[Congressional Record Volume 145, Number 165 (Friday, November 19, 1999)]
[Senate]
[Pages S15065-S15066]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  FINANCIAL SERVICES MODERNIZATION ACT

  Mrs. LINCOLN. Mr. President, a week ago today, President Clinton 
signed S. 900, The Financial Services

[[Page S15066]]

Modernization Act. Beyond the obvious positive implications that this 
legislation has for the bankers of my state of Arkansas, there is a 
provision in the bill that I rise to speak of today that has been a 
long time in coming and will finally bring fairness to Arkansas' 
banking market.
  Section 731 of the Financial Services Modernization Act is titled 
``Interest Rates and Other Charges at Interstate Branches.'' This 
section was not included in the original version of S. 900 that passed 
this body, but with the support of the entire Arkansas congressional 
delegation it was added to the House version, and retained in the 
conference committee. Because of the importance of this provision to my 
state, because of the role that both Arkansas Senators played in 
protecting this provision in the conference committee, and because 
there was no debate on the provision in the Senate, I will speak 
briefly on the history that led to this new law, and the reason it was 
so vitally needed.
  With the passage of the Riegle-Neal Interstate Banking and Branching 
Act several years ago, the question arose as to which state law 
concerning interest rates on loans would apply to branches of 
interstate banks operating in a ``host state.'' Would those branches be 
governed by the interest rate ceiling of the charter location or that 
of their physical location? The Office of the Comptroller of the 
Currency and the Federal Deposit Insurance Corporation addressed this 
issue with opinions that basically gave branches of interstate banks 
the option of being governed by either their home or host state 
requirements concerning interest rates by structuring the loan process 
to meet certain requirements.
  In Arkansas this had a profound effect upon the local banking 
community. Under Article 19, Section 13 of the Arkansas Constitution, 
the state places the maximum rate that can be charged for many classes 
of loans at 5% above the Federal Reserve Discount Rate. However, over 
40% of the banking locations in Arkansas are non-Arkansas based 
interstate banks, and were, in effect, not governed by this 
constitutional provision after Riegle-Neal became the law of the land. 
The out of state banks were able to price freely, while Arkansas banks 
were bound by the usury restrictions in the Arkansas Constitution. This 
placed Arkansas banks at a significant competitive disadvantage.
  In light of this clear inequity, and because, if left uncorrected, my 
state could have lost virtually all of its local community banks, the 
Arkansas delegation wholly supported the language of Section 731 that 
provides our local banks with loan pricing parity in all regards with 
non-Arkansas interstate banks operating branches in Arkansas. Remedying 
this disparity was our intent, Mr. President, and I am pleased that my 
colleagues supported its inclusion in the Financial Services 
Modernization Act.
  The local banks in Arkansas play such an important role in the small 
and rural communities they serve. Not only do they provide the capital 
that fuels the local economy, but they are always out front in charity 
and community service. You always see their names in the back of the 
football program, or leading the drive to buy the new band uniforms. 
The local bankers in my state are much more than business men and 
women, they are neighbors and friends, and dedicated to their homes.
  In short, Mr. President, Congress put Arkansas banks at a severe 
competitive disadvantage with the passage of the Riegle-Neal Interstate 
Banking and Branching Act. The entire Arkansas delegation, therefore, 
considered it appropriate, if not our duty, to work to rectify this 
inequity here in Congress where it was created. I am glad we were 
successful.

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