S2856SEP29

TheWeekInCongress.com (TM)

Week Ending September 29, 2006

S.2856 An original bill to provide regulatory relief and improve productivity for insured depository institutions, and for other purposes.

The purpose of the bill aims at reducing Regulatory burdens imposed on the financial services industry”, some of which have become obsolete.

The Federal Reserve Bank is authorized to pay interest on balances held by depository institutions at the Reserve Bank. (The Fed). The Fed, responsible for determining the amount of money banks must hold in reserve against loans and other transactions, is provided with some flexibility to the extent that it could, when ‘appropriate’, allow for a zero reserve ratio. Capital requirements historically decided by two thirds of the bank shareholders will continue.

The method of electing directors is loosened up by allowing for the bank to select directors according to its business goals and needs. Directors are given some flexibility is the decision to pay dividends providing that the decision still meets the approval of the US Comptroller of the Currency.

Credit unions like banks would be exempt from the investment adviser and broker-dealer regulatory requirements.

Regarding court jurisdiction it is established that a Federal savings association is a citizen of the State in which its home office is located.

Limitations on the amount that can be loaned to one borrower are changed. Thrifts that restricted loans to develop domestic residential housing units to units with a purchase price less than $500,000 may loan more but the limitation of $30 million or 30% of the banks unimpaired capital and surpluses continues.

A credit union spending to build an outlet on federal lands can be extended leases at a minimal charge.

The maturity limitation on Federal credit union loans is extended from 12 to 15 years. Federal credit unions are also authorized to sell negotiable checks, money orders and other transfers including domestic and international electronic fund transfers to anyone who is eligible for credit union membership even if they do not chose to be a member.

The amount of assets that would qualify an institution to move to the 18 month examination schedule is raised from $250 million to $500 million.

Accounting firms would be exempted from complying with State law prohibiting the disclosure of a consumer’s non-public personal information without the knowing and expressed consent of the consumer.

The extent to which a retiring executive can be compensated is extended to non-bank holding companies.

A person convicted of a criminal offense involving dishonesty, a breach of trust, or money laundering is prohibited from participating in the affairs of a bank holding company or an Edge or Agreement Corporation, without the consent of the Federal Reserve Board, and from participating in the affairs of a savings and loan holding company or any of its nonthrift subsidiaries, without the consent of the Office of Thrift Supervision (`OTS'). Foreign banks and nonbank subsidiaries of a bank holding company are excluded

Sponsor: Senator Mike Crapo (R-ID)

Vote: Passed Senate by Unanimous Consent May 25, 2006.

Cost to the taxpayers: CBO estimates that enacting this bill would reduce federal revenues by $1.0 billion over the 2007-2011 period and by a total of $2.4 billion over the 2007-2016 period. In addition, we estimate that direct spending would increase by $2 million over the 2007-2011 period and by a total of $6 million over the 2007-2016 period. Provisions affecting programs funded by annual appropriations would cost another $1 million in 2007, CBO estimates.

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