This time last summer, in the heat of the Bert Lance revelations, the public was being treated to a crash course in the arcane lingo of banking. Such terms as "insider loans," "correspondent balances" and "overdrafts" became daily newspaper fare.
Now, in what can be described as a Lance legacy, the House Banking Committee is poised to vote out banking regulatory legislation that , if turned into law would prohibit many of the banking practices that made headlines a year ago.
Lance resigned as federal budget director last September because of revelations about his financial dealings when he headed National Bank of Georgia in Atlanta and the Calhoun First National Bank of Georgia.
The House bill would give additional and much-needed clout to bank regulators, by allowing them to move against individual bankers. Currently, they can take legal action only against institutions.
The civil remedies offered by the bill would allow regulators to issue cease and desist orders to bankers allegedly violating the laws. Recalcitrant bankers could be fined up to $1,000 a day. They could be removed from office by regulators if they threatened the safety and soundness of the bank.
The bill also would sharpen the law on what bank insiders can and cannot do with assets under their control. Many of the proposals to curb insiders relate to Lance's affairs. Moreover, according to government statistics. 57 percent of the recent bank failures were caused by loans to insiders.
Among the Lance-related sections of the bill that would apply to all state and federally chartered banks:
Insiders - officers, directors and owners of 10 percent or more of a bank's stock - would be prohibited from overdrawing their checking accounts.
Loans of $25,000 or more to insiders would have to be approved by a majority of the bank's board of directors. When Lance was chairman of the Calhoun First National Bank he allegedly kept his directors in the dark about the loans issued to himself and his relatives.
Insiders would be barred from getting loans on preferential terms from banks having correspondent relationships with their bank. Correspondent banks exchange services and often keep noninterest-earning deposits with each other. Lance allegedly got low-interest personal loans from correspondent of the Calhoun bank and NBG.
Federal Deposit Insurance Corp. - insured banks would have to make public the aggregate amount of loans outstanding to bank officers and 10 percent stockholders.
Aggregate loans by a bank to insiders, their business and their political campaigns would be limited to 10 percent of the bank's capital account, which is equtiy capital and retained earnings. Lance borrowed from the Calhoun for himself, his relatives and his 1974 gubernatorial campaign, among other things. Under this legislation, the total of those loans could not exceed 10 percent of capital account.
Some states allow bankers to borrow 25 percent of the capital account - and that is not aggregate. For example, a banker could borrow 25 percent for himself, a business he controls could borrow another 25 percent from his bank, and if he seeks office, the campaign committee can also borrow 25 percent.
Currently, there is no statutory limit to the amount that a bank insider can borrow for himself and his interest.
The American Bankers Association's chief lobbist, Gerald Lowrie, says his organization will try to defeat the 10 percent borrowing limit when the bill reaches the House floor. The ABA wants the states to continue to set the limits, and Lowrie says he will enlist the aid of the lobbist for the Conference of State Superintendents of Banks in fighting the bill's lending limitaion.
The ABA has endorsed a milder bank bill the Senate passed last year before the full extent of Lance's banking activities was revealed. After the House's financial institutions reform bill is voted on the floor, House and Senate banking conferees will hammer out the final legislative package.
The House Banking Committee is scheduled to resume work on the bill July 11. The only uncompleted section would set limits on access by government investigators to a citizen's bank records.
Rep. Fernand St Germain (D.R.I.) the bill's author, tried to move beyondthe Lance legacy and attack other aspects of banking establishment.
He tried to close the loophole in the ClaytonAct that allows the exchange of board members between banks and insurance companies, the two country's most powerful financial institutions.
This failed but the bill would prohibit interlocking directors among depository institutions, such as banks, savings and loans associations, and credit unions.
St Germain also failed to win approval of a provision to halt the rapid growth of bank holding companies, which now control 70.8 percent of the country's total bank deposits.
The committee excised the section of the bill that would have empowered the Federal Reserve Board, which regulated bank holding complains, to turn down an acquistion request by a banking company if it would give the company more than 20 percent of the total deposits in its state.