The House Banking Committee yesterday approved a regional banking bill that sets the stage for full interstate banking by 1990.
The vote came just two days after the Supreme Court unanimously ruled that regional banking compacts were constitutional, meaning in effect that states could band together but prohibit money center banks from entering their markets and swallowing up local banks.
"It reverses the Supreme Court decision," said Rep. Doug Barnard (D-Ga.), an opponent of the bill. "The court said states could pick and choose states with whom to do business, but the committee said states can pick and choose for just five years. We have violated states' rights to the utmost."
Rep. John LaFalce (D-N.Y.), who was the author of the national trigger legislation, denied that the committee overrode the Supreme Court. He pointed out that the tribunal ruled on the issue of constitutionality but that Congress was concerned with public policy.
Barnard led an unsuccessful attempt to have the banking bill postponed. He said he would pursue his campaign on the House floor, where he expects that the Supreme Court vote will put more pressure on members not to pass regional banking legislation with a national trigger.
At the urging of committee Chairman Fernand St Germain (D-R.I.), the members rejected further attempts to water down the bill as passed last week by a subcommittee. One compromise proposed by Rep. Bruce Vento (D-Minn.) would have allowed states to opt out of regional compacts before 1990 but without disturbing all of the bank mergers that have taken place up to that time.
The Depository Institutions Acquisitions Act of 1985 would authorize states to permit the purchase of in-state banks by out-of-state bank holding companies. If a state passes such a law and mergers take place, the state would be required to permit interstate acquisitions from any state without regard to location starting in July 1, 1990, or two years after the state law is passed.
This measure, known as interstate banking with a national trigger, passed by a vote of 31-18 after the committee approved several amendments requiring banks from out of state to abide by rules involving reinvestment of funds in their local community and also limiting acquisitions so that no bank holding company could control more than 1 percent of total U.S. deposits.
Of the area congressmen on the committee, D.C. Delegate Walter Fauntroy and Maryland Rep. Parren Mitchell, both Democrats, voted in favor, while Rep. Stan Parris (R-Va.) voted against.
Earlier in the day, the committee passed a bill closing the nonbank bank loophole. The loophole has been used by corporations to enter banking fields and by bank holding companies to evade federal laws restricting geographical expansion across state lines by opening financial institutions that escape the legal definition of a bank.
The measure was approved on a voice vote, after a series of roll call votes in which members attempted to reduce the number of existing nonbank banks that will be grandfathered, or allowed to continue.
The legislators debated at length about the fairness of sanctioning any of these institutions, and a vote to outlaw them all was rejected by the narrow margin of 26 to 23. In the end, the committee voted to set the cutoff date at May 9, 1984, a date that would grandfather 109 nonbank banks.
The committee approved an amendment, requested by the Federal Home Loan Bank Board, that the agency could bar state-chartered federally insured savings institutions from engaging in any business activities the FHLBB does not approve. The amendment is intended to curb speculation by S&Ls with federally insured deposits in such enterprises as windmill farms and fast-food restaurants.