GOP in House, Senate back bills on banking laws


WASHINGTON -- House and Senate Republicans, including the banking committee chairmen, united yesterday behind bills that would substantially scale back banking laws that provide for consumer protection and more lending in poor neighborhoods.

The bills, introduced yesterday, would make more than 60 changes in federal laws. Some of the changes are broad, like an exemption for small and medium-sized banks from the Community Reinvestment Act, which requires that financial institutions lend in poor neighborhoods as well as in rich ones.

Others are highly specific, like raising the limit on potential liability of bank customers to $500 from $50 if they lose their automatic teller machine cards together with their personal identification numbers.

Sen. Alfonse D'Amato, R-N.Y., who heads the Senate Banking Committee, said the legislation would save money for banks and ultimately for consumers by eliminating what he described as unnecessary regulations.

"We believe we can save consumers billions of dollars by streamlining the system," he said.

Rep. Jim Leach, R-Iowa, who heads the House Banking Committee, co-sponsored the House version.

Industry groups, led by the Bankers Roundtable in Washington, quickly endorsed the legislation.

The introduction of a bill used to be a minor event. But House and Senate Republicans have shown this year that when they unite in favor of a bill, particularly with the support of the committee chairmen in both chambers, then the bill tends to have a strong chance of passage.

But Democrats as well as consumer and community groups accused Republicans of subjecting consumers to new financial risks and of undermining affirmative action.

They were particularly critical of the provisions that would exempt small banks from the Community Reinvestment Act and make it harder for the Justice Department or community groups to challenge large banks that make few loans in poor neighborhoods.

Sen. Connie Mack, R-Fla., said the bills introduced yesterday should not be seen as an effort to undermine affirmative action.

"There will be those who claim that we're out to gut CRA, but the reality is 80 percent of the assets of the banking system will still be covered by CRA," he said.

Robert L. Gnaizda, the general counsel of the Greenlining Institute, a San Francisco-based advocacy group, said the legislation would gut the Community Reinvestment Act because it would also bar challenges under the law to any big bank that earned a "satisfactory" rating or better on its most recent evaluation by regulators. Virtually all large financial institutions receive such a rating.

The act currently allows community groups to block regulatory approval of bank mergers and other deals if the banks involved cannot provide fresh proof of their compliance with the act.

Clinton administration officials were unenthusiastic about the new legislation.

The Federal Reserve, two Treasury Department agencies and the Federal Deposit Insurance Corp. plan to finish next month a new set of Community Reinvestment Act regulations that would reduce paperwork requirements for small banks.

"We believe the revised regulation deserves an opportunity to work without legislative tinkering," said a senior Treasury official.

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