[House Report 104-193]
[From the U.S. Government Publishing Office]
104th Congress Rept. 104-193
HOUSE OF REPRESENTATIVES
2d Session Part 2
_______________________________________________________________________
FINANCIAL INSTITUTIONS REGULATORY RELIEF ACT OF 1995
_______
June 18, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
SUPPLEMENTAL REPORT
[To accompany H.R. 1858]
[Including cost estimate of the Congressional Budget Office]
Errata
On page 92, move Mr. Fox's roll call vote from the ``NAYS''
column to the ``YEAS'' column.
On page 95, in the Section-By-Section Analysis of Section
105(c), strike the words ``voluntary insurance'' and insert in
lieu thereof the words ``voluntary noninsurance''.
On page 115, add the following sentences to the Section-By-
Section Analysis of Section 229:
As part of the agencies' paperwork reduction review,
the Committee directs the agencies to include the
regulations and guidelines implemented under sections
39 of the FDICIA. In reviewing these regulations and
guidelines, the agencies should consider whether the
regulations and guidelines are duplicative of other
existing policies or regulations and whether it may be
appropriate to modify the regulations and guidelines
adopted under section 39 or to recommend that such
section be repealed by the Congress.
Under the Committee Consideration and Votes add the
following votes:
An amendment offered by Mr. Vento which strikes section 234
of the legislation modifying the culpability standards for
outside director was defeated 17-24.
YEAS NAYS
Mr. Leach Mr. McCollum
Mrs. Roukema Mr. Bereuter
Mr. Gonzalez Mr. Roth
Mr. LaFalce Mr. Baker, (LA)
Mr. Vento Mr. Lazio
Mr. Frank Mr. Bachus
Mr. Kanjorski Mr. Castle
Mr. Kennedy Mr. King
Mr. Flake Mr. Royce
Mr. Orton Mr. Lucas
Mrs. Maloney Mr. Weller
Ms. Roybal-Allard Mr. Hayworth
Mr. Barrett, (WI) Mr. Bono
Ms. Velazquez Mr. Ney
Mr. Watt Mr. Ehrlich
Mr. Hinchey Mr. Barr
Mr. Bentsen Mr. Chrysler
Mr. Cremeans
Mr. Fox
Mr. Heineman
Mr. Stockman
Mr. LoBiondo
Mr. Watts
Mrs. Kelly
A motion offered by Mr. Orton to reconsider the Kennedy
Amendment which strikes section 238 concerning second mortgages
was defeated 24-24.
YEAS NAYS
Mr. Leach Mr. McCollum
Mr. Metcalf Mrs. Roukema
Mr. Gonzalez Mr. Bereuter
Mr. LaFalce Mr. Roth
Mr. Vento Mr. Baker, (LA)
Mr. Schumer Mr. Lazio
Mr. Frank Mr. Bachus
Mr. Kanjorski Mr. Castle
Mr. Kennedy Mr. King
Mr. Flake Mr. Royce
Mr. Mfume Mr. Lucas
Ms. Waters Mr. Weller
Mr. Orton Mr. Hayworth
Mr. Sanders Mr. Bono
Mrs. Maloney Mr. Ney
Mr. Gutierrez Mr. Ehrlich
Ms. Roybal-Allard Mr. Barr
Mr. Barrett, (WI) Mr. Chrysler
Ms. Velazquez Mr. Cremeans
Mr. Wynn Mr. Fox
Mr. Watt Mr. Stockman
Mr. Hinchey Mr. LoBiondo
Mr. Ackerman Mr. Watts
Mr. Bentsen Mrs. Kelly
CBO Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 29, 1995.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1858, the
Financial Institutions Regulatory Relief Act of 1995.
Enacting H.R. 1858 would affect both direct spending and
receipts. Therefore, pay-as-you-go procedures would apply to
the bill.
If you wish further details on this estimate, we will be
pleased to provide them.
Sincerely,
James L. Blum
(For June E. O'Neill, Director).
Enclosure.
congressional budget office cost estimate
1. Bill number: H.R. 1858.
2. Bill title: The Financial Institutions Regulatory Relief
Act of 1995.
3. Bill status: As reported by the House Committee on
Banking and Financial Services on July 18, 1995.
4. Bill purpose: H.R. 1858 would amend several banking
statutes, including the Community Reinvestment Act (CRA), the
Truth in Lending Act (TILA), the Real Estate Settlement
Procedures Act (RESPA), the Truth in Savings Act (TISA), the
Equal Opportunity Act, and the Home Mortgage Disclosure Act. It
also would make a number of other changes affecting banks,
savings and loans, consumers, and federal agencies, primarily
those responsible for regulating financial institutions. Major
provisions are discussed below.
Examinations.--H.R. 1858 would permit the financial
regulatory agencies--the Federal Deposit Insurance Corporation
(FDIC), the Office of Thrift Supervision (OTS), the Office of
the Comptroller of the Currency (OCC), and the Board of
Governors of the Federal Reserve--to extend from one year to 18
months the time between examinations for safety and soundness
for healthy institutions with assets between $175 million and
$250 million.
The bill also would modify the requirements for examining
institutions for compliance with CRA. Under current law, CRA
requires institutions to be evaluated on their success in
meeting the credit needs of the community. The bill would adopt
a multi-tiered approach toward examining institutions for
compliance with CRA, exempting some small banks and savings and
loans with assets of less than $100 million from the act's
requirements, and allowing institutions with assets of less
than $250 million to certify their own compliance with the act.
These levels would be adjusted annually for inflation, as
measured by the Consumer Price Index. Institutions receiving a
satisfactory or better rating would be protected against
challenges to regulatory approvals of branching or certain
other applications, as is the case under current law.
Foreign bank fees.--the bill would require the Federal
Reserve to collect examination fees from U.S. offices of
foreign banks only to the extent that it collects such fees
from the state-chartered member banks that it also examines.
Under current law, U.S. offices of foreign banks must pay such
fees beginning in July 1997. Because the Federal Reserve does
not exercise its existing authority to charge state-chartered
member banks, the bill would effectively preclude the payment
of these fees by the U.S. offices of foreign banks.
Consumer banking provisions.--Current law requires banks
and other lenders to provide information about loans in a
simply and accurate way so as to allow borrowers to compare
features more easily. H.R. 1858 would allow a greater degree of
tolerance for inaccurate disclosures of loan finance charges,
thereby limiting a borrower's right to cancel loan agreements.
It also would make recovering damages in certain events more
difficult. The bill would modify major portions of TISA, which
require uniform disclosures of the terms and conditions of
consumers' savings accounts, replacing them with a ban on
misleading or inaccurate advertisements.
Lender liability.--The bill would limit the environmental
liability of private lending institutions, federal banking and
lending agencies, and those who acquire property from them by
exempting them from strict liability for the release of
hazardous substances on properties that were acquired as a
result of: receivership, conservatorship, or liquidation
authority; loans, discounts, advances, or other financial
assistance; and civil or criminal proceedings or administrative
enforcement actions.
This relief would not apply if the lending institution or
agency directly caused or materially contributed to the release
of a hazardous substance. In that case, it would remain liable
for any remedial measures necessary to repair the damages.
Finally, government agencies and subsequent purchasers would
not be subject to any environmental lien provisions at the time
of transfer of the property. In addition to the financial
regulatory agencies, other agencies specifically affected by
this provision include the Department of Housing and Urban
Development, the Farm Credit Administration, the Farm Credit
System Assistance Board, the Farmers Home Administration, the
Rural Utilities Service (formerly the Rural Electrification
Administration), and the Small Business Administration.
Qualified thrift lenders.--The bill would allow savings
institutions to qualify as thrift lenders by satisfying either
the statutory test for qualified thrift lenders of the Internal
Revenue Service test on asset composition. Currently, thrifts
have to pass both tests.
Appraisal Subcommittee of the Financial Institutions
Examination Council.--Section 224 would require that the
subcommittee repay by 1998 a $5 million loan from the Treasury.
Reimbursement to financial institutions for information
requests.--For certain investigatory purposes, the federal
government now generally reimburses financial institutions for
providing requested records related to individuals and small
partnerships. The bill would expand this provision to require
the Department of Justice (DOJ) and certain other federal
investigatory agencies to reimburse financial institutions for
the cost of providing information about corporations and other
entities.
Other provisions.--The bill also would: exempt well-
capitalized and well-managed financial institutions from
independent audits to verify compliance with safety and
soundness regulations and internal controls; place a permanent
moratorium on the authority of the OCC to expand the insurance
powers of banks; allow an institution more flexibility in
choosing membership in a particular district bank of the
Federal Home Loan Bank System; require an annual study on the
effect of the act on lending to small businesses; and encourage
the banking regulatory agencies to appoint an examiner-in-
charge to coordinate examinations conducted by the various
agencies.
5. Estimated cost to the Federal Government: H.R. 1858
would increase spending subject to appropriations by requiring
federal agencies to reimburse financial institutions for
providing certain types of records to federal investigatory
agencies. Over the 1996-2000 period, CBO estimates that
spending for this purpose would total $170 million, assuming
appropriations of the necessary amounts. In addition, the bill
would make a number of changes that would result in a net
decrease in the payment the Federal Reserve remits to the
Treasury, thereby decreasing revenues by an estimated $21
million over the 1996-2000 period. The following table displays
the estimated budgetary impact of the bill.
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 999 2000
----------------------------------------------------------------------------------------------------------------
Spending subject to appropriations action:
Estimated authorization level.................................. 18 36 37 39 40
Estimated outlays.............................................. 18 26 37 39 40
Revenues:
Estimated revenues \1\......................................... 3 4 -9 -9 -10
----------------------------------------------------------------------------------------------------------------
\1\ Includes changes in the Federal Reserve surplus, net of income tax effects. A negative sign indicates a
decrease in revenues.
In addition, various provisions of H.R. 1858 would result
in savings to the federal banking regulatory agencies, not
including the Federal Reserve, of an estimated $95 million over
the 1996-2000 period. These savings would be offset by a
reduction in fees charged to banks and thrifts, resulting in no
net budgetary impact.
While the bill also could affect spending for deposit
insurance, CBO has no clear basis for predicting the net change
in such spending, and hence the above table does not include
any estimated impact on the deposit insurance funds. A number
of other provisions in the bill could have budgetary
implications, but they are not expected to be significant.
Spending resulting from this bill would fall primarily in
budget functions 370 and 750.
6. Basis of estimate: Fees for corporations.--Section 227
would amend the Financial Privacy Act of 1978 to allow
financial institutions to request reimbursement from federal
agencies for the costs of providing requested records on
corporations and other entities. The act now allows such
reimbursement only for records related to individuals and other
small partnerships. Typically prosecutors from the Department
of Justice request corporate records when conducting criminal
and civil investigations, particularly in the areas of money
laundering and illegal drug activity. The offices of Inspectors
General, the Treasury Department, the Securities and Exchange
Commission, and many other agencies also request such
information and would be affected by the provision.
Based on information from DOJ and data from a survey
conducted by the banking industry in 1992, CBO estimates that
the federal agencies would spend approximately $35 million
annually to reimburse qualified financial institutions for
providing records to investigators and prosecutors, totaling
$170 million over the 1996-2000 period. Such spending would be
subject to appropriation action. The 1996 estimate is lower
than amounts estimated for future years to allow for phasing in
the expanded program; estimated costs in fiscal year 1997 and
beyond have been adjusted for projected cost increases. The
financial regulatory agencies expect that they too would have
to pay reimbursements under section 227. Most such costs, which
constitute mandatory spending, would be offset by charging
higher fees to the institutions that they supervise.
Federal Reserve.--Three changes to current law in H.R. 1858
would affect the net income of the Federal Reserve in its role
as bank examiner and regulator. One change, effectively
precluding payments by offices of foreign banks for the costs
of examinations, would reduce the income of the Federal Reserve
System and thereby reduce governmental receipts by an estimated
$44 million over the period from 1996 to 2000. A second change,
exempting certain banks from some of the requirements of CRA,
would reduce costs of the Federal Reserve System by an
estimated $15 million over that same period. A third change,
streamlining the process by which certain bank holding
companies broaden their activities, would reduce the Federal
Reserve's costs of processing applications by an estimated $8
million from 1996 to 2000. Because the Federal Reserve System
remits its surplus to the Treasury, those changes in its
operating costs and income would affect governmental receipts.
The net effect of those three changes would be to reduce
governmental receipts by $21 million over the five-year period.
First, H.R. 1858 would reduce operating income of the
Federal Reserve System by effectively precluding payment by
U.S. offices of foreign banks for the costs of examinations.
Under current law, U.S. offices of foreign banks must pay for
the costs of examinations begun after July 25, 1997. The bill
would instead require the Federal Reserve to collect those
examination fees only to the same extent that it collects such
fees from the state-chartered member banks that it examines.
The Federal Reserve has the authority to collect examination
fees from those member banks, but it has never chosen to
exercise that authority. As a result, we expect that this
provision would forestall payments by U.S. offices of foreign
banks for examinations. If the bill were enacted, we estimate
that Federal Reserve income would decrease by $59 million from
1997 to 2000. This loss to the Treasury would be partially
offset by increased corporate income tax receipts of $15
million from the reduction in tax-deductible fees paid by those
banks. The net effect would be to reduce receipts by $44
million over the 1997-2000 period.
Second, H.R. 1858 would exempt certain financial
institutions from the examination requirements of CRA. That act
encourages banks and thrifts to lend in the communities in
which their deposits originate and requires that all of them be
examined for compliance. If H.R. 1848 were enacted, most
institutions with assets of up to $100 million (indexed for
inflation) would be exempt from CRA and therefore would not be
examined. Financial institutions with assets over $100 million
but not more than $250 million (also indexed) would be able to
certify their own compliance and would be subject to less
frequent and simpler examinations. Over 80 percent of the
nearly 1,000 banks that the Federal Reserve examines have
assets of $250 million or less, although these banks account
for less than 10 percent of the total assets of the banks it
examines. Based on information provided by staff members of the
Board of Governors of the Federal Reserve System, we estimate
that the Federal Reserve System would save $15 million over the
period from 1996 through 2000 because of changes made by the
bill with regard to CRA.
Third, the bill would streamline the process by which
certain bank holding companies engage in nonbanking activities
(section 201), acquire banks (section 202), and merge existing
subsidiaries (section 203). That streamlining would reduce the
Federal Reserve's costs of processing applications by an
estimated $8 million from 1996 to 2000.
H.R. 1858 also would affect the Federal Reserve's
operations in numerous other ways that are not expected to
cause significant budgetary effects. The bill would require the
Federal Reserve to issue several regulations, including ones to
implement the bill's repeal of some of the disclosure
requirements for bank accounts mandated by TISA. In addition,
the bill would affect the number of applications the Federal
Reserve would process--for example, by allowing some financial
institutions to undertake certain activities without prior
approval. Based on information provided by Federal Reserve
staff we estimate that the budgetary effects of these and
various other provisions affecting the Federal Reserve would be
insignificant.
Regulatory savings.--H.R. 1858 would make a number of
changes that would change banking laws, for the most part
relaxing or eliminating many regulations affecting the banks
and savings and loans. Federal banking agencies now spend about
$1.4 billion per year on their regulatory activities. CBO
estimates that the provisions of this bill would reduce
administrative costs by about $120 million over the 1996-2000
period. The expenses of the FDIC are paid for by bank premiums;
the OTS and the OCC charge fees to recover their costs. We
expect those three agencies to reduce their premiums and fees
to reflect savings totaling about $95 million, resulting in no
net budgetary impact. About $61 million of these savings would
result from changes related to examinations for safety and
soundness, and $34 million would stem from changes related to
CRA compliance. The remaining savings would be realized by the
Federal Reserve, and were discussed above.
Deposit insurance funds.--Enacting H.R. 1858 could affect
the federal budget by causing changes in the government's
spending for deposit insurance, but there is no clear basis for
predicting the amount of such changes. The bill would relax
current policies governing practices for ensuring the safety
and soundness of insured depository institutions, including
examination cycles, outside directors and accountants, and
audit committees, and would extend the examination period from
a 12-month to an 18-month cycle for certain institutions.
In the 1980s, the examination cycles were lengthened for
smaller institutions on the theory that they did not pose a
systemic risk. In many cases, however, problems went undetected
for significant periods of time, causing higher resolution
costs when the institutions ultimately failed. While the
banking sector is now relatively stable, depository
institutions can deteriorate quickly, especially in periods of
rapid flux and competition. Thus, lengthening the examination
cycles poses at least a small risk of increased examination
cycles to the maximum extent currently permissible under law.
Assuming that the FDIC would continue this policy of balancing
the goals of maintaining safety and soundness while minimizing
the regulatory burden, CBO would not expect the FDIC to incur
significant additional insurance losses as a result of this
provision.
In addition, the bill would repeal a requirement that
independent public accountants confirm management's claims as
to the effectiveness of an insured depository institution's
internal financial controls and certain safety and soundness
rules. It would also exempt all well-capitalized and well-
managed banks and thrifts with assets over $500 million from
the rule requiring that audit committees be composed entirely
of outside directors. While we cannot estimate the budgetary
effect resulting from enactment of these provisions, such
changes could result in less effective oversight of an
institution and to reduced effectiveness of the audit process,
thereby contributing to losses in the insurance funds.
If losses to the deposit insurance funds were to increase
as a result of enactment of this measure, the FDIC would have
to increase premiums that banks pay for deposit insurance.
Thus, the net effect on the budget is not likely to be
significant.
Lender liability.--Under existing law, a federal department
or agency that acquires title or control of a facility through
means such as bankruptcy, foreclosure, tax delinquency,
abandonment, or similar means is considered the owner or
operator of that property and is generally liable for the costs
incurred by the federal or state governments to clean up
hazardous substances at that facility. H.R. 1858 would shift
the liability for those clean-up costs from the department or
agency to the person who owned, operated, or controlled
activities at the facility prior to its acquisition by a
federal entity. Such protections also would apply to the
purchaser of the property. In the event that the federal agency
directly caused or materially contributed to the release of a
hazardous substance, that entity would be held liable for any
remedial measures needed to cure the damages. In such cases,
the bill would limit the liability of the agency under state
law to the value of the agency's interest in the property. The
bill would apply to any claims that have not reached final
adjudication or settlement prior to enactment.
The net budgetary impact of the lender liability provisions
is not clear and cannot be estimated with any precision at this
time because: (1) existing law continues to be modified through
regulations and court decisions, thereby raising uncertainty
about the extent of the federal entities' responsibility, and
(2) federal departments and agencies lack adequate data about
the number and value of properties that might be affected by
the bill. Although the bill could result in potential savings
to the individual agencies (including the FDIC) that acquire
property or facilities through these involuntary means, the net
impact on total federal spending is less clear. The net impact
would depend on the interpretation of various legal issues and
on whether the federal government ultimately would pay for
hazardous waste clean-up at affected sites through the
Hazardous Waste Superfund Trust Fund administered by the
Environmental Protection Agency. Based on limited information
from the agencies affected by the provision, CBO does not
expect that any significant savings would result from enactment
of this provision.
Appraisal Subcommittee.--The Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (Public Law 101-73)
established the Appraisal Subcommittee of the Federal Financial
Institutions Examination Council. The subcommittee received a
one-time appropriation of $5 million, which H.R. 1858 would
require be repaid by 1998. The subcommittee already plans to
repay the loan by that date, so this provision would have no
budgetary impact relative to current law.
7. Pay-as-you-go considerations: Section 252 of the
Balanced Budget and Emergency Deficit Control Act of 1985 sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts through 1998. CBO estimates that enacting
H.R. 1858 would affect both direct spending and receipts;
therefore, pay-as-you-go procedures would apply to the bill. We
estimate that direct spending changes would be offsetting and
no net change in spending would result.
As a result of reductions in administrative costs of the
Federal Reserve to implement CRA activities and to process
certain applications, CBO estimates that governmental receipts
would increase by $3 million in 1996 and by $5 million in 1997
and in 1998. These savings would by offset by reduced
examination fees paid to the Federal Reserve by foreign banks
of $1 million in 1997 and $14 million in 1998. The net
reduction in governmental receipts through 1998 would total $2
million, as shown in the following table.
------------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------------
Change in outlays............................ 0 0 0
Change in receipts........................... 3 4 -9
------------------------------------------------------------------------
8. Estimated cost to State and local governments: CBO
estimates that the provisions of H.R. 1858 would have two
direct impacts on state governments. First, it would increase
the costs of administering state insurance laws in states that
currently allow banks to sell insurance. These costs would
likely be offset by increased receipts from examination and
licensing fees. Second, it would reduce the cost of
administering state banking laws. These savings would be
partially offset by a reduction in bank examination fees.
In total, CBO estimates that the net budgetary impact of
H.R. 1858 on states would be negligible. Local government
budgets would not directly be affected by H.R. 1858.
Bank holding company sales of insurance.--Section 211 of
the bill would allow bank holding companies to sell insurance
in states that currently allow banks to sell insurance. As of
May 1995, the Conference of State Banking Supervisors noted
that there were 34 states that allowed banks to sell insurance
in some form.
This provision, which would take effect in April 1997,
means that bank holding companies would be able to buy or
establish their own insurance affiliates or form alliances with
insurance companies to sell insurance in their banks in these
34 states. This would result in additional work for state
insurance regulators who would be required to perform more
examinations of insurance companies or affiliates and license
more agents.
The number of bank holding companies that would take
advantage of this provision is unknown at this time but would
vary from state to state based on existing state laws. In some
states there would be no increase in workload because state
laws are the same as the existing federal law (bank holding
companies may only sell insurance in towns with a population
less than 5,000). In other states, workload increases would
vary based on the state's insurance climate and laws regulating
insurance sales by banks.
Some states would be able to reduce their costs by
undertaking examinations of insurance companies in conjunction
with other states. Also some states do not separately examine
all companies. For example, if a company is domiciled in
another state, and has received a superior rating, some states
do not undertake a separate examination. Other times there may
be no cost increase because a bank holding company has bought
an existing insurance company within the state. Finally,
additional costs incurred by states would likely be offset by
recoveries from examination and licensing fees.
According to the National Association of Insurance
Commissioners (NAIC), there were more than 8,200 domestic
insurers (of all types) and 1.59 million insurance producers in
1993. State insurance regulators conducted in excess of 4,200
financial and market conduct exams during that year. NAIC
reports that state insurance departments will spend close to
$650 million on their regulatory activities in 1995. The
provisions of section 211 would increase costs by at most a
small percentage of this amount.
Expanded regulatory discretion for small bank
examinations.--Section 226 of the bill would allow federal
regulators to examine banks that meet certain asset and rating
requirements every eighteen months. Under current law, these
banks must be examined every twelve months. The provisions of
this section would take effect in September 1996 if federal
regulators choose to implement them.
These changes should reduce state bank examination costs
because most states coordinate their bank examinations with the
federal government. It is likely that many states would follow
the federal government's lead in relaxing examination schedules
for small banks. Section 226 would encourage coordinated
examinations by requiring the FDIC to submit semiannual reports
to Congress on progress being made to achieve this goal.
The savings to states from this measure are difficult to
predict, although CBO would expect them to be less than the
savings achieved by the FDIC. Some states already allow for
longer examination cycles than provided in this bill, while
other states might not want to coordinate examinations with the
federal government. Thus, it is likely that the savings from
this provision would only represent a small percentage of the
$300 million states spend annually regulating banks. Finally,
savings by states would be partially offset by a reduction in
receipts from bank examination fees.
Sales of insurance by national banks.--Section 240 and 241
of the bill combined to allow national banks to sell insurance
in empowerment zones. For purposes of this bill, empowerment
zones include enterprise communities and Indian reservations.
There are currently nine empowerment zones and 95 enterprise
communities. To sell insurance in these areas, however, a
national bank must provide sufficient evidence that
competitively priced insurance products are not adequately
available.
Enactment of these provisions would result in additional
work for state insurance regulators who would be required to
license more agents and review the new relationships between
national banks and insurance companies. The number of national
banks that would take advantage of this new authority and the
cost of regulating them is difficult to predict. They would
vary from state to state based on existing state laws, the
state's insurance climate, and the willingness of the OCC to
override state laws. It is likely that the cost increases from
these provisions would be quite small, and that they would be
offset by recoveries from examination and licensing fees.
9. Estimate comparison: None.
10. Previous CBO estimate: None.
11. Estimate prepared by: Federal Costs: Mary Maginniss and
Mark Booth. State and Local Costs: Marc Nicole.
12. Estimate approved by: Robert R. Sunshine for Paul N.
Van de Water, Assistant Director for Budget Analysis.
------
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 8, 1996.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Unfunded Mandates Reform Act of 1995
(Public Law 104-4) took effect on January 1, 1996. The new law
requires the Congressional Budget Office (CBO) and
Congressional committees to carry out a number of new
activities. I am writing to you today to let you know how CBO
plans to fulfill its responsibilities under the new law and to
provide you with mandate cost statements for those bills under
your jurisdiction that were on the House calendar as of January
23, 1996.
New responsibilities under the act.--The new law requires
CBO to provide a statement to authorizing committees as to
whether reported bills contain federal mandates. For
legislation that contains identifiable federal mandates, CBO is
required to estimate their aggregate direct costs. If those
costs are above a specified threshold in the fiscal year that
the mandate is first effective or in any of the four following
years, CBO must provide an estimate of the costs, if feasible,
and the basis of the estimate. The threshold is $50 million for
intergovernmental mandates and $100 million for private-sector
mandates.
Any member may raise a point of order against any reported
bill unless the committee has published a CBO statement about
mandates costs. A member may also raise a point of order
against any bill, amendment, motion, or conference report that
would increase the direct costs of federal intergovernmental
mandates by more than $50 million unless the bill provides for
funding (either by creating direct spending authority or by
authorizing future appropriations) and provides a mechanism for
terminating or scaling back mandates if agencies determine that
there are not sufficient funds to cover those costs. We have
enclosed with this letter a more detailed description of the
new law and a brief summary of the new responsibilities
assigned to CBO and Congressional committees.
Whenever possible in future cost estimates, CBO will be
explicit about whether a bill contains mandates. If we are
uncertain, we will say so in the mandate statement and provide
as much detail as possible so that the Congress can decide
whether points of order apply to the bill.
In order to have sufficient time to prepare mandate cost
statements, we will need to know about potential legislation as
early as possible, particularly those bills that might contain
mandates. Because it takes time to prepare mandate analyses, we
would greatly appreciate receiving early notification about
your legislative agenda for the year. It might also be
helpful--for both your committee and ourselves--if your staff
would contact us early in the process of dealing with
legislation that might contain mandates. The CBO staff contacts
for your committee are: for intergovernmental mandates: Theresa
Gullo; for private sector mandates: Elliot Schwartz.
Bills on the House Calendar.--Enclosed with this letter are
two lists of the legislation on the calendar as of January 23,
1996, that is under your committee's jurisdiction: one for
intergovernmental mandates and one for private-sector mandates.
The list group the legislation into three categories: those
that do not contain mandates as defined in Public Law 104-4;
those that contain mandates but the direct costs are below the
relevant thresholds; and legislation that we need to review
further.
We look forward to working with your committee in these new
endeavors. Your assistance will be extremely important to us as
we strive to provide high quality and timely statements of
mandates costs to the Congress. If you have any questions about
CBO's new activities or about the enclosed lists, please feel
free to contact me or the staff contacts listed above.
Sincerely,
June E. O'Neill, Director.
Enclosures.
intergovernmental mandate statement for bills on the house calendar (as
of january 23, 1996)
Committee: Banking and Financial Services.
Bills that do not contain mandates: H.R. 1062, Financial
Services Competitiveness Act of 1995; H.R. 1858, Financial
Institutions Regulatory Relief Act of 1995.
Bills that contain mandates, but aggregate net costs are
below $50 million: None.
Bills that require further review: None.
private sector mandate statement for bills on the house calendar (as of
january 23, 1996)
Committee: Banking and Financial Services.
Bills that do not contain mandates: None.
Bills that require further review: H.R. 1062, Financial
Services Competitiveness Act of 1995; H.R. 1858, Financial
Institutions Regulatory Relief Act of 1995.
------
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 30, 1996.
Hon. Jim Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: In previous correspondence dated
February 8, 1996, regarding The Unfunded Mandates Reform Act of
1995 (Public Law 104-4), the Financial Institutions Regulatory
Relief Act of 1995 (H.R. 1858) was listed as requiring further
review for private-sector mandates. The Congressional Budget
Office (CBO) has now completed its review of this bill.
CBO finds that H.R. 1858 would impose several new mandates
on the private sector. The direct costs of the private-sector
mandates identified in this bill, however, would not likely
exceed the $100 million threshold established in Public Law
104-4.
Provisions in Section 105--Ensuring Honoring of Lock-in
Promises under Disclosures for Adjustable Rate Mortgages in the
Truth in Lending Act--and Section 153--Notice of Adverse Action
under the Equal Credit Opportunity Act Amendments--contain
mandates that would impose new disclosure or reporting
requirements on financial institutions. In order to comply with
the new requirements in Section 105, financial institutions
anticipate that they would need to design new forms, train loan
officers, and change operation manuals. Industry
representatives were unable to provide the precise data
necessary to estimate the direct costs of these new
requirements, but it appears that the net costs would not
exceed the threshold level identified in Public Law 104-4. The
new requirements under Section 153, would not involve major
changes or costs for industry compliance.
Section 114 revises the Truth in Lending Act in a way that
makes consumers who exercise their right to rescission in loan
transactions responsible for paying any charges for an
appraisal report or credit report. Under current law, consumers
who rescind loan transactions receive a full refund of the
costs they incurred during the loan process. According to
industry experts and consumer groups, consumers rarely use the
right to rescind, therefore making the incremental costs to
consumers as a whole small. This provision could, however,
change the potential costs of procuring a loan in such a way as
to preclude rescission as a cost-effective option for some
consumers.
A provision in Section 125--Special Purpose Financial
Institutions--requires new standards under which special
purpose institutions (as defined in the bill to mean a
financial institution that does not accept deposits from the
public of less than $100,000) may be deemed to comply with
Community Reinvestment Act (CRA) requirements. It is unclear
whether these new standards would have any effect on an
institution's cost of compliance under CRA. There may also be
new standards imposed by Section 163, which requires written
regulations or staff commentary to update and clarify
requirements for lease disclosures, contracts, and other issues
related to consumer leasing under the Consumer Credit
Protection Act. Most industry sources expect that the new
standards would be less costly than existing rules.
If you wish further details on this analysis, we will be
pleased to provide them. The CBO contact is Patrice Gordon.
Sincerely,
June E. O'Neill, Director.