perish from the earth.
  Mr. Speaker, in order to expedite consideration of this important 
legislation, it is being considered today under suspension of the 
rules, which limits total debate time to 20 minutes on each side of the 
aisle. As a result, it is not possible to address all of the issues we 
would like to address if we had additional time.
  I have already expressed my deep appreciation and thanks to my 
colleague from Ohio (Mr. LaTourette) who had the courage to join me in 
sponsoring this legislation when many of our colleagues thought we were 
titling against windmills.
  I have also expressed my appreciation to the distinguished Chairman 
of the Committee, (Mr. Leach) who was at all times fair, courteous and 
supportive. I also want to thank the ranking Democratic Member (Mr. 
LaFalce), the Chairwoman of the Financial Institutions Subcommittee 
(Mrs. Roukema), the ranking Democratic Member of the Subcommittee (Mr. 
Vento), and all of their staffs, who worked long and hard to help 
produce the bipartisan legislation we are considering today. All of 
their leadership is greatly appreciated.
  Also making a major contribution today's bill is Assistant Secretary 
of the Treasury Rick Carnell who helped perfect the title of the bill 
strengthening capital requirements for credit unions, the credit union 
share insurance fund, and the authority of the National Credit Union 
Administration to take prompt corrective action against troubled credit 
unions.
  National Credit Union Administration Chairman Norm D'Amours, and the 
members of the board, also provided their unwavering support for our 
legislation.
  The members of the other body, particularly the chairman and ranking 
Democratic member of the Banking Committee, must also be commended for 
acting so promptly on the House-passed bill, and for making only a few 
changes in it.
  And last, and certainly not least, I want to thank the millions of 
Americans across our national who took the time to explain to their 
Congressmen and Senators how important their credit union was to them.
  It is their hard work that made this victory possible.

[[Page H7045]]

  It is their hard work that demonstrates what being a member of a 
voluntary, not-for-profit, cooperative means.
  It is their hard work that demonstrates the strength of the 
cooperative movement.
  Mr. Speaker, the court decision we overturn today threatened 
financial accounts held by tens of millions of average American working 
families. It also jeopardized the safety and soundness of thousands of 
credit unions and the National Credit Union Share Insurance Fund.
  In my home state of Pennsylvania alone the safety and soundness of 
367 credit unions serving nearly two million members and their family 
were endangered by the court decision.
  In addition, if allowed to stand the court decision would have 
discriminated against the employees of small businesses who would have 
been effectively denied the right to choose a credit union for their 
financial services. Yet employees of small businesses are among the 
persons of small means most likely to benefit from credit union 
membership.
  Mr. Speaker, as the co-author of the Credit Union Membership Access 
Act, there are a number of technical provisions contained in it which 
need elaboration, particularly since there will be no formal conference 
report on the bill.
  One amendment added by the other body provides a specific retroactive 
exception from the multiple common bond requirements for a specific 
voluntary merger that was in progress when the court decision took 
effect.
  I want to make it clear that in granting this specific retroactive 
exception from the multiple common bond requirements we are not in any 
way diminishing the existing authority of the National Credit Union 
authority under section 205 of the Federal Credit Union Act to grant or 
withhold approval for voluntary mergers of credit unions.
  All of the federal banking regulators, including the National Credit 
Union Administration, have broad authority to approve and disapprove 
mergers of institutions under their jurisdiction, and this legislation 
is not intended to obstruct that authority in any way.
  Another important provision in this bill explicitly authorizes 
multiple group credit unions to include underserved areas in their 
field of membership. This is a provision which incorporates the 
principles of legislation originally introduced by the gentleman from 
Texas (Mr. Frost).
  Providing service to underserved areas, which are defined in the bill 
and by NCUA regulations, helps all credit unions fulfill their mandate 
to serve persons of small means. It is integral to the spirit of the 
credit union movement.
  By including explicit language authorizing multiple group credit 
unions to include underserved areas in their field of membership, we 
are not in any way restricting the ability of the National Credit Union 
Administration to allow community and single group credit unions to 
include underserved areas in their fields of membership.
  Precluding community credit unions from serving underserved areas 
would be contrary to their reason for existence.
  Similarly, precluding single group credit unions from serving 
underserved areas makes no sense and would only add paperwork and 
regulatory burden for both credit unions and the NCUA since virtually 
any single group credit union can apply to add an additional group to 
its field of membership, thus becoming a multiple group credit union. 
Single group credit unions are a subset of multiple group credit unions 
and it was never intended, and would make no sense, for multiple group 
credit unions to have this authority, and for single group credit 
unions not to have similar authority.
  In the area of member business loans, the Senate amendments also 
provide an important exception to the limitation on member business 
loans for credit unions that are chartered for the purpose of, or have 
a history of, primarily making member business loans to their members 
as determined by the National Credit Union Administration.
  Under the bill the NCUA has broad authority to determine whether a 
credit union is chartered for the purpose of, or has a history of 
primarily making, member business loans to its members. This broad 
authority is important because member business loans need not be the 
largest category of loans in order for a credit union to qualify for 
this exception.
  Member business lending merely needs to constitute a significant 
portion of the portfolio or a significant number of loans in order for 
the NCUA to determine that a credit union is eligible for this 
exception.
  Secretary of the Treasury Robert Rubin has confirmed to us that 
member business loans by credit unions are not a safety and soundness 
problem. Quite to the contrary, member business loans are an important 
authority for community credit unions, and all credit unions, as they 
attempt to meet all of the credit needs of their members and their 
communities. More competition in this area, where many persons of small 
means have difficulty obtaining credit, must be encouraged by the 
Congress and the National Credit Union Administration.
  Finally, Mr. Chairman, there are two changes made by the Senate 
amendment which I hope we will be able to revisit at some point in the 
future. By a relatively narrow margin the other body voted to delete 
from bill provisions strengthening the obligation of credit unions to 
meet the financial services needs of persons of modest means. This 
deletion was unfortunate because this provision in the House bill 
helped to keep credit unions focused on their primary purpose.
  Similarly, I was extremely disappointed by the deletion of the 
provisions drafted by Chairman Leach designed to prevent insider self-
dealing when a credit union converts to a mutual savings bank and from 
a mutual savings bank to a stock institution. This same amendment also 
greatly weakened the safeguards that exist in current law to prevent 
quickie conversions without approval by a reasonable, and informed, 
proportion of the membership.
  These changes open the door to the kind of fraud and abuse that we 
saw all too often during the savings and loan debacle. I hope that 
federal and state banking regulators will use their oversight authority 
over any proposed conversions to ensure that consumers are not 
defrauded and insiders are not enriched. I also look forward to working 
with the Chairman and ranking Democratic member to correct these 
provisions in future legislation.
  Mr. LEACH. Madam Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Solomon), our distinguished chairman of the Committee on 
Rules.
  Mr. SOLOMON. Madam Speaker, I thank the gentleman from Iowa for 
yielding me this time, and I certainly salute him for his stewardship 
over this legislation; and I want to salute the gentleman from Ohio 
(Mr. LaTourette) and the gentleman from Pennsylvania (Mr. Kanjorski) 
for having the courage to introduce this legislation, first of all, and 
then drive this legislation through the Congress. It was a time when 
many, in my opinion rather arrogantly, tried to keep this legislation 
from even reaching the floor, and I was pleased to assist these two 
fine gentlemen in making sure that that did not happen.
  Madam Speaker, following the Supreme Court's February ruling relating 
to membership in the Nation's credit unions this issue has been among 
the most pressing this Congress has had to address in many years, and I 
am pleased that the Congress has acted in a bipartisan fashion to 
preserve current and future memberships in credit unions. Credit union 
members have looked to this Congress for a long time now to end any 
uncertainty which may have resulted from the Supreme Court decision. 
This legislation guarantees that millions of credit union members, 
including me and probably you, Madam Speaker, will not be turned away 
from their credit unions.
  And, Madam Speaker, these cooperative organizations count some 70 
million Americans as members. There are over 200,000 members in the 
Hudson Valley of New York State alone, where I happen to reside and 
represent.
  As chairman of the House Committee on Rules, I am often suspicious of 
the other body and its lack of rules, but in this case, Madam Speaker, 
the other body I think has improved the legislation. The Senate has 
produced a consensus product which removes the unfair CRA-like 
provisions but puts restrictions on business lending, and that is as it 
should be. And, Madam Speaker, compromise is critical in this 
legislative process, and I believe that this legislation is an 
appropriate and fair compromise, and I hope Members will come over and 
unanimously support it. It is a good piece of legislation.
  Mr. LaFALCE. Madam Speaker, I yield 2 minutes to the distinguished 
gentleman from Minnesota (Mr. Vento), the ranking Democrat on the 
Subcommittee on Financial Institutions and Consumer Credit.
  Mr. VENTO. Madam Speaker, I thank the gentleman for yielding this 
time to me and for his work on this measure, as well as the chairman, 
the gentleman from Iowa (Mr. Leach), and of course congratulate the 
principal sponsors, the gentleman from Ohio (Mr. LaTourette) and the 
gentleman from Pennsylvania (Mr. Kanjorski) for their marshaling of 
effort and their willingness to work with others to bring us to 
hopefully final passage and sending this to President's desk today.
  This is an urgent problem. This spring, when the court case came out, 
I think all of us were aware that there had been a back and forth 
disagreement about what the meaning of the

[[Page H7046]]

1934 law is. But what worked in the 1930's in terms of credit unions, 
and other financial institutions, for that matter, does not fit the 
needs of the 1990's, of this decade 60 years later. We need to 
modernize our financial institution laws.
  Now there is obviously this law, and the effect of the court decision 
affected up to 20 million members of credit unions who would have been 
adversely impacted in terms of having to change memberships and divest 
and go through that process. So it became of paramount importance that 
we act quickly to eliminate any uncertainty because these lines of 
credit are fundamental to our economy.
  As was mentioned by our chairman of the Committee on Rules, 70 
million credit union members are a viable part of providing for the 
services and the needs of people across this Nation, especially in 
locations that are often remote, often not served by other financial 
service entities. In fact, of course, people have a strong affection 
for any of those that are able to give them credit because they, of 
course, facilitate our successful attainment of ownership of cars, of 
being able to provide a college education, being able to do many of the 
things that we need through credit extension in our mixed economy 
today.
  This bill is a fine work product. I regret that the Community 
Reinvestment Act provisions, or similar provisions that were put on in 
the House, were taken off. But frankly most of the other work that we 
achieved in the House in terms of the Committee on Banking and 
Financial Services and the principal Members, the gentlewoman from New 
Jersey (Mrs. Roukema) who also worked with us there, is retained in 
this, so they used our foundation. We are happy to send it along and to 
have this good measure serve the needs of the people of this country.
  Mr. LEACH. Madam Speaker, I yield 2 minutes to the gentlewoman from 
New Jersey (Mrs. Roukema), our distinguished chairman of the 
Subcommittee on Financial Institutions and Consumer Credit.
  (Mrs. Roukema asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Madam Speaker, I think I will make three direct points:
  First, I think this is a good example of how this Congress can work 
forthrightly and diligently and on a bipartisan basis to deal with a 
pressing economic issue and avoid partisan bickering, and I want to 
commend all my colleagues for that. We have really worked hard on this.
  Secondly, there are 20 million credit union members at thousands of 
credit unions across the country that have been wondering since late 
February this year whether or not they would be thrown out of their 
credit unions. We got to say here, at last, we are protecting those 
innocent people. I am proud to say that the bill makes it very clear 
that they can remain in the institution of their choice, and that is 
very important.
  And then, too, we are putting, and it is important to me, in place 
many of the Treasury Department's recommendations on safety and 
soundness. These changes are extremely important. Credit unions will 
have prompt corrective action applied to them, and that means that 
bank-like capital and net worth requirements will be applied to credit 
unions. That is very important.
  In addition, large credit unions will be required to have annual 
audits performed by licensed CPAs, just like banks and savings 
associations have. Other safety and soundness provisions improvements 
are important and are made to the share insurance fund which will 
ensure the solvency and safety of the fund for years to come.
  Finally, Madam Speaker, I want to recognize that the CRA provisions 
were lifted from the credit union bill, and I think that was the 
correct choice. No question about that. I do look forward to attempting 
to provide small community banks and savings associations with similar 
relief at the appropriate time, but this is not the time today.
  We are commending the work of this Congress and the other body for 
all those millions and millions of credit union people.
  Mr. Chairman, thank you very much.
  I rise today in strong support of this Credit Union bill.
  I want to make 3 points.
  First, we have worked forthrightly and diligently to work in a bi-
partisan way to deal with this pressing economic issue and avoided 
partisan bickering.
  Secondly, we are protecting innocent people. 20 million credit union 
members at 3,600 Federal Credit unions have been wondering since late 
February of this year whether they will be thrown out of their credit 
union. I am proud to say that this bill makes it clear that they can 
remain members of their financial institution of choice.
  Thirdly, we are putting in place many of the Treasury Department's 
recommendations on safety and soundness. These changes are extremely 
important. Credit Unions will have prompt corrective action applied to 
them--this means that bank like capital and net worth requirements will 
be applied to credit unions. In addition, large credit unions will be 
required to have annual audits performed by licensed CPAs just like 
large banks and savings associations. Other safety and soundness 
improvements are made to the share insurance fund which will ensure the 
solvency and safety of the fund for years to come. These new 
requirements, along with the limits on commercial lending, will assure 
that credit unions are safe in the years to come. The Senate improved 
the bill in this area.
  Finally, Mr. Chairman, I recognize some members and groups may be 
disappointed with the final product. I know that some are upset that 
the CRA provisions were lifted from the Credit Unions. I believe that 
was the correct choice, and look forward to attempting to provide small 
community banks and savings associations with similar relief at the 
appropriate time. In addition, I would have liked to see tighter 
restrictions on the expansion of multiple common bond credit unions. I 
believe that we should promote the formation of new credit unions 
whenever possible as opposed to permitting large, multiple common bond 
credit unions to expand. That is the correct public policy.
  Mr. Chairman, I know that we have made an honest attempt to be fair 
in this legislation. I urge my colleagues to support this bill.
  Mr. LaFALCE.  Madam Speaker, I yield 2 minutes to the distinguished 
Independent gentleman from Vermont (Mr. Sanders).
  Mr. SANDERS. Madam Speaker, first I want to congratulate the 
gentleman from Iowa (Mr. Leach) and the ranking member, the gentleman 
from New York (Mr. LaFalce) for their very hard work on this important 
legislation.
  As a member of the Committee on Banking and Financial Services and an 
original cosponsor of this bill, I rise in strong support of H.R. 1151, 
legislation which will nullify a recent Supreme Court decision by 
ensuring that Federal credit unions can serve multiple groups and that 
no current credit union members will be forced out of their accounts.
  Large corporate banks have been trying for years to shut out their 
credit union competition. In recent years they have filed 19 separate 
lawsuits in 12 States, and now five Supreme Court Justices say the law 
is on their side. Very simply, we must change the law and ensure that 
Americans have choices in banking, and today we will do just that.
  At a time of increasing bank fees, ATM surcharges, high credit card 
fees, increasing minimum balance requirements and the loss of many 
locally-owned banks to large, multi-billion dollar corporate 
institutions, credit unions today are more important than they have 
ever been. I have been a long-time supporter of credit unions because 
they are managed by their members and not by a high-priced board of 
directors. Credit unions, therefore, are more concerned about the 
financial needs of their own membership and not the profits of the 
owners of the institution. Credit union profits do not go to pay high 
executive salaries; they are directed back to customers in the form of 
lower fees and higher rates of return.
  In Vermont, where 170,000 people are members of credit unions and 
where the membership has played a very, very active role in determining 
that this legislation will be passed, credit unions provide important 
benefits such as lower loan rates, lower minimum balances, free ATM use 
and free credit cards.
  Madam Speaker, it is incumbent upon Congress to pass this important 
legislation, and I urge all of our Members to support it.
  Mr. LEACH. Madam Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas (Mr. Archer),

[[Page H7047]]

chairman of the Committee on Ways and Means.
  Mr. ARCHER. I thank the gentleman for yielding this time to me, Madam 
Speaker, and I reluctantly rise in opposition to this bill.
  I voted for the first bill that came through the House, and I am not 
here to in any way criticize the detailed compromises made with the 
Senate, but what I am here to state as, I think, a fatal flaw in this 
bill is it is scored as losing $150 million in revenue over the next 5 
years which is not paid for. We are supposed to operate under rules 
that no suspension can be brought on the floor if it involves over $100 
million. This $150 million of scored revenue loss is the result of 
expansion of credit unions operating on a tax-free basis and therefore 
costing revenue to the Treasury. It has been used already, this money 
has been used already to pay for the health bill that passed this 
House. It redounds to our score card on Ways and Means as a tax loss, 
and therefore on the score card will reduce the amount of revenue that 
we have already used to offset the health care bill.
  Madam Speaker, this is not the way this House should do business, and 
I must oppose this bill so that it can come back in a form where it is 
appropriately paid for.
  Mr. LaFALCE.  Madam Speaker, I yield 2 minutes to the gentleman from 
New York (Mr. Hinchey).
  Mr. HINCHEY. Madam Speaker, I, too, want to strongly support H.R. 
1151, the Credit Union Membership Act of which I am an original prime 
sponsor.
  The credit union movement has distinguished itself over the years by 
providing its members with good quality, low cost financial services. 
As nonprofit cooperatives managed by their members, credit unions excel 
at providing the services families and small businesses need most. 
Study after study shows that from home mortgages to student loans to 
start-up financing for small businesses, credit unions beat the 
competition in terms of service and customer satisfaction.
  Credit unions have also taken the lead in communities that are all 
but ignored by the banking industry. In many distressed urban and rural 
areas a community development credit union is often the only 
conventional financial institution to be found. In my district a group 
of public housing tenants formed a credit union when they were unable 
to interest a bank in their financial goals. We need to encourage these 
types of institutions to bring more low-income individuals into the 
financial mainstream.
  The credit union movement deserves much of the praise for this 
legislation. Like everyone here, I heard from people in my district who 
are passionate about their credit unions, not just the officers and 
directors and employees, but the men and women and families and 
businesses who are affiliated with these institutions. Not only did 
they take the time to call and write, but they also came here to 
Washington and to my district offices to tell me in person how 
important their credit unions are to them.
  So, Madam Speaker, on behalf of the 3.3 million New Yorkers who are 
credit union members, I urge the suspension of the rules and the 
passage of H.R. 1151.

                              {time}  1215

  Mr. LEACH. Madam Speaker, I yield myself 1 minute.
  Madam Speaker, I would simply respond to a previous intervention. Let 
me just say the CBO has estimated a revenue loss of $143 million for 
this bill, but it is important to note that there will be a $510 
million increase in revenues to the credit union fund. But because of 
budget rules, the $510 million cannot be used as an offset to this 
revenue loss. Instead, the $143 million revenue loss must be absorbed 
through other tax accounts under the budget rules.
  I will say in the Senate, the Senate balanced this revenue loss with 
their IRS reform bill. We have formally by letter informed the 
Committee on Ways and Means of this circumstance, but I recognize it 
does produce certain difficulties for the distinguished chairman of the 
Committee on Ways and Means.
  All I can say is this is not a surprise. It has been dealt with 
appropriately in the Senate, it has been flagged here in the House, and 
there is an offset of approximately three times the revenue loss, but 
it occurs in another account of the Federal budget.
  Mr. LaFALCE.  Madam Speaker, I yield 3 minutes to the gentleman from 
Massachusetts (Mr. Kennedy) in opposition to the bill.
  Mr. KENNEDY of Massachusetts. Madam Speaker, I rise today as a strong 
supporter of nonprofits, as a strong supporter of credit unions, but a 
strong opponent of this bill.
  The truth of the matter is that the politics that went on in the 
formation of this bill would make the bankers, the insurance industry 
and all of the special interests that normally come before the 
Committee on Banking salivate. They went into the back room of the 
Senate and they knocked out all of the provisions that are supposed to 
protect the consumer, particularly the poor consumer.
  These credit unions come into our offices and pretend they are taking 
care of the poor. They pretend that the Congress established them to go 
into underserved areas, where bankers would not go. The fact of the 
matter is, if you look at their records, the credit unions have an 
abominable record of lending to the poor, the worst record of any of 
the banks, of any of the S&L's. They have a worse record in lending to 
people of color, the minorities, blacks.
  In the Navy Credit Union, the Navy, which prides itself on bringing 
in minorities into the Nation's service, you are 11 times more likely 
coming from the same neighborhood with the same income levels to be 
turned down for a home mortgage loan if the color of your skin was 
black versus if it was white.
  The truth of the matter is the credit unions ought to be held to the 
Community Reinvestment Act. We could not get that through. But what we 
could get through is the fact that they would have to publicly report 
exactly what their record of lending to the minority communities and 
the low income communities have been. It is 5.4 percent today, with the 
information we get, much lower than any of the other financial services 
industries that we collect data on, and 16.5 percent in terms of the 
minority community loans.
  Madam Speaker, these numbers are an indictment of an industry that 
comes before each and every Member of Congress, parades before us a 
bunch of little folks that have deposits in credit unions, and then 
tells us there is a terrible attack taking place on credit unions by 
the big banks and insurance companies, so therefore we should give them 
everything they want.
  That is not how it is supposed to work. We are supposed to stand for 
some principles. And if these folks that run these credit unions, 
particularly the very large ones, which are much bigger than many 
banks, think they can just come in and roll right over the Congress of 
the United States, roll right over the United States Senate, have 
everybody come marching on up here saying what a great job they do, and 
sweep under the rug how they treat the poor, how they treat minorities, 
we ought to be ashamed of ourselves.
  We have to stand up every once in awhile and try to do what is right. 
We are not asking the credit unions to lose money. What we are saying 
is that if somebody who is a member of that credit union comes in and 
the color of their skin happens to be black, they ought to be treated 
the same way as somebody who is a member of that credit union whose 
color of their skin happens to be white, and that does not happen in 
today's America. It ought to happen. We ought to defeat this bill. We 
ought to stand up to the credit unions and do what is right.
  Mr. LEACH. Madam Speaker, I yield 2 minutes to my distinguished 
colleague, the gentleman from Texas (Mr. Paul).
  (Mr. PAUL asked and was given permission to revise and extend his 
remarks.)
  Mr. PAUL. Madam Speaker, I thank the gentleman for yielding me time.
  Madam Speaker, today I rise in support of this bill. I do not support 
legislation casually here, and have thought this through. I voted 
against this bill the first time it went through, and I was one of a 
few. But it is a better bill now than it was before.
  I am a supporter of the free market, and I do not believe you can 
achieve equity by raising taxes and putting

[[Page H7048]]

more regulations on those who do not have regulations and who do not 
have taxes.
  For this reason, I argued the case that instead of equity being 
achieved by taxing credit unions or making it more difficult for them 
to survive with more regulations, the best thing we should do now is 
talk about at least the smaller banks that compete with credit unions, 
to lower their taxes, get rid of their taxes and get rid of the 
regulation.
  Precisely because we dealt with the CRA function in the Senate is the 
reason that I can support this bill. CRA does great deal of harm to the 
very people who claim they want CRA to be in the bill. CRA attacks the 
small, marginal bank that is operating in communities that have poor 
people in them. But if you compel them to make loans that are not 
prudent and to make loans that are risky, you are doing precisely the 
opposite of what we should do for these companies.
  We should work to lower taxes, not only on the credit unions, and 
lower regulations. We must do the same thing for the banks. We must 
lower the taxes and get rid of these regulations in order for the banks 
to remain solvent and that we do not have to bail the banks out like we 
have in the past. But the regulations do not achieve this.
  This is a bill that I think really comes around to achieving and 
taking care of a problem and protecting everybody interested. But I am 
quite convinced that this is still not a fair bill, a fair approach, 
because we have not yet done enough for our community bankers. We must 
eventually apply these same principles of less regulations and less 
taxes to the small banker. Then we will provide a greater service to 
the people that are their customers, and we will certainly be allowing 
the poor people a greater chance to achieve a loan.
  Since I strongly support the expansion of the field of membership for 
credit unions and was the first one in this congress to introduce 
multiple common bonds for credit unions in the Financial Freedom Act, 
H.R. 1121, I am happy to speak in support of the passage of H.R. 1151 
here today. Having argued forcefully against the imposition of new 
regulations imposed upon credit unions, I congratulate the senate for 
not increasing the regulatory burden on credit unions in an attempt to 
``level the playing field'' with banks and other financial 
institutions.
  A better approach is to lead the congress toward lower taxes and less 
regulation--on credit unions, banks and other financial institutions. 
H.R. 1151, The Credit Union Membership Access Act, as amended by the 
senate, takes us one step in the right direction of less government 
regulation restricting individual choice. We must continue on the path 
of fewer regulations and lower taxes.
  These regulations add to the costs of operations of financial 
institutions. This cost is passed on to consumers in the form of higher 
interest rates and additional fees. These regulations impose a 
disproportionate burden on smallers institutions, stifles the 
possibility of new entrants into the financial sector, and contributes 
to a consolidation and fewer market participants of the industry. 
Consumers need additional choices, not congressionally-imposed limits 
on choices.
  The estimated, aggregate cost of bank regulation (noninterest 
expenses) on commercial banks was $125.9 billion in 1991, according to 
The Cost of Bank Regulation: A Review of the Evidence, Board of 
Governors of the Federal Reserve System (Staff Study 171 by Gregory 
Elliehausen, April 1998). It reports that studies estimate that this 
figure amounts to 12 percent to 13 percent of noninterest expenses. 
These estimates only include a fraction of the ``most burdensome'' 
regulations that govern the industry, it adds, ``The total cost of all 
regulation can only be larger . . . The basic conclusion is similar for 
all of the studies of economies of scale: Average compliance costs for 
regulations are substantially greater for banks at low levels of output 
than for banks at moderate or high levels of output,'' the Staff Study 
concludes.
  Smaller banks face the highest compliance cost in relation to total 
assets, equity capital and net income before taxes, reveals Regulatory 
Burden: The Cost to Community Banks, a study prepared for the 
Independent Bankers Association of America by Grant Thornton, January 
1993. For each $1 million in asset, banks under $30 million in assets 
incur almost three times the compliance cost of banks between $30-65 
million in assets. This regulation almost quadruples costs on smaller 
institutions to almost four times when compared to banks over $65 
million in assets. These findings are consistent for both equity 
capital and net income measurements, according to the report.
  We need to work together now to reduce the regulatory burden on all 
financial institutions. The IBAA study identified the Community 
Reinvestment Act as the most burdensome regulation with the estimated 
cost of complying with CRA exceeding the next most burdensome 
regulation by approximately $448 million or 77%. Respondents to the 
IBAA study rated the CRA as the least beneficial and useful of the 
thirteen regulatory areas surveyed. We need to reduce the most costly, 
and least beneficial and useful regulation on the banks.
  Let's all work together now, credit unions, banks and other financial 
institutions, to reduce their regulatory burden. Credit unions have 
demonstrated that fewer regulations contribute to lower costs passed on 
to consumers and greater consumer choice. Let's extend that model for 
banks and other financial institutions.
  Mr. LaFALCE. Madam Speaker, I yield 1 minute to the gentleman from 
California (Mr. Filner).
  Mr. FILNER. Madam Speaker, I rise today also to herald the final 
passage of H.R. 1151, the Credit Union Membership Access Act. Our vote 
today for H.R. 1151 is a vote of confidence in the 71 million Americans 
who are member-owners of more than 11,000 credit unions throughout the 
Nation.
  I do not often differ with the gentleman from Massachusetts, but I 
represent a fairly low income district in Southern California, 75 
percent of which are people of color. My district supports the credit 
unions. They are working in our neighborhoods and supporting our 
neighborhoods.
  I want to praise the grassroots efforts of millions of credit union 
members for rising to the defense of their credit unions and fighting 
the battle until it was won. This bill is needed to protect them, and 
it provides guidance on how they can expand.
  We are guaranteeing credit union members, every day workers in our 
Nation, the ability to choose low-cost higher returns and greater 
convenience. With final passage, we will be giving credit union 
members, everyday Americans who believe in democracy, the victory they 
so richly deserve.
  Marla, this one's for you.
  Mr. LEACH. Madam Speaker, I yield 1 minute to the distinguished 
gentleman from New York (Mr. Quinn).
  Mr. QUINN. Madam Speaker, I want to congratulate the gentleman from 
Iowa (Mr. Leach), and my good friend, the gentleman from Buffalo (Mr. 
LaFalce), on their work on this, and I want to speak about this great 
American success story that we heard about this morning, the Nation's 
credit unions.
  Of course, credit unions are far different from banks. They are 
democratically owned and primarily engaged in consumer loans, and, 
Madam Speaker, I believe it is this simplicity that is the secret to 
their success.
  Credit unions are not in the business to buy other banks, they are 
not there to sell insurance or to acquire commercial affiliates. More 
importantly, they are not for profit. Credit unions have all of the 
revenues funneled back into the members for low cost loans.
  I am a proud sponsor of the Credit Union Membership Access Act to 
preserve credit unions in their current status. The many differences 
between credit unions and banks are what make credit unions so 
valuable. Even bankers admit that there is a certain percentage of the 
population that banks cannot serve. Low wage workers oftentimes cannot 
afford high bank fees or loan rates. Without credit unions, these 
people would be forced to turn to check cashers or to pawn brokers or 
any number of different kinds of facilities.
  I know that my district in western New York, thousands of people have 
come to rely on credit unions. I have constituents tell me all the time 
how much they mean to them, and many claim they would not be able to 
afford their own home, a loan to start a new business, or, in my case, 
attend college. It is clear to me credit unions are critical for 
thousands of Americans, and I urge Congress to help credit unions play 
an important role, now and in the future.
  Mr. LaFALCE. Madam Speaker, I yield 1\1/4\ seconds to the gentleman 
from Michigan (Mr. Dingell), the distinguished ranking member of the 
Committee on Commerce.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)

[[Page H7049]]

  Mr. DINGELL. Madam Speaker, I rise to, first of all, commend the 
leadership on both sides, the distinguished gentleman from Iowa and the 
distinguished gentleman from New York, for this legislation.
  I rise to offer my unequivocal support for the legislation, and also 
to praise credit unions, which are dedicated to the communities and the 
people they serve. These institutions provide low-cost consumer credit 
to American families and small businesses, and they provide a fine 
opportunity for the American people to work together for their own 
common good. I urge support of H.R. 1151.
  As a freshman Congressman in 1934, my dad worked on the Federal 
Credit Union Act. The committee in its report on that legislation, 
which happened in one of the darkest times in American financial 
history, said this: That the credit unions have, and I now quote, 
``come through the depression without failures, when the banks have 
failed so notably, is a tribute to the worth of cooperative credit.''
  That is as clear today as it was then. Credit unions are a vital part 
of our community and our Nation. They serve the people, and they serve 
them well.
  Strong consumer support for credit unions does not surprise me. Over 
the past year, people have come to me at town hall meetings, pancake 
breakfasts and other events, and said to me, ``Congressman, you have to 
help the credit unions, because they work for us.''
  While some of the provisions in the House bill are different than I 
would have had, H.R. 1151 is a good bill. It will help credit unions 
continue to provide high-quality low-cost services to the members and 
to the communities which have made them so popular with the families 
across America.
  I urge support of the legislation, and I commend my colleagues who 
have worked on it.
  Mr. LEACH. Madam Speaker, I yield 30 seconds to the gentleman from 
New York (Mr. LaFalce).
  Mr. LaFALCE. Madam Speaker, I thank the gentleman very much for this 
time.
  Madam Speaker, I want to take this opportunity to thank the chairman, 
to thank majority and minority Members, to thank the majority and 
minority staff. This has been truly a bipartisan, a collegial effort.
  I think we have an excellent bill before us today. It is not 100 
percent that either the chairman or I would like, but it is pretty 
close. I would have preferred that we had a slightly different process 
of going to conference with the Senate, but there were circumstances 
which made that difficult, and it was expedient to obtain final passage 
before the recess. I certainly understand the judgment that was made.
  I hope that we can go forward in a similar fashion on other 
legislation, whether it is the IMF legislation, whether it is the 
financial services modernization. I hope in financial services 
modernization we will not receive something from the Senate the day 
before we are about to leave, so that we have to consider that on a 
take-it-or-leave-it basis also. But I look forward on all of these 
issues to working with the chairman, as we have on this particular 
bill.
  Mr. LEACH. Madam Speaker, I yield myself the balance of my time.
  Madam Speaker, I thank the gentleman from New York (Mr. LaFalce). Let 
me just say a couple comments about the process. For a deliberative 
body, we have moved quickly on this legislation. Within two weeks of 
the Supreme Court ruling, our Committee on Banking and Financial 
Services had a comprehensive hearing on the subject. Two weeks later we 
marked up a bill, and one week later brought it to the floor. Once the 
Senate has acted, we have responded again within a two week time frame.
  This is testament, I believe, to cooperation between the parties, as 
the gentleman from New York (Mr. LaFalce) has mentioned. I think it is 
very important that I particularly extend my appreciation to the 
gentleman from Ohio (Mr. LaTourette), the gentleman from Pennsylvania 
(Mr. Kanjorski), the gentleman from New York (Mr. LaFalce) and the 
gentleman from Minnesota (Mr. Vento), who have played just an 
extraordinarily critical role in the legislation. But this is not 
abstract legislation.

                              {time}  1230

  It is, most of all, a testament to the role of credit unions in 
American society and the allegiance which they have obtained.
  What we have here is an industry that has served its members, served 
its members well. It has brought services at a competitive rate to 
people who have controlled their own financial destiny in ways they 
never have been able to before. It has also brought competition to 
other kinds of private sector institutions that are not part of the 
cooperative movement.
  This is a very fundamental role of cooperatives, to serve members and 
people who are nonmembers, because of the competition that is implicit 
within this particular kind of cooperative structure.
  Finally, I would also stress that this body should above all respect 
choice, the choice of the individual Americans. Approaches that are 
designed to deny choice to the individual American in finance, to force 
Americans by default into institutions that may be beyond their 
control, is a mistake.
  What the credit union movement symbolizes is an option for the 
average American, an option that is a community-controlled 
circumstance, an option that has served the public historicly 
exceptionally well. I am confident it will in the future. I am proud of 
this legislation. I believe it is common sense. I also believe that it 
is deeply legitimizing of a movement that deserves every aspect of 
legitimacy that it can muster. I urge my colleagues to support this 
legislation, and I also urge the President to promptly sign it.
  Ms. KAPTUR. Mr. Speaker, I rise in support of H.R. 1151, the Credit 
Union Membership Act.
  This has truly been a classic ``David-versus-Goliath'' confrontation 
between widely different interests. The ``Davids'' in this instance are 
the thousands of not-for-profit small credit unions throughout the 
nation, such as Little Flower Parish Federal Credit Union in Toledo. 
Little Flower has 1,700 members, with total assets of $5 million. I'm 
proud to be one of those members.
  This is a confrontation that pits member-owned credit unions that are 
not-for-profit cooperatives against banks that often place the 
interests of shareholders and profits over and above the need of 
consumers and communities. With higher fees becoming more prevalent and 
banking options shrinking for many consumers, there can be little doubt 
that credit unions have helped to keep banks in check by being viable 
financial alternatives for millions of Americans. America's consumers 
will now be guaranteed more options and alternatives when it comes to 
conducting their financial business and transactions.
  As was stated in an editorial in the Toledo Blade earlier this year, 
``Credit unions are about local folks helping local folks.'' I'll 
continue to support the ``local folks'' who place community and family 
over profits only and will continue to fully support America's credit 
unions and the rights of all Americans to join and belong to their 
local credit union.
  Mr. Speaker, H.R. 1151 is right for all Americans.
  Mr. CUNNINGHAM. Mr. Speaker, I rise once again in support of the 
Credit Union Membership Access Act (H.R. 1151). While the Senate has 
made a couple of minor changes to the legislation the House passed 
earlier this year, the substance of this legislation remains the same.
  H.R. 1151 will reverse the February 25, 1998, Supreme Court ruling 
(AT&T Family Federal Credit Union et al. v. First National Bank & Trust 
Co.) which sent shockwaves through this nation's 70 million credit 
union members. That decision threatened the future financial safety of 
our nation's credit unions. The 51st District in California, which I 
represent, is served by more than 230 different credit unions with more 
than 305,000 members. By passing this legislation, we will ensure that 
not a single credit union member will lose their choice of financial 
service provider.
  This legislation affirms the commitment of this Republican Congress 
to keep a healthy, competitive financial service industry in America. I 
call on all my colleagues to join me in support of credit union members 
and to vote for H.R. 1151, with the Senate Amendments.
  Mr. BENTSEN. Mr. Speaker, I rise today in support of H.R. 1151, the 
Credit Union Membership Access Act. This legislation is necessary to 
ensure that credit unions can continue to accept new members and 
consumers continue to have the freedom to select the financial 
institutions of their choice. I am pleased that Congress has acted so 
quickly to reverse the February Supreme Court decision ruling that 
credit unions were illegally allowed to form bonds between unrelated 
groups.

[[Page H7050]]

  As a member of the House Banking Committee, where this legislation 
originated, I am pleased that Congress has acted in a prudent manner to 
ensure that credit unions can continue to accept new members. For many 
consumers, credit unions offer low-cost, well-managed financial 
institutions to serve their needs including checking and savings 
accounts. I believe that many Texans will benefit from this 
legislation.
  This legislation would overturn this Supreme Court ruling and allow 
credit unions to serve all consumers. This measure would establish 
three different types of credit unions, including single common bond, 
multiple common-bond, and community credit unions. Single common bond 
credit unions would be formed around one single company. Multiple 
common-bond credit unions would include groups of up to 3,000 that are 
in ``reasonable proximity'' to each other. Larger groups could also 
join multiple common-bond credit unions, as could persons in under 
served areas, through a formal review process at the National Credit 
Union Association (NCUA), the federal agency responsible for overseeing 
credit unions. Community credit unions would be based on a distinct 
community.
  This measure would also limit the amount that credit unions can 
provide for commercial business loans to their members. The bill 
includes a provision to limit commercial business loans to 12.25% of 
the credit union's assets. Any credit unions that currently exceed 
these limits would have three years to come into compliance. For any 
undercapitalized credit unions, new loans would be restricted until 
their capital levels are increased to proper levels.
  This legislation would also provide important new protections to 
ensure that credit unions are financially sound. These provisions 
include a requirement that credit unions larger than $10 million in 
assets must prepare a financial statement based upon generally accepted 
accounting principles and that credit unions larger than $500 million 
or more in assets must have an independent audit of their financial 
statements. This legislation also establishes new credit union capital 
requirements that would determine the financial status of credit 
unions. The legislation also requires that the National Credit Union 
Share Insurance Fund (NCUSIF), the federal deposit insurance fund for 
credit unions, must maintain a minimum of 1.2 percent of insured 
deposits in order to save for future losses at credit unions. If the 
NCUSIF drops below this level, this legislation would require the NCUA 
to increase assessments to reach this level.
  As a supporter of the House version of this bill on April 1, 1998, I 
am pleased that the Senate has also acted to approve this bill. The 
bill being considered today would resolve this matter and ensure that 
credit unions can continue to grow and prosper. I urge my colleagues to 
support this critical banking legislation.
  Mr. LaFALCE. Mr. Speaker, in February the Supreme Court challenged 
Congress to answer a difficult policy question--whether to uphold its 
narrow interpretation of the 60-year-old Federal Credit Union Act or 
overturn the Court and expand the scope of the Act to permit credit 
unions to serve a broader segment of the American public.
  Today, we are giving a definitive answer to that question. I'm 
pleased to say the answer is a resounding ``yes'' to credit union 
expansion, ``yes'' to preserving the membership rights of all current 
credit union members, and ``yes'' to making credit union services 
available to even greater numbers of American families.
  The Senate-passed bill we are considering today incorporates 
virtually every single key element of the bipartisan compromise that 
passed the House on April 1st with an overwhelming 411-to-8 vote. First 
and foremost, it protects the membership of every current credit union 
member and every group within a credit union. It also permits common 
bond credit unions to continue to expand their field of membership by 
including new occupation and association-based groups. The bill limits 
this expansion, however--first, by requiring the creation of new, 
separate common-bond credit unions wherever feasible; second, by 
limiting the size of new groups to under 3,000 members; and third, by 
requiring that these small groups be included within a credit union 
that is located within reasonable proximity to the group--thus 
reinforcing a geographic ``common bond''.
  This ``proximity'' requirement is extremely important, and I insisted 
on its inclusion in the bill to ensure that we maintain, to the maximum 
extent practicable, the closest feasible geographic common bond. It was 
my intent in offering this provision that NCUA give a conservative 
interpretation to the term ``reasonable proximity'', allowing credit 
unions located in a larger city to incorporate only common bonds groups 
located within nearby sections of that city. This would mean, for 
example in my own Congressional district, that a credit union located 
in Rochester could incorporate an eligible common bond within the 
Rochester area. It should not be able to incorporate groups in outlying 
counties or in a nearby city such as Buffalo, except in instances where 
there is no local credit union capable of expanding its services to 
serve these groups. Similarly, credit unions based in smaller cities or 
towns, like Lockport or Niagara Falls in my district, also should be 
able to incorporate new groups only from within, or in close proximity 
to, those jurisdictions. However they should also have priority in 
serving local groups ahead of any credit union based outside the area. 
This is an area where NCUA will not to provide detailed guidance to 
credit unions.
  The core elements of this legislation, I'm proud to say, follow the 
basic outline of a set of proposals I circulated last November to 
encourage discussion of a compromise on the field of membership issue. 
Like my original proposal, this legislation balances expansion of 
credit union membership with preservation of the traditional credit 
union values of common bond and community.
  While this legislation adequately answers the questions raised by the 
Court and resolves several over key credit union issues, it includes 
two Senate changes that House Members should be aware of. It deletes 
House language reaffirming the credit unions' obligation to serve 
persons of modest means within their field of membership. Let me 
emphasize that this House provision only restated a long-understood 
obligation in current law that credit unions must serve all potential 
members, and it attempted to provide greater parity in regulatory 
treatment between credit unions and other financial institutions. This 
provision should not have been dropped. I strongly encourage NCUA to 
continue enforcing current law with the understanding that this 
legislation merely attempted to reaffirm and clarify this existing 
obligation . . . it does not negate or eliminate it.
  A second change in the Senate amendments is the weakening of current 
regulatory and voting requirements for credit union conversions to 
mutual savings institutions. Currently, a credit union can not convert 
its charter without an affirmative vote of a majority of its members. 
The Senate changed this to require only a majority of the members who 
participate in a conversion vote. The Senate made no provision to 
assure adequate and effective notice for conversion vote. Thus, under 
the Senate provision it is entirely possible for a small fraction of a 
credit union's membership, either by manipulation or inadequate notice, 
to convert a credit union and deprive the overwhelming majority of 
members of their ownership rights and credit union services. This is an 
inappropriate change that could, without very strict regulation and 
supervision, facilitate the slow undoing of our credit union system. I 
intend to work with Chairman Leach to address this issue within another 
context. In the meantime, I urge NCUA to exercise the maximum feasible 
regulation of credit union conversions permissible under this 
legislation.
  While these aspects of the bill continue to concern me, they are 
outweighed by the significant improvements the bill makes in the Credit 
Union Act and by the need for immediate action to resolve the pressing 
issues raised by the Supreme Court. I believe this is one of the most 
important bills Congress will consider this year. It is an important 
victory for the credit unions and, most important, it is a tremendous 
victory for American consumers.
  I am proud of the significant work and bipartisan cooperation that 
went into the development of this legislation. It is good public 
policy. I urge the House to suspend the rules and adopt H.R. 1151.
  Mr. THOMPSON. Mr. Speaker, I rise today in support of the final 
passage of H.R.1151, the ``Credit Union Membership Access Act.'' I was 
proud to be an early co-sponsor of the original House version of this 
bill, and I am glad to see the final product we will send to the 
President's desk includes most of the provisions in that bill.
  Last year the Supreme Court ruled the members of a federal credit 
union must be organized on the basis of a common occupational bond, 
which threatened the viability of federal credit unions across the 
nation. This suit was filed by one of the largest banks in the nation 
out of fear that credit unions were encroaching on business services 
which traditionally have been offered by banks. I find this fear 
irrational, especially when one takes into account the overall 
characteristics of the two industries. For example, the $5.4 trillion 
U.S. banking industry grew by more than $300 billion last year, an 
amount almost as great as the total assets of all American credit 
unions combined. Moreover, the average credit union has less than $28 
million in assets--less than one sixteenth the size of the average 
banking institution.
  The bill we are voting on today expressly protects the structure of 
all existing credit unions and permits future credit unions to gather 
members from multiple groups. Despite the previous disagreements 
between the banking and credit union industries, I believe this design 
will permit both credit unions and

[[Page H7051]]

banks to continue to prosper by correcting the flaws in existing law 
the Supreme Court has unearthed. Most importantly, the bill will ensure 
each working American is free to obtain services from whatever type of 
financial institution he or she considers best.
  I am pleased to join with my colleagues on both sides of the aisle in 
support of the Credit Union Membership Access Act, and I look forward 
to watching the President sign it into law.
  Mr. DAVIS of Illinois. Mr. Speaker I rise today to express my 
concerns regarding H.R. 1155, The Credit Union Membership Access Act, 
as amended by the Senate on July 27, 1998. While I recognize the 
important and necessary role credit unions play in our economy, it is 
my understanding that their creation was expressly premised upon the 
dire need to serve low-income communities and groups. It was out of 
recognition of this unique obligation that I worked to preserve the 
tax-exempt status for credit unions. The inclusion of an express 
requirement that credit unions serve economically disadvantaged groups 
appears to be a consistent, if not superfluous, corollary to these 
originally stated goals. Unfortunately, changing times has not ushered 
in an era where the need for financial institutions that serve 
underserved communities has dissipated.
  In fact, the need to provide financial services to low-income 
communities is as compelling today as it has ever been. There are 
endless accounts of individuals with limited financial means who have 
been unable to purchase a home, unable to buy a car, unable to by other 
necessities of life simply because they cannot find financing in the 
private sector. Obviously, it is proper and fitting to require credit 
unions--who receive a subsidy from the government by virtue of their 
tax-exempt status--to serve these underserved communities and groups.
  It is quite ironic that the rationales offered in debate on the House 
floor in support of H.R. 1151 were based upon the unique obligation 
credit unions have to serve lower-income groups. Yet, this version of 
H.R. 1151 deletes any express requirement that credit unions serve 
these communities or groups. This irony is further underscored by the 
fact that it has been an unwritten policy of the National Credit Union 
Administration that credit unions must significantly endeavor to serve 
low-income groups. Nevertheless, I am hopeful that this unwritten 
policy will continue.
  Mr. VENTO. Mr. Speaker, I rise today in support of this urgently 
needed legislation for current credit unions and their members who have 
been jeopardized by the Supreme Court's decision in February. The House 
passed this bill in April and the other body finally sent our bill back 
to us last week with some changes.
  This bill will protect the ten to twenty million credit union members 
that could be affected by the Supreme Court ruling this past Spring. 
H.R. 1151 as passed by the House earlier and now as passed by the 
Senate with amendment should also assist future credit unions and their 
members by providing additional statutory direction that can hopefully 
immunize the credit union industry from future law suits.
  Following the lead provided by our good work in the House Banking 
Committee, the Senate made limited and mostly positive amendments to 
H.R. 1151. I support the changes made to the Prompt Corrective Action 
provisions of the bill along with the strengthening of the capital 
standards for credit unions. I am concerned, however, and want to note 
here for the record that the Community Reinvestment Act (CRA)-like 
requirements were stricken from the bill. These were a positive 
addition to the bill and one that I believe would have served credit 
unions and their members well. The loss of this provision, however, 
should not jeopardize the work of the NCUA in providing some kind of 
community service test in regulation for credit unions that are 
community based by their very name. Such a regulatory test, focused on 
actual performance in their own community is important when credit 
unions form in order to serve specific communities and is a fair test 
of the strength of a community credit union's charter. Despite my 
reservations about the loss of the CRA-like provision, I recognize the 
importance of acting and acting now to resolve the membership issues 
for credit unions and do not want to hold up the good in pursuit of the 
better.
  Mr. Speaker, credit unions are a vital part of so many communities, 
neighborhoods, workplaces and towns across this great land. They 
provide needed financial services sometimes in special locations and 
places where affordable, good services and credit is scarce. For all of 
those communities and members, Congress needs to modernize the 1934 
credit union law and field of membership definitions which certainly do 
not fit the socio-economic reality of the 1990's. Credit unions have 
been in a straight-jacket even before the February court ruling because 
of the caution their regulator had to take in light of all the court 
actions.
  We have reached a point when credit union law must move credit unions 
from the strict interpretation of the ``common bond'' and ``field of 
membership'' law so that the economic realities of the world of 
business and employment today: divestitures, mergers or closings of 
businesses, doesn't result in the double whammy of the loss of 
financial services through credit unions. The model that served in the 
1980's does not fit the 1990's anymore than the laws governing other 
financial institutions fit.
  By creating a new mechanism for adding so-called select employee 
groups, basically allowing multiple common-bond credit unions, we are 
revamping and facilitating the federal credit union law and empowering 
credit unions to adapt to the 1990's market place. Once law, the 
provisions of H.R. 1151 will provide clear direction to the National 
Credit Union Administration (NCUA) including a 3,000 field of 
membership guideline and a reasonable proximity test. It also affords 
the regulator with flexibility to accommodate groups that may not meet 
this test but that would find it difficult to form a single-bond credit 
union of their own.
  We will now have a significantly strengthened regulatory foundation 
for credit unions, the regulator and the insurance fund by adding 
capital and net worth requirements to be established by the National 
Credit Union Administration. The NCUA will be empowered with important 
prompt corrective action powers, like those that have been established 
to govern the banks and thrifts. These important safety and soundness 
provisions should not be overlooked.
  The Senate has added a further limitation on member business loans, 
based on a net worth for a well-capitalized credit union so that total 
member loans for business purposes would be limited to 12.25%. 
Importantly, however, exceptions are provided along with a three year 
transition period for credit unions who do not immediately comply and 
special exception for credit unions established for such expressed 
purpose as fits the entity activities. For example commercially, 
fisherman loans for their enterprise remain an appropriate activity.
  Mr. Speaker and Members of this House, we need to pass this bill 
today so that this corrective legislation with regards to credit unions 
can make its way to the President as soon as possible and become law.
  Credit unions have been faced by the same competitive pressures, 
changing technology, and the evolution in products and services that 
other financial institutions are facing. In order to meet the 
challenges of the 21st Century, credit union law, regulation and 
operation must modernize and grow responsibly. I urge my Colleagues to 
support H.R. 1151, the Credit Union Membership Access Act.
  Mrs. MINK of Hawaii. Mr. Speaker, today is a great day for credit 
unions and the concept of grassroots movements in this nation. With 
this bill, H.R. 1151, we are beating back efforts of the big banks to 
limit access to non-profit, community-oriented credit unions.
  With the unanimous support this bill received in the House, I have no 
doubt that this Senate version will pass today, and very soon the 
President will sign it into law.
  H.R. 1151 is necessary because in February of this year, credit 
unions were dealt a severe blow by the Supreme Court, which upheld a 
ruling prohibiting the practice of multiple-group federal credit 
unions. In multiple-group credit unions, membership can consist of more 
than one distinct group so long as each group has its own common bond. 
This practice maintains the long standing practice of a credit union 
that its members have a common bond, yet allow credit union membership 
to continue to grow and thrive in our communities throughout the 
nation.
  H.R. 1151, overturns the Supreme Court ruling and allows credit 
unions to expand membership outside of their original group, as along 
as new members share common bond with each other.
  This is a particular victory for smaller communities and 
organizations that cannot maintain a credit union on their own. This 
bill will allow them to join existing credit unions. This is especially 
important in the rural areas of my state where groups may be too small 
to start their own credit union. Financial institution options are 
often limited in rural communities; this bill will help assure that 
individuals and families in rural communities have access to credit 
union alternatives.
  I was told that without this bill up to 69 of Hawaii's 113 credit 
unions could have been affected by the Court decision to limit credit 
union membership.
  Credit Unions are unique financial institutions built upon the idea 
of members in a community helping one another. It is the concept that 
collectively we can do more for each other than on our own. We need to 
preserve this unique nature of credit unions and support membership 
access to our credit unions.
  I urge my colleagues to join me in supporting the Credit Union 
Membership Access Bill. Let's send this bill to the President today!

[[Page H7052]]

  Mr. LEACH. Madam Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mrs. Emerson). The question is on the motion 
offered by the gentleman from Iowa (Mr. Leach) that the House suspend 
the rules and concur in the Senate amendment to the bill, H.R. 1151.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate amendment was 
concurred in.
  A motion to reconsider was laid on the table.

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