[Congressional Record Volume 149, Number 173 (Monday, November 24, 2003)]
[Senate]
[Pages S15873-S15874]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 PRESERVING INDEPENDENCE OF FINANCIAL INSTITUTION EXAMINATIONS ACT OF 
                                  2003

  Mr. ENSIGN. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of S. 1947, which was introduced 
earlier today.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       A bill (S. 1947) to prohibit the offer of credit by a 
     financial institution to a financial institution examiner, 
     and for other purposes.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. HATCH. Mr. President, I rise to join my friend and distinguished 
colleague, Senator Leahy, in the introduction of the Preserving 
Independence of Financial Institution Examiners Act of 2003. This bill 
modifies two criminal statutes, sections 212 and 213 of title 18 of the 
United States Code, which impose criminal penalties on bank examiners 
who are offered, or who accept, a loan or gratuity from a financial 
institution they are examining. These revisions are needed to reflect 
the changes in our national banking system.
  When originally enacted, the criminal statutes were designed to 
ensure that bank examiners were not subjected to undue and improper 
influences from the subject banks. With the increased consolidation and 
globalization of the banking industry, it is difficult in today's 
banking economy for examiners, particularly those who examine credit 
card banks, to obtain nationally available credit cards. The statutes, 
which were originally enacted in 1948, include no exception for 
routine, ordinary business transactions that were never intended to 
fall within the ambit of the statutes. The proposed legislation 
provides an exception to the statutes for bank examiners who hold 
everyday credit cards and residential home mortgage loans from the 
banks they are examining. The exceptions are narrow and the purposes of 
the statutes to prohibit such conflicts of interest will remain intact.
  I want to thank Senator Leahy for his willingness to address this 
problem. I urge my colleagues to support this measure and quickly pass 
it.
  Mr. LEAHY. Mr. President, today's passage of the Preserving 
Independence of Financial Examinations Act of 2003 is an example of 
solid, efficient bipartisan work on a needed legislative reform. I am 
pleased to have seen its passage so swiftly through the U.S. Senate and 
I thank my friend from Utah, Senator Hatch, for his assistance and 
advice.
  The bill provides a logical and necessary modification to important, 
but outdated, criminal statutes originally written to ensure the 
objectivity and integrity of financial institution examinations. 
Sections 212 and 213 of title 18 of the United States Code, first 
drafted in 1948, appropriately provide criminal penalties for bank 
examiners who are offered, or who accept, a loan or gratuity from the 
financial institution they are examining. This bill exempts from the 
law's reach ordinary credit card and residential home mortgage loans 
sought and held by bank examiners in their everyday lives.
  Several factors supported the proposed blanket credit card and 
residential loan exceptions. Most important, consolidation within the 
banking industry made it increasingly difficult for examiners to obtain 
nationally available credit cards and mortgage loans and for the 
banking agencies to assign examiners to work.
  The Leahy-Hatch bill strictly defines the circumstances under which 
the exceptions to the criminal statute apply with a keen eye on 
preserving the independence of financial institution examinations and 
the original legislative intent of the statute.
  I thank Senator Hatch for his assistance in this bill forward and 
making it possible for bank examiners to engage in arms-length and 
routine business transactions without fear of prosecution. I also thank 
our friends in the banking agencies, including the Federal Reserve 
Bank, the Office of Thrift Supervision and the Federal Deposit 
Insurance Corporation for bringing this important issue to our 
attention.
  Mr. ENSIGN. Mr. President, I further ask unanimous consent that the 
bill be read three times and passed, the motion to reconsider be laid 
upon the table, with no intervening action or debate; and that any 
statements relating to this measure be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (S. 1947) was read the third time and passed, as follows:

                                S. 1947

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Preserving Independence of 
     Financial Institution Examinations Act of 2003''.

     SEC. 2. OFFER AND ACCEPTANCE OF CREDIT.

       (a) In General.--Title 18, United States Code, is amended 
     by striking sections 212 and 213 and inserting the following:

     ``Sec. 212. Offer of loan or gratuity to financial 
       institution examiner

       ``(a) In General.--Except as provided in subsection (b), 
     whoever, being an officer, director or employee of a 
     financial institution, makes or grants any loan or gratuity, 
     to any examiner or assistant examiner who examines or has 
     authority to examine such bank, branch, agency, organization, 
     corporation, association, or institution--
       ``(1) shall be fined under this title, imprisoned not more 
     than 1 year, or both; and
       ``(2) may be fined a further sum equal to the money so 
     loaned or gratuity given.
       ``(b) Regulations.--A Federal financial institution 
     regulatory agency may prescribe regulations establishing 
     additional limitations on the application for and receipt of 
     credit under this section and on the application and receipt 
     of residential mortgage loans under this section, after 
     consulting with each other Federal financial institution 
     regulatory agency.
       ``(c) Definitions.--In this section:
       ``(1) Examiner.--The term `examiner' means any person--
       ``(A) appointed by a Federal financial institution 
     regulatory agency or pursuant to the laws of any State to 
     examine a financial institution; or
       ``(B) elected under the law of any State to conduct 
     examinations of any financial institutions.
       ``(2) Federal financial institution regulatory agency.--The 
     term `Federal financial institution regulatory agency' 
     means--
       ``(A) the Office of the Comptroller of the Currency;
       ``(B) the Board of Governors of the Federal Reserve System;
       ``(C) the Office of Thrift Supervision;
       ``(D) the Federal Deposit Insurance Corporation;
       ``(E) the Federal Housing Finance Board;
       ``(F) the Farm Credit Administration;
       ``(G) the Farm Credit System Insurance Corporation; and
       ``(H) the Small Business Administration.
       ``(3) Financial institution.--The term `financial 
     institution' does not include a credit union, a Federal 
     Reserve Bank, a Federal home loan bank, or a depository 
     institution holding company.
       ``(4) Loan.--The term `loan' does not include any credit 
     card account established under an open end consumer credit 
     plan or a loan secured by residential real property

[[Page S15874]]

     that is the principal residence of the examiner, if--
       ``(A) the applicant satisfies any financial requirements 
     for the credit card account or residential real property loan 
     that are generally applicable to all applicants for the same 
     type of credit card account or residential real property 
     loan;
       ``(B) the terms and conditions applicable with respect to 
     such account or residential real property loan, and any 
     credit extended to the examiner under such account or 
     residential real property loan, are no more favorable 
     generally to the examiner than the terms and conditions that 
     are generally applicable to credit card accounts or 
     residential real property loans offered by the same financial 
     institution to other borrowers cardholders in comparable 
     circumstances under open end consumer credit plans or for 
     residential real property loans; and
       ``(C) with respect to residential real property loans, the 
     loan is with respect to the primary residence of the 
     applicant.

     ``Sec. 213. Acceptance of loan or gratuity by financial 
       institution examiner

       ``(a) In General.--Whoever, being an examiner or assistant 
     examiner, accepts a loan or gratuity from any bank, branch, 
     agency, organization, corporation, association, or 
     institution examined by the examiner or from any person 
     connected with it, shall--
       ``(1) be fined under this title, imprisoned not more than 1 
     year, or both;
       ``(2) may be fined a further sum equal to the money so 
     loaned or gratuity given; and
       ``(3) shall be disqualified from holding office as an 
     examiner.
       ``(b) Definitions.--In this section, the terms `examiner', 
     `Federal financial institution regulatory agency', `financial 
     institution', and `loan' have the same meanings as in section 
     212.''.
       (b) Technical and Conforming Amendment.--The table of 
     sections of chapter 11 of title 18, United States Code, is 
     amended by striking the matter relating to sections 212 and 
     213 and inserting the following:

``212. Offer of loan or gratuity to financial institution examiner.
``213. Acceptance of loan or gratuity by financial institution 
              examiner.''.

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