Bankers this year will not face the kind of stiff bank reform legislation that they did during the 95th Congress, but there are several measures being considered in committees and subcommittes that are of vital importance to the folks in the pin-striped suits.
While a few issues are new, most are leftovers from the last furious hours of the 96th when the omnibus bank reform legislation squeaked through. Once labeled as the Safe Banking Act, the Financial Institutions Regulatory Act of 1978 generally strengthened the enforcement clout of regulators. The act also outlawed certain banking abuses that allegedly were committed by President Carter's former budget director, Bert Lance, when he was a banker in Georgia.
One new area of interest to Senate Banking Committee Chairman William Proxmire (D-Wis.) is how national bank charters have been dispensed by the Office of the Comptroller of the Currency, which oversees the country's 4,800 national banks. For months now, Banking Committee staffers have been poring over 900 charter applications received by the comptroller between 1970 and 1977 in search of trends. Their findings will be used during hearings on bank charters planned for sometime in the spring.
Proxmire believes it should be easier for a bank to enter the national banking system. The committee is concentrating on national banks because they are the only types of banks where the states don't have a say in the granting of charters.
Often the comptroller denies a charter for a new bank on the basis of arguments by an existing bank that the area it serves cannot support another bank. But the staff reportedly has found that such arguments often are used by the existing bank simply to block competition, which, in fact, would have improved service to the community.
Another bank regulation measure that should get attention in this session of Congress is the long-debated issue of consolidating the bank regulatory agencies -- the Comptroller, the Federal Deposit Insurance Corp. and the Federal Reserve System.
This is an evergreen Proxmire issue, but it may be that at least one of the redundant functions of the three agencies -- the examination of banks -- can be consolidated in a single agency, says a congressional staffer. The reason this is at least possible, he maintains, is that Federal Reserve Chairman William Miller has apparently indicated he is willing to consider such a proposal. By contrast, Miller's predecessor, Arthur Burns, never would consider any plan to consolidate bank regulators.
On the other hand, this same staffer says he doesn't expect any help from the White House on this particular issue. The reason, he said, is that such a debate over bank examination invariably would lead to a re-telling of the weak bank surveillance that allowed Bert Lance to practice his free-wheeling form of banking. And the White House staff, reflecting the view of President Carter himself, does not want any further discussion of Lance's affairs -- even if it means ignoring one area of federal reorganization that clearly needs attention.
Other areas of banking that may get attention from Congress in this session include:
Bank holding companies. Rep. Fernand St Germain (D-R.I.), who is responsible for pushing through the House version of the omnibus bank bill in the last session, was unhappy when a section proposing controls over bank holding companies was lopped from his bill. St Germain has vowed to give it another try in the 96th Congress.
What troubles St Germain and others is that in the eight years since the Federal Reserve Board was given supervision of holding companies, they have not only proliferated but also have ranged far from the business of banking. Among the nonbanking functions of bank holding companies are travel agencies, armored car businesses and casualty insurance companies. One aide to St Germain points out, for example, that Citibank has subsidiaries in 38 states selling casualty insurance.
Federal Reserve Board membership. In an effort to bolster its dwindling membership roles, the Fed has urged Congress to allow it to pay interest on the first 100 million in reserves banks are required to keep on deposit at the central bank. In exchange for collecting the interest, all banks would be required to belong to the Federal Reserve System.
Rep. Henry S. Reuss (D-Wis.), House Banking Committee chairman, has said he plans to introduce legislation to aid the Fed. But unlike the Fed's own proposal, Reuss would require only the nation's biggest banks to meet the central bank's reserve requirements.
Revenue bonds. National banks are pushing for legislation that will allow them to underwrite so-called revenue bonds, which is prohibited under the Glass-Stegall Act. Since the passage of Proposition 13 in California, bankers believe that communities will no longer guarantee bonds for financing projects. They see communities turning to revenue bonds, which are not guaranteed.
Indicative of the bankers' seriousness, the Dealer Banks Association, which represents the large national banks located in financial centers, has hired former Treasury Undersecretary Charles Walker to argue its cause on Capitol Hill.
Alternative mortgages. Recently, the Federal Home Loan Bank Board allowed federal savings and loan associations in California to compete with state thrift institutions thereby offering variable rate mortgages. Variable mortgages have interest rates that rise or fall according to an index pegged to the movement of the prime interest rate.
Both Proxmire and St Germain oppose variable rate mortgages, as do most consumer groups. And St Germain wants to schedule hearings on them so that Congress can propose legislation to set standards for the variable rate mortgages.
Next: The Automobile Industry.