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[House Report 107-516]
[From the U.S. Government Publishing Office]

107th Congress                                            Rept. 107-516
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================
 
            FINANCIAL SERVICES REGULATORY RELIEF ACT OF 2002

                                _______
                                

 July 22, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3951]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3951) to provide regulatory relief and improve 
productivity for insured depository institutions, and for other 
purposes, having considered the same, reports favorably thereon 
with amendments and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     2
Background and Need for the Legislation
  A. Background..................................................     2
  B. Amendments..................................................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Vote of the Committee............................................     4
Committee Oversight Findings.....................................     4
Performance Goals and Objectives.................................     4
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Cost Estimate........................     5
Constitutional Authority Statement...............................    15
Section-by-Section Analysis and Discussion.......................    15
Changes in Existing Law Made by the Bill, as Reported............    17
Markup Transcript................................................    18
Additional Views.................................................   115
    The amendments (made to the committee print document 
containing the text of the amendment as reported by the 
Committee on Financial Services) are as follows:

    After section 311, insert the following (and make such 
technical and conforming changes as may be appropriate):

SEC. 312. EXEMPTION FROM PREMERGER NOTIFICATION REQUIREMENT OF THE 
                    CLAYTON ACT.

    Section 7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) 
is amended by inserting ``205(b)(3) of the Federal Credit Union 
Act (12 U.S.C. 1785(b)(3),'' before ``or section 3''.

    Strike section 607 (and make such technical and conforming 
changes as may be appropriate).

                          Purpose and Summary

    H.R. 3951, as reported by the Committee on the Judiciary, 
is intended to alter or eliminate statutory banking provisions 
in order to lessen the regulatory compliance burden on insured 
depository institutions and improve their productivity, as well 
as to make needed technical corrections to current statutes 
without compromising existing protections against anti-
competitive behavior.

                Background and Need for the Legislation

                             A. BACKGROUND

    On June 18, 2002, the Committee on Financial Services 
reported H.R. 3951, the ``Financial Services Regulatory Relief 
Act of 2002'' (See H. Rept. 107-516). The bill was sequentially 
referred to the Committee on the Judiciary for a period not 
later than July 22, 2002. The sections within the jurisdiction 
of the Committee on the Judiciary deal with the Federal courts, 
claims against the United States, and for regulation of the 
banking industry as it pertains to antitrust considerations.
    H.R. 3951 provides the following regulatory improvements 
for national banks: (1) removes the prohibition on national and 
State banks expanding across State lines by opening branches; 
(2) allows the use of subordinated debt instruments to meet 
eligibility requirements for national banks to benefit from 
subchapter S tax treatment; (3) eliminates duplicative and 
costly reporting requirements on banks regarding lending to 
bank officials; (4) changes the exemption from the prohibition 
on management interlocks for banks in metropolitan statistical 
areas from $20 million in assets to $100 million; and (5) 
streamlines bank merger application regulatory requirements.
    H.R. 3951 provides the following regulatory improvements 
for savings associations: (1) gives savings associations parity 
with banks with respect to broker-dealer and investment adviser 
Securities and Exchange Commission (SEC) registration 
requirements; (2) removes auto lending and small business 
lending limits and expands business lending limit for Federal 
thrifts; (3) allows Federal thrifts to merge with one or more 
of their non-thrift subsidiaries or affiliates, the same as 
national banks; (4) permits Federal thrifts to invest in 
service companies without regard to geographic restrictions; 
and (5) gives Federal thrifts the same authority as national 
and State banks to make investments primarily designed to 
promote community development.
    H.R. 3951 provides the following regulatory improvements 
for credit unions: (1) allows privately insured credit unions 
to apply for membership to the Federal Home Loan Bank system; 
(2) expands the investment authority of Federal credit unions; 
(3) permits offering of check cashing and money transfer 
services to eligible members; (4) increases the limit on 
investment by Federal credit unions in credit union service 
organizations from 1 percent to 3 percent of shares and 
earnings; and (5) raises the general limit on the term of 
Federal credit union loans from 12 to 15 years.
    H.R. 3951 provides the following regulatory improvements 
for Federal financial regulatory agencies: (1) provides 
agencies the discretion to adjust the examination cycle for 
insured depository institutions to use agency resources in the 
most efficient manner; (2) allows the agencies to share 
confidential supervisory information concerning an examined 
institution; (3) modernizes agency record keeping requirements 
to allow use of optically imaged or computer scanned images; 
(4) clarifies that agencies may suspend or prohibit individuals 
charged with certain crimes from participation in the affairs 
of any depository institution and not only the institution with 
which the individual is associated; and (5) allows bank 
examiners to receive credit cards from examined depository 
institutions if issued under the same terms and conditions as 
generally offered to the public.
    These improvements will allow financial institutions to 
devote more resources to the business of lending to consumers 
and less to compliance with outdated and unneeded regulations. 
Reducing regulatory burden should lower credit costs for 
consumers and boost the national economy.

                             B. AMENDMENTS

    An amendment offered by Mr. Bachus, which creates a new 
section 312 of H.R. 3951, amends the Clayton Act to exempt 
credit unions from a premerger notification requirement, and 
was adopted by voice vote.
    Under provisions of the Hart-Scott-Rodino (HSR) Antitrust 
Improvements Act of 1976 (15 U.S.C. 18a), certain acquired and 
acquiring persons--including federally insured credit unions--
must file a notification and report form with the Federal Trade 
Commission (FTC) to provide advance notification of mergers and 
acquisitions when the value of the transaction exceeds $50 
million. The information submitted is reviewed by the FTC to 
determine if the proposed transaction may be anticompetitive 
and to justify, if appropriate, taking enforcement action to 
prevent the consummation of transactions that violate Section 7 
of the Clayton Act. Only after observing the waiting period 
under the HSR Act may the companies complete the proposed 
transaction.
    A tiered fee structure requires that companies pay a 
$45,000 filing fee for transactions valued at less than $100 
million, $125,000 for transactions valued at $100 million to 
less than $500 million, and $280,000 for transactions valued at 
$500 million or more. (Transactions valued at less than $50 
million are exempt from the requirement of filing the pre-
merger notification forms).
    Exempting federally insured credit unions from the pre-
merger notification requirements of the HSR Act would in no way 
relieve credit unions from the prohibitions found in Section 1 
of the Sherman Act which outlaws every contract, combination or 
conspiracy, in restraint of trade or those found in Section 2 
of the Sherman Act which make it unlawful for a company to 
monopolize, or attempt to monopolize trade or commerce. Nor 
would such an exemption shield credit unions from Section 7 of 
the Clayton Act, which prohibits mergers and acquisitions in 
which the effect may be to substantially lessen competition or 
tend to create a monopoly.
    In addition, if the attorney general of any State believed 
that the merger of two credit unions resulted in injury to 
persons residing in his/her State by virtue of alleged 
violations of either the Sherman or the Clayton Act, nothing 
would impede the ability of the attorney general to bring a 
civil action in the name of the State on behalf of those 
individuals living in that State. This action could be brought 
in any U.S. District Court having jurisdiction over the 
defendant.
    An amendment offered by Ms. Jackson Lee to eliminate 
section 607 of H.R. 3951 was adopted by voice vote. Section 607 
would have amended the Bank Holding Company Act of 1956, 12 
U.S.C. Sec. 1849(b), by eliminating an existing minimum 15 day 
waiting period for bank and bank holding companies to merge 
with or acquire another bank or bank holding company. 
Currently, the Bank Holding Act provides a 30 day waiting 
period, which may be reduced to 15 days upon a concurrence of 
the Attorney General and the relevant banking agency.

                                Hearings

    No hearings were held on H.R. 3951.

                        Committee Consideration

    On Wednesday, July 17, 2002, the Committee met in open 
session and ordered favorably reported the bill H.R. 3951, with 
amendment, by voice vote, a quorum being present.

                         Vote of the Committee

    There were no recorded votes taken on H.R. 3951.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                    Performance Goals and Objectives

    H.R. 3951 does not authorize funding. Therefore, clause 
3(c) of rule XIII of the Rules of the House of Representatives 
is inapplicable.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 3951, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 19, 2002.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3951, the 
Financial Services Regulatory Relief Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp, who can be reached at 226-2860.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 3951--Financial Services Regulatory Relief Act of 2002.

                                SUMMARY

    H.R. 3951 would affect the operations of financial 
institutions and the agencies that regulate them. Some 
provisions would address specific sectors: national banks could 
more easily operate as S corporations; thrift institutions 
would be given some of the same investment, lending, and 
ownership options available to banks; credit unions would have 
new options for investments, lending, mergers, and leasing 
Federal property; and certain privately insured credit unions 
could become members of the Federal Home Loan Bank system. The 
bill would modify regulatory procedures governing certain 
financial transactions, such as de novo branches and interstate 
mergers, and give agencies more flexibility in sharing data, 
retaining records, and scheduling exams. It also would limit 
the legal defenses that the United States could use against 
certain claims for monetary damages. Finally, H.R. 3951 would 
require insured depository institutions and credit unions to 
notify a consumer if information that may be construed as being 
adverse is being given to a credit reporting agency.
    CBO estimates that enacting this bill would reduce Federal 
revenues by $23 million over the next 5 years and by a total of 
$72 million over the 2003-2012 period. In addition, we estimate 
that direct spending would increase by $17 million over the 
next 5 years and by a total of $22 million over the 2003-2012 
period. Because H.R. 3951 would affect direct spending and 
receipts, pay-as-you-go procedures would apply.
    H.R. 3951 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that 
the cost of complying with those requirements would not exceed 
the threshold for intergovernmental mandates established in 
UMRA ($58 million in 2002, adjusted annually for inflation).
    H.R. 3951 contains several private-sector mandates as 
defined by UMRA. Those mandates would affect insured depository 
institutions and credit unions, uninsured banks, nondepository 
institutions that control depository institutions, certain 
parties affiliated with those depository institutions, and 
people charged with or convicted of crimes of dishonesty. At 
the same time, the bill would relax some restrictions on the 
operations of certain financial institutions. CBO estimates 
that the aggregate direct cost of private-sector mandates in 
the bill would exceed the annual threshold established in UMRA 
($115 million in 2002, adjusted annually for inflation).

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of H.R. 3951 is shown in the 
following table. The costs of this legislation fall within 
budget function 370 (commerce and housing credit).

                           BASIS OF ESTIMATE

    Most of the budgetary impacts of this legislation would 
result from three provisions: section 101, which would make it 
easier for national banks to convert to S corporation status; 
section 214, which would limit the Government's legal defenses 
against certain claims for monetary damages, and section 302, 
which would allow certain Federal credit unions to lease 
Federal land at no charge. For this estimate, CBO assumes that 
H.R. 3951 will be enacted in the fall of 2002.
    HR. 3951 also would affect the workload at agencies that 
regulate financial institutions, but we estimate that the net 
change in agency spending would not be significant. Based on 
information from each of the agencies, CBO estimates that the 
change in administrative expenses--both costs and potential 
savings--would average less than $500,000 a year over the next 
several years. Expenditures of the Office of the Comptroller of 
the Currency (OCC), the Office of Thrift Supervision (OTS), the 
National Credit Union Administration (NCUA), and the Federal 
Deposit Insurance Corporation (FDIC) are classified as direct 
spending and would be covered by fees or insurance premiums 
paid by the institutions they regulate. Any change in spending 
by the Federal Reserve would affect net revenues, while 
adjustments in the budget of the Securities and Exchange 
Commission would be subject to appropriation.
Revenues
    CBO estimates that enacting H.R. 3951 would reduce Federal 
tax revenues collected from national and State-chartered banks 
and would have an insignificant effect on civil and criminal 
penalties collected for violations of the bill's provisions.
    S Corporation Status. Under this bill, some national banks 
would find it easier to convert from C corporation status to S 
corporation status. section 101 would allow directors of 
national banks to be issued subordinated debt to satisfy the 
requirement that directors of a bank own qualifying shares in 
the bank. This provision would effectively reduce the number of 
shareholders of a bank by removing directors from shareholder 
status, making it easier for banks to comply with the 75-
shareholder limit that defines eligibility for subchapter S 
election.
    Income earned by banks taxed as C corporations is subject 
to the corporate income tax, and post-tax income distributed to 
shareholders is taxed again at individual income tax rates. 
Income earned by banks operating as S corporations is taxed 
only at the personal income tax rates of the banks' 
shareholders and is not subject to the corporate income tax. 
The average effective tax rate on S-corporation income is lower 
than the average effective tax rate on C-corporation income. 
CBO estimates that enacting this provision would reduce 
revenues by a total of $23 million over the 2003-2007 period 
and by $72 million over the 2002-2012 period.
    Based on information from the Federal Reserve Board, the 
OCC, and private trade associations, CBO expects that most of 
the banks that would be affected are small, although banks and 
bank holding companies with assets over $500 million would also 
be affected. In addition, States are likely to amend the rules 
for State-chartered banks to match those for national banks. 
CBO expects that most conversions to Subchapter S status would 
occur between 2003 and 2006 and that national banks would 
convert earlier than State-chartered banks.
    Civil and Criminal Penalties. H.R. 3951 would make all 
depository institutions--not just insured institutions--subject 
to certain civil and criminal fines for violating rules 
regarding breach of trust, dishonesty, and certain other 
crimes. CBO estimates that any additional penalty collections 
under those provisions would not be significant.
Direct Spending
    CBO estimates that enacting H.R. 3951 would increase direct 
spending by a total of about $15 million over the 2003-2012 
period to pay for increased litigation costs and larger 
payments for ``goodwill'' claims against the Government. The 
bill also would reduce offsetting receipts from credit unions 
that lease Federal facilities, and it could affect the cost of 
deposit insurance.
    Monetary Damages in Goodwill Cases. Section 214 would 
preclude the use of certain legal defenses in claims for 
damages against the United States arising out of the 
implementation of the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989 (FIRREA). CBO estimates that 
enacting this provision would increase the cost of litigating 
and resolving such claims by a total of $15 million over the 
next 5 years.
    Background on Goodwill Cases. Under section 214, courts 
could not dismiss a claim arising out of the implementation of 
FIRREA on the basis of res judicata, collateral estoppel, or 
similar defenses if the defense was based on a decision, 
opinion, or order of judgment entered by any court prior to 
July 1, 1996. On that date, the Supreme Court decided United 
States v. Winstar Corp., 518 U.S. 839 (1996), holding that the 
Government became liable for damages in breach of contract when 
the accounting treatment of ``supervisory goodwill'' that it 
had previously approved was prevented by enactment of FIRREA. 
About 100 ``goodwill'' cases against the Government are still 
pending before the courts, with claims totaling about $20 
billion. CBO estimates that, under current law, such claims 
will cost the Government about $2 billion over the 2003-2012 
period. Judgments, settlements, and litigation expenses for 
such claims are paid from the FSLIC Resolution Fund, and such 
payments do not require appropriation action.
    By eliminating some defenses currently available to the 
United States in such cases, section 214 would increase the 
likelihood that some claims would reach a hearing on the 
merits, thereby allowing cases to proceed further in the 
judicial process than may otherwise be likely. According to the 
Department of Justice (DOJ) and the FDIC, this provision would 
affect only a few of the goodwill cases; claims in the affected 
cases could total about $200 million. (This provision also 
could affect cases in which the FDIC is the plaintiff as the 
receiver of a failed thrift, but any monetary awards to the 
FDIC would be intragovernmental payments and would have no net 
effect on the Federal budget.)
    Estimated Cost of This Provision. CBO expects that enacting 
section 214 would increase the cost of litigation and potential 
settlements or judgments against the United States. Whether 
those costs are large or small would depend on the role those 
defenses would otherwise play in the outcome of each case. For 
example, the cost could be significant if the loss of those 
defenses resulted in a judgment for plaintiffs on the merits, 
but could be negligible if the judgment were against the 
plaintiffs.
    For this estimate, CBO assumes that defenses of res 
judicata and collateral estoppel would be just two of several 
possible defenses and other factors affecting awards of 
monetary damages and that barring them would therefore have a 
small effect on the potential costs of such claims. We estimate 
that enacting this provision would increase expected payments 
for such claims by about $10 million--or 5 percent of the $200 
million in claims that may be affected by this provision. Given 
the pace of such litigation, we expect that those added costs 
would occur in 2006 and 2007. In addition, CBO estimates that 
DOJ's administrative costs would increase by an average of 
about $1 million a year as a result of the added time and 
workload associated with those cases. This estimate is based on 
historical trends in the cost of litigating such claims.
    Nongoodwill Cases. Because section 214 would not limit the 
affected claims to goodwill cases, this provision also could 
affect other types of claims for monetary damages arising out 
of the implementation of FIRREA that meet the criteria in the 
bill. This provision could encourage the filing of such claims 
that were resolved prior to July 1, 1996; however, DOJ is 
currently unaware of any such claims.
    Offsetting Receipts From Federal Leases. Section 302 would 
allow Federal agencies to lease land to Federal credit unions 
without charge under certain conditions. Under existing law, 
agencies may allocate space in Federal buildings without charge 
if at least 95 percent of the credit union's members are or 
were Federal employees. Some credit unions, primarily those 
serving military bases, have leased Federal land to build a 
facility. Prior to 1991, leases awarded by the Department of 
Defense (DoD) were free of charge and for terms of up to 25 
years; a statutory change enacted that year limited the term of 
such leases to 5 years and required the lessee to pay a fair 
market value for the property. According to DoD, about 35 
credit unions have leased land since 1991 and are paying a 
total of about $525,000 a year to lease Federal property. Those 
proceeds are recorded as offsetting receipts, and any spending 
of those payments is subject to appropriation.
    CBO expects that enacting this provision would result in a 
loss of offsetting receipts from all credit union leases. Those 
lessees currently paying a fee would stop making those payments 
after they renew their current leases, all of which should 
expire within the next 5 years. In addition, credit unions that 
have long-term, no-cost leases would be able to renew them 
without becoming subject to the fees they otherwise would pay 
under current law. CBO estimates that enacting this provision 
would cost a total of about $2 million over the next 5 years 
and would cost an average about $700,000 annually after 2007.
    Deposit Insurance. Several provisions in the bill could 
affect the cost of Federal deposit insurance. For example, the 
bill would streamline the approval process for mergers, 
branching, and affiliations, which could give eligible 
institutions the opportunity to diversify and compete more 
effectively with other financial businesses. In some cases, 
such efficiencies could reduce the risk of insolvency. It is 
also possible, however, that some of the new lending and 
investment options could increase the risk of losses to the 
deposit insurance funds.
    CBO has no clear basis for predicting the direction or the 
amount of any change in spending for insurance that could 
result from the new investment, lending, and operational 
arrangements authorized by this bill. The net budgetary impact 
of such changes would be negligible over time, however, because 
any increase or decrease in costs would be offset by 
adjustments in income from insurance premiums from banks, 
thrifts, or credit unions.
Spending Subject to Appropriation
    Section 312 would exempt federally insured credit unions 
from filing certain acquisition or merger notices with the 
Federal Trade Commission (FTC). Under current law, the FTC 
charges filing fees ranging from $45,000 to $280,000, depending 
on the value of the transaction. The collection of such fees is 
contingent on appropriation action. Based on information from 
the FTC, CBO estimates that this exemption would have no 
significant effect on the amounts collected from such fees.

                      PAY-AS-YOU-GO CONSIDERATIONS

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. The net changes in outlays and 
governmental receipts that are subject to pay-as-you-go 
procedures are shown in the following table. For the purposes 
of enforcing pay-as-you-go procedures, only the effects through 
fiscal year 2006 are counted.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    H.R. 3951 would preempt certain State laws and place new 
requirements on certain State agencies that regulate financial 
institutions. Both the preemptions and the new requirements 
would be mandates as defined in UMRA.
    Section 209 would preempt certain State securities laws by 
prohibiting States from requiring agents representing a Federal 
savings association to register as brokers or dealers if they 
sell deposit products (CDs) issued by the savings association. 
Specifically, this provision would affect States that register 
exclusive agents of certain insurance companies who offer or 
sell CDs issued by the thrift they are affiliated with. Such a 
preemption would impose costs (in the form of lost revenues) on 
those States that currently require such registration. 
Information from representatives of the securities industry and 
securities regulators indicates that 16 States could be 
affected by this provision, but that only a small number of 
agents would fall under the preemption. CBO estimates that 
losses to States as a result of this prohibition would total 
less than $1 million a year.
    Section 301 would authorize certain privately insured 
credit unions to apply for membership in a Federal home loan 
bank. Part of the application process would require the 
relevant State regulators of credit unions to determine whether 
an applicant is eligible for Federal deposit insurance. This 
requirement would be a mandate, but because the regulators 
already make that determination under State law, the additional 
cost to comply with the requirement would be minimal.
    Upon becoming a member of a Federal home loan bank, such a 
credit union would be eligible for loans from that bank. To 
preserve the value of these loans, section 301 would preempt 
certain State contract laws that otherwise would allow 
defaulting credit unions to avoid certain contractual 
obligations. Because those credit unions are not currently 
eligible for membership in a Federal home loan bank, and 
accordingly, have no contracts for credit, this preemption, 
while a mandate, would impose no costs on State, local, or 
tribal governments.
    Section 302 would require State regulators of credit unions 
to provide certain information when requested by the NCUA. 
Because this provision would not require States to prepare any 
additional reports, merely to provide them to NCUA upon 
request, CBO estimates the cost to States would be minimal.
    Section 401 would expand an existing preemption of State 
laws related to mergers between insured depository institutions 
chartered in different States. Current law preempts State laws 
that restrict mergers between insured banks with different home 
States. This section would expand that preemption to cover 
mergers between insured banks and other insured depository 
institutions or trust companies with different home States. 
This expansion of a preemption would be a mandate under UMRA 
but would impose little or no cost on States.
    Section 401 also would preempt State laws that regulate 
certain fiduciary activities performed by insured banks and 
other depository institutions. The bill would allow banks and 
trusts of a State (the home State) to locate a branch in 
another State (the host State) as long as the services provided 
by the branch are not in contravention of home State or host 
State law. Further, if the host State allows other types of 
entities to offer the same services as the branch bank or trust 
seeking to locate in the host State, home State approval of the 
branch would not be in contravention of host State law. This 
provision could preempt laws of the host State but would impose 
no costs on them.
    CBO estimates that the cost of those mandates taken 
together would not exceed the threshold established in UMRA 
($58 million in 2002, adjusted annually for inflation).

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    H.R. 3951 contains several private-sector mandates as 
defined by UMRA. At the same time, the bill would relax some 
restrictions on the operations of certain financial 
institutions. CBO estimates that the aggregate direct costs of 
mandates in the bill would well exceed the annual threshold 
established in UMRA ($115 million in 2002, adjusted annually 
for inflation). CBO does not have sufficient data to provide an 
estimate of the total private-sector cost of complying with 
mandates in the bill, but we estimate that start-up costs would 
be at least $250 million and ongoing costs at least $600 
million a year.
Mandates
    The bill would impose mandates on insured depository 
institutions and credit unions, uninsured banks, nondepository 
institutions that control depository institutions, certain 
parties affiliated with those depository institutions, and 
people charged with or convicted of crimes of dishonesty. 
Mandates in the bill include a new consumer notification 
requirement, an expansion of the authority of the Federal 
Deposit Insurance Corporation over insured depositories 
controlled by a company that is not a depository institution 
holding company, and expanded prohibitions on employment at 
financial institutions of people convicted of certain crimes.
    Consumer Notification Requirement. Section 409 would 
require insured depository institutions and insured credit 
unions to notify customers when information that is, or may be 
construed as, adverse to the interests of the customer is 
furnished to a consumer reporting agency.
    To comply with this mandate, the affected institutions 
would incur start-up and ongoing costs. Start-up costs would 
include additional data processing, legal services, personnel 
training, and the design of notification forms. Primary ongoing 
costs would include the costs of producing and mailing notices 
and any additional personnel needed to answer customers' 
questions about the new notifications and to handle customer 
disputes.
    Start-up Costs. Institutions that report information to 
consumer credit reporting agencies would have to keep track of 
the information furnished to such agencies and report it to the 
customer at the same time it is reported to the agency. The 
costs of required data processing changes could include the 
purchase and installation of software and equipment, 
programming and testing, and charges by third-party processors. 
Based on data from a Federal Reserve study of the cost of 
implementing the Truth in Savings Act, CBO estimates that the 
cost to set up data-processing systems could average about 
$15,000 per institution. About 16,500 insured depository 
institutions and credit unions furnish customer data to 
consumer reporting agencies. Thus, CBO estimates that the cost 
of data-processing systems would amount to at least $250 
million. To the extent that the data processing changes 
necessary to comply with this mandate would likely be more 
complicated than what was necessary to comply with the Truth in 
Savings Act, the compliance costs would be larger.
    Institutions also would likely incur legal costs, training 
costs, and the costs of designing and producing notification 
forms. CBO does not have adequate information to estimate those 
costs of complying with this mandate.
    Ongoing Costs. According to industry sources, consumer 
reporting agencies receive about 2 billion updates per month on 
consumer accounts from all types of financial service firms. 
About 200 million to 300 million of those notices are obviously 
adverse reports, such as a report of late payments. Assuming 
that about half of those adverse notices are furnished by 
insured depository institutions, they would be responsible for 
at least 100 million to
    150 million notices per month. Many additional types of 
reports, however, may be construed as an adverse report under 
the bill. For example, opening a new credit card account may be 
construed as adverse by a lender reviewing a credit report if 
an individual already has several lines of credit.
    The ongoing cost of compliance would depend on whether the 
notices would have to be sent out separately to qualify as 
notifying the customer ``at the same time'' as the information 
is furnished to the consumer reporting agencies. Because the 
notices would have to be personalized (as opposed to a blanket 
policy disclosure that is the same for all customers), they 
would have to be mailed at a first-class rate. Depending upon 
the presorting done by the depository institution, first-class 
postage could range from 28 cents to 37 cents a piece. In 
addition to postage, mailing costs would include the cost of 
paper, envelopes, printing, and labor. According to industry 
sources, outside letter shops might charge between 50 cents and 
$1 a piece to mail such notices, including postage. (If insured 
depository institutions are allowed to include notices in 
monthly statements that they already send, the incremental cost 
of mailing could be much lower.) If separate notices are 
required, and if 100 million notices would be mailed per month 
at a cost of 50 cents each, the ongoing costs of producing and 
mailing such notices would be $600 million per year. But CBO 
expects the printing and mailing costs would probably be higher 
than this amount. In addition to those costs, institutions 
would incur ongoing expenses for any additional personnel who 
would be needed to respond to customers' inquiries, correct 
errors, and resolve disputes.
    Because reporting to consumer credit reporting agencies is 
voluntary, it is possible that insured depository institutions 
might mitigate their cost of compliance by decreasing the 
frequency with which they report customer data to such 
agencies, or by reducing the information they report, or stop 
such reporting altogether. However, depository institutions 
would have to weigh the costs and benefits of reducing their 
reporting to consumer credit reporting agencies. For example, 
depository institutions themselves benefit from having more 
comprehensive information about a potential borrower's credit 
history when making decisions about extending credit to that 
individual.
    Expansion of the FDIC's Authorities. The Gramm-Leach-Bliley 
Act allowed new forms of affiliations among depositories and 
other financial services firms. Consequently, insured 
depository institutions may now be controlled by a company 
other than a depository institution holding company (DIHC). 
H.R. 3951 would amend current law so that certain regulatory 
authorities of the FDIC would apply to all commonly controlled 
depository institutions, regardless of the form of their 
holding company.
    Under current law, if the FDIC suffers a loss from 
liquidating or selling a failed depository institution, the 
FDIC has the authority to obtain reimbursement from any insured 
depository institutions within the same DIHC. Section 407 would 
expand the scope of the FDIC's reimbursement power to include 
all insured depository institutions controlled by the same 
company, not just those controlled by the same DIHC. Section 
408 would broaden the FDIC's authority to prohibit or limit any 
company that controls an insured depository from making 
``golden parachute'' payments or indemnification payments to 
institution-affiliated parties of insured depositories. 
(Institution-affiliated parties include directors, officers, 
employees, and controlling shareholders.) CBO has no basis to 
estimate the costs of these mandates.
    Employment Practices. The bill would prevent people 
convicted of certain crimes from participating in the affairs 
of uninsured banks and would give bank regulatory agencies the 
authority to bar individuals charged with certain crimes of 
dishonesty from working at any depository institution. Section 
604 would give the OCC and the Federal Reserve the authority to 
penalize uninsured banks for unauthorized participation by 
individuals convicted of certain crimes. Section 608 would 
expand the suspension, removal, and prohibition authority of 
Federal banking agencies and the National Credit Union 
Administration Board with regard to individuals charged with 
certain crimes. CBO has no basis to estimate the cost of these 
mandates.
Other Private-Sector Effects
    Several provisions of the bill would benefit financial 
institutions by allowing for greater flexibility of operations 
and relaxing certain restrictions. However, those provisions do 
not qualify as direct savings under UMRA since those benefits 
do not result directly from compliance with the mandates or 
affect the same activities as the mandates and cannot be netted 
against the mandate costs. Some of the provisions that would 
benefit the private sector are listed below:

         LSection 101 would make it easier for some 
        national banks to meet the requirements for S-
        corporation status, and could lower the taxes paid by 
        those banks.

         LTitle II would give Federal thrift 
        institutions some of the same powers available to 
        banks, such as parity with banks with respect to 
        investment adviser and broker-dealer registration 
        requirements, allowing investments in community 
        development and small businesses, ownership by trusts, 
        and mergers with nonthrift affiliates.

         LTitle III would give Federal credit unions 
        new options for investments, lending, and mergers, 
        subject to certain terms and conditions. Section 302 
        would allow Federal agencies to lease land to Federal 
        credit unions without charge under certain conditions. 
        Section 312 would exempt insured credit unions from the 
        requirement to file a notification and report form with 
        the Federal Government in advance of a merger.

         LTitle IV would ease restrictions on 
        interstate branching and mergers and eliminate 
        reporting requirements regarding insider lending 
        imposed on banks and banks' executive officers.

                           PREVIOUS ESTIMATES

    On July 17, 2002, CBO transmitted a cost estimate for H.R. 
3951 as ordered reported by the House Committee on Financial 
Services on June 6, 2002. The version ordered reported by the 
Committee on the Judiciary differs only with regard to the 
timing of antitrust reviews and the filing of pre-merger 
notifications by federally insured credit unions. CBO estimates 
that those differences would have no significant effect on the 
impact of the bill on the Federal budget or on the costs of the 
intergovernmental or private-sector mandates imposed by the 
bill.

                         ESTIMATE PREPARED BY:

Federal Costs: Kathleen Gramp (226-2860)
Federal Revenues: Pam Greene (226-2680)
Impact on State, Local, and Tribal Governments: Susan Sieg 
    Tompkins (225-3220)
Impact on the Private Sector: Judith Ruud (226-2940)

                         ESTIMATE APPROVED BY:

Robert A. Sunshine
Assistant Director for Budget Analysis
and
G. Thomas Woodward
Assistant Director for Tax Analysis

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority for this legislation in article 1, 
section 8, clause 1 (relating to the general welfare of the 
United States); article 1, section 8, clause 3 (relating to the 
power to regulate interstate commerce); article 1, section 8, 
clause 5 (relating to the power to coin money and regulate the 
value thereof); and article I, section 8, clause 18 (relating 
to making all laws necessary and proper for carrying into 
execution powers vested by the Constitution in the government 
of the United States).

               Section-by-Section Analysis and Discussion

    The following section by section analysis describes the 
sections of H.R. 3951 as reported by the Committee on the 
Judiciary.

                        TITLE I--NATIONAL BANKS

    Provisions contained in title I were not referred to the 
Committee on the Judiciary, see H. Rept. 107-516 for analysis.

               TITLE II--SAVINGS ASSOCIATIONS PROVISIONS

    Section 213. Clarifying citizenship of Federal savings 
associations for Federal court jurisdiction. This section 
amends the Home Owners' Loan Act, 12 U.S.C. Sec. 1464, by 
establishing home State citizenship for Federal savings 
associations in the State where the association's main office 
is located. Federal diversity jurisdiction requires all of the 
parties of a lawsuit be citizens of different States and there 
be at least $75,000 in dispute. Currently Federal savings 
associations do not satisfy the requirements of diversity 
jurisdiction because they are chartered by the Federal 
Government, typically operate in a number of States, and thus 
have no State citizenship. This section will conform the legal 
citizenship of Federal savings associations with that of 
national banks, which have been deemed citizens of the State 
where they are headquartered.
    Section 214. Clarification of applicability of certain 
procedural doctrines. This section amends Section 11A(d) of the 
Federal Deposit Insurance Act, 12 U.S.C. Sec. 1821a(d), by 
prohibiting the assertion of res judicata, collateral estoppel, 
or any similar defense or rule of law for claims brought 
against the United States or related agency based upon actions 
of the Federal Savings and Loan Insurance Corporation prior to 
its dissolution, or the Federal Home Loan Bank Board prior to 
its dissolution, and arising from th Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) or its 
implementation where any monetary recovery would be paid from 
the Federal Savings & Loan Insurance Corporation (FSLIC) 
Resolution Fund. During the savings and loan crisis of the 
1980's, Federal thrift regulators sought to avoid incurring 
additional deposit insurance liabilities by encouraging healthy 
thrifts to take over ailing thrifts through supervisory 
mergers. In exchange, the Federal thrift regulators offered to 
treat a failed thrift's negative net worth as supervisory 
goodwill and include it in regulatory capital. In 1989, 
Congress enacted FIRREA, which prohibited thrifts from counting 
supervisory goodwill as regulatory capital. In 1996, in United 
States v. Winstar, 518 U.S. 839 (1996), the Supreme Court held 
that the government had entered into contracts with the 
acquiring thrifts, and had breached those contracts when it 
implemented FIRREA's prohibitions on including supervisory 
goodwill in calculating regulatory capital. Section 214 seeks 
to ensure that all institutions entitled to pursue claims 
against the government under the Winstar decision be treated 
equally and given an opportunity to have those claims heard on 
their merits.

                   TITLE III--CREDIT UNION PROVISIONS

    Section 312. Exemption from Premerger Notification 
Requirement of the Clayton Act. This section amends the Clayton 
Act to exempt credit unions form provisions of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (15 U.S.C. 18a) which 
require certain acquired and acquiring persons--including 
federally insured credit unions to file a notification and 
report form with the Federal Trade Commission (FTC) to provide 
advance notification of mergers and acquisitions when the value 
of the transaction exceeds $50 million.

              TITLE IV--DEPOSITORY INSTITUTION PROVISIONS

    Section 402. Statute of Limitations gor Judicial Review of 
Appointment of a Receiver for Depository Institutions. This 
section amends the National Bank Receivership Act, 12 U.S.C. 
Sec. 191, the Federal Deposit Insurance Act, 12 U.S.C. 
Sec. 1821(c)(7), and the Federal Credit Union Act, 12 U.S.C. 
Sec. 1787(a)(1), by establishing a uniform 30 day statute of 
limitations for national banks, State chartered non-member 
banks, and credit unions to challenge decisions by the Office 
of the Comptroller of the Currency, Federal Deposit Insurance 
Corporation, and the National Credit Union Administrator to 
appoint a receiver. Current law generally provides that 
challenges to a decision by the Federal Deposit Insurance 
Corporation or the Office of Thrift Supervision to appoint a 
receiver for an insured State bank or savings association must 
be raised within 30 days of the appointment. See 12 U.S.C. 
Sec. Sec. 1821(c)(7), 1464(d)(2)(B). However, there is no 
statutory limitation on national banks' ability to challenge a 
decision by the Office of the Comptroller of the Currency to 
appoint a receiver of an insured or uninsured national bank. As 
a result, the general 6 year statute of limitations currently 
applies to national banks in these instances. This protracted 
time period severely limits the Office of the Comptroller of 
the Currency's authority to mange insolvent national banks that 
are placed in receivership and the ability of the Federal 
Deposit Insurance Corporation to wind up the affairs of an 
insured national bank in a timely manner with legal certainty. 
See James Madison, Ltd. v. Ludwig, 82 F.3d 1085 (1996).

                   TITLE V--BANKING AGENCY PROVISIONS

    Provisions contained in title V were not referred to the 
Committee on the Judiciary, see H. Rept. 107-516 for analysis.

                  TITLE VI--BANKING AGENCY PROVISIONS

    Section 609. Streamlining Depository Institution Merger 
Application Requirements. This section 609 amends paragraph 4 
of section 18(c) of the Federal Deposit Insurance Act, 12 
U.S.C. Sec. 1828(c), by establishing new competitive report 
requirements for depository institution merger applications. 
Currently, depository merger applications require competitive 
factors reports from the Office of the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, the 
Federal Reserve, and the Office of Thrift Supervision, and the 
United States Department of Justice (DOJ). This section 
simplifies the competitive report requirement by requiring a 
report from the responsible banking agency and the DOJ, and 
requires that all report requests be filed with the FDIC to 
provide notice as it relates to the provision of Federal 
deposit insurance.

              TITLE VII--CLERICAL AND TECHNICAL AMENDMENTS

    Section 703. Other Technical Corrections. This section 
amends 18 U.S.C. Sec. 1306 by making a technical correction to 
a cross reference to section 5136A of the Revised Statutes of 
the United States. 18 U.S.C. Sec. 1306 imposes criminal 
penalties for national or State banks in violation of the 
banking laws, which prohibit banks from participating in a 
lottery. In 1999, when Gramm-Leach-Bliley, Pub. L. No. 106-102, 
was enacted, the law that prohibits national banks from 
participating in lotteries was re-designated from section 5136A 
to section 5136B of the Revised Statutes of the United States; 
however, no corresponding change was made to the cross 
reference in title 18. This section correctly amends title 18 
to conform with the change made in 1999 by correctly changing 
the cross reference to section 5136B of the Revised Statutes of 
the United States.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported by the Committee on Financial Services, 
are shown in Report 107-516 part 1, filed on June 18, 2002.

    The Committee on the Judiciary adopted amendments (shown at 
the beginning of this report) to the bill as reported by the 
Committee on Financial Services. Changes in provisions of 
existing law that would result from those amendments and differ 
from the changes that would result from the bill as reported by 
the Committee on Financial Services are shown as follows (new 
matter is printed in italics and existing law in which no 
change is proposed is shown in roman):

                     SECTION 7A OF THE CLAYTON ACT

    Sec. 7A. (a) * * *

           *       *       *       *       *       *       *

    (c) The following classes of transactions are exempt from 
the requirements of this section--
            (1) * * *

           *       *       *       *       *       *       *

            (7) transactions which require agency approval 
        under section 10(e) of the Home Owners' Loan Act, 
        section 18(c) of the Federal Deposit Insurance Act (12 
        U.S.C. 1828(c)), 205(b)(3) of the Federal Credit Union 
        Act (12 U.S.C. 1785(b)(3), or section 3 of the Bank 
        Holding Company Act of 1956 (12 U.S.C. 1842), except 
        that a portion of a transaction is not exempt under 
        this paragraph if such portion of the transaction (A) 
        is subject to section 4(k) of the Bank Holding Company 
        Act of 1956; and (B) does not require agency approval 
        under section 3 of the Bank Holding Company Act of 
        1956;

           *       *       *       *       *       *       *

                           Markup Transcript

                            BUSINESS MEETING

                        WEDNESDAY, JULY 17, 2002

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    Chairman Sensenbrenner. The Committee will be in order.

           *       *       *       *       *       *       *

    Pursuant to notice, I now call up the bill H.R. 3951, the 
``Financial Services Regulatory Relief Act,'' for purposes of 
markup and move its favorable recommendation to the House.
    Without objection, the bill will be considered as read and 
open for amendment at any point.
    [The bill, H.R. 3951, follows:]
      
      

  

    Chairman Sensenbrenner. The Chair now recognizes himself 
for 5 minutes for purposes of a statement.
    This bill was reported by the Committee on Financial 
Services and was sequentially referred to the Judiciary 
Committee for a period not later than July 22, which is next 
Monday so we have to act on this bill today. Sections 213, 214, 
402, 607, 609, and 703 are within the jurisdiction of this 
Committee and will be open for amendment.
    The last time Congress overhauled the regulation of 
America's banking industry, the FIRREA law was enacted in 1989. 
At that time we were recovering from an S&L crisis which 
prompted Congress to develop comprehensive reform to restore 
the integrity and reliability of the banking industry. While 
FIRREA has generally been a large success, the bill addresses 
many shortcomings in the law. It is estimated that the annual 
cost of compliance with various State and Federal banking 
regulations is nearly $26 billion. While the need for effective 
banking regulation is absolutely necessary to ensure the 
soundness of banking institutions, enforce compliance with 
various consumer protection statutes, and combat money 
laundering and other financial crimes, this bill eliminates 
duplicative and unnecessary regulation. As a result, banking 
regulation will be more focused, regulators will be better 
prepared to conduct thorough and effective reviews, and banks 
should be able to improve productivity for the American 
consumer.
    The bill was carefully reviewed by the Financial Services 
Committee during 2 days of hearing and subsequent markup. It 
has received wide bipartisan support and was adopted in that 
Committee by a voice vote. It is common-sense legislation 
because it eliminates bureaucratic red tape and costly 
regulations that are not being utilized, and I would urge the 
Members to support it.
    At this point in time, I recognize the gentleman from 
Michigan, Mr. Conyers, for an opening statement.
    Mr. Conyers. Thank you, Mr. Chairman.
    I agree with your opening statement, and I hope my 
colleagues on this side of the aisle will as well. The only 
thing that we would ask that you consider is the Waters 
amendment, which would--could make this a much shorter hearing. 
And I don't know if you----
    Chairman Sensenbrenner. Without objection, all Members may 
include opening statements in the record at this point.
    Are there amendments? And the gentleman from Alabama has an 
amendment.
    Mr. Bachus. Thank you.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from Alabama seek recognition?
    Mr. Bachus. Mr. Chairman, I have an amendment at the table, 
and I----
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to Judiciary----
    Mr. Conyers. Mr. Chairman, I reserve a point of order.
    Chairman Sensenbrenner. A point of order is reserved.
    The Clerk. Amendment to Judiciary Committee Print to H.R. 
3951, offered by Mr. Bachus----
    Mr. Bachus. Mr. Chairman, I'd ask that the amendment be 
considered as read.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman from Alabama is 
recognized for 5 minutes on the condition that the gentleman 
from Michigan has reserved a point of order. The gentleman from 
Alabama is recognized.
    Mr. Bachus. Mr. Chairman, my amendment's very simple. It 
amends current law to give credit unions the same exemption 
from the pre-merger notification requirements of Hart-Scott-
Rodino that banks and thrifts already enjoy. As my colleagues 
know, that act requires that certain businesses that are 
planning to engage in merger transactions must file notice with 
the FTC and pay a $45,000 filing fee. The act sets forth 
specific exemptions for certain transactions that are already 
subject to review and approval by Federal agencies other than 
the FTIC, including mergers involving banks and thrifts that 
are reviewed by the Federal Reserve, the Comptroller, the FDIC, 
and OTS. As with these depository institutions, when credit 
unions merge, the transaction is subject to review and approval 
by the Federal regulator, the National Credit Union 
Administration, which, like the FTIC, is an independent Federal 
agency.
    I have heard no one offer any justification for why credit 
unions should be treated any differently from mergers involving 
banks and thrifts. My amendment simply ensures parity of 
treatment among the various kinds of financial institutions. 
This amendment has the strong support of the NCUA board. Its 
chairman, appointed by the President, has written a letter 
earlier this week endorsing the amendment. I'd like to move 
that that be made a part of the record.
    Chairman Sensenbrenner. Without objection.
    [The letter follows:]
    
    
    Mr. Bachus. I would also like to thank the Federal 
Association of Federal Credit Unions and the Credit Union 
National Association, NAFCU and CUNA, for their support for 
this effort. I urge adoption of the amendment and reserve the 
balance of my time.
    Mr. Watt. Would the gentleman yield for a second?
    Mr. Bachus. I would yield.
    Mr. Watt. I wanted to inquire, apparently the amendment is 
fairly non-controversial except that your amendment refers to 
17--12 U.S.C. 1785(b), and I'm told that the specific section 
that you want to amend would actually be 12 U.S.C. 1785(b), 
subparagraph (3), as opposed to the entire section.
    Mr. Bachus. That's correct.
    Mr. Watt. I am wondering if the gentleman would entertain 
a--would amend his amendment to insert the reference to 
1785(b)(3) as opposed to just 1785(b)?
    Chairman Sensenbrenner. Will the gentleman----
    Mr. Bachus. I consider that a perfecting----
    Chairman Sensenbrenner. Would the gentleman from Alabama 
yield? When the staff is given permission to make technical and 
conforming changes, should this bill be reported out, that 
issue can be picked up and the correction made pursuant to 
authority.
    Mr. Watt. I think that this is a little bit more than a 
technical amendment, Mr. Chairman. This has substance to it 
because what the amendment currently does is waive all the 
provisions of the Clayton Act as opposed to just the specific 
pre-merger provision. So I don't think the staff can do this on 
a technical clean-up, and so I would ask the gentleman if he 
would include the reference specifically or at least let's make 
it clear that we are talking about 1785(b)(3).
    Mr. Bachus. We are. We're just talking about the pre-merger 
notification requirement alone. So I believe that what you are 
proposing is consistent with what I'm attempting to do. So I 
would accept the----
    Chairman Sensenbrenner. Without objection, the amendment is 
so modified.
    Mr. Conyers. Mr. Chairman?
    Chairman Sensenbrenner. The question--does the gentleman 
from Michigan insist upon his point of order?
    Mr. Conyers. No, sir, I do not.
    Chairman Sensenbrenner. The reservation is withdrawn. The 
question is----
    Mr. Conyers. No, wait a minute. I seek recognition.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Conyers. Thank you.
    We're back in this ``hurry up and let's get out of here'' 
stage today, aren't we, Mr. Bachus? In your other Committee, we 
hold hearings on this bill, H.R. 3951. In the Judiciary 
Committee, we hold no hearings. And then on top of it, you have 
the concern to come forward with an amendment with no 
discussion, no warning, that credit unions should be exempt 
from the Hart-Scott-Rodino. Could you explain to me----
    Mr. Bachus. Now----
    Mr. Conyers. Could you explain to me why you didn't bring 
it up in the bill that you originally introduced back in March 
but this morning, without a single hearing, you find it very 
timely to run it through? And I yield.
    Mr. Bachus. No, I appreciate the gentleman raising that. 
The provisions in the credit union title of 3951 are all 
amendments to the Federal Credit Union Act and other banking 
law. And my amendment amends the Clayton Act, as you said, but 
it was not included in the measure that came out of the 
Financial Services, a difference to this Committee's 
jurisdictional prerogative, and not----
    Mr. Conyers. Okay----
    Mr. Bachus.--because the Financial Services Committee had 
any concerns about the substance of the provision.
    Mr. Conyers. All right.
    Mr. Bachus. In fact, the Chairman has----
    Mr. Conyers. Okay, fine. Excuse me, sir.
    Mr. Bachus. So this----
    Mr. Conyers. Now that you've explained why it didn't come 
up in this Committee, could you please tell me why credit 
unions should be exempt from Hart-Scott-Rodino?
    Mr. Bachus. Yes. All we're exempting them from is the pre-
merger notification requirement that the act exempted banks and 
thrifts from. So we're not exempting them from the whole act. 
We're simply exempting them from the requirement that they pay 
the $45,000 fee and get----
    Mr. Conyers. Okay, sir. Let me put it this way: Are you 
exempting them from the reporting--the credit unions from the 
reporting requirements of Hart-Scott-Rodino?
    Mr. Bachus. No, not other than----
    Mr. Conyers. No.
    Mr. Bachus. No.
    Mr. Conyers. Well, then, I have a staff problem because 
it's suggested from them that you are.
    Mr. Bachus. From who?
    Chairman Sensenbrenner. Will the gentleman from Michigan--
--
    Mr. Conyers. My staff.
    Chairman Sensenbrenner. Will the gentleman from Michigan 
yield?
    Mr. Conyers. The people that we pay to help us out.
    Chairman Sensenbrenner. Will the gentleman from Michigan 
yield?
    Mr. Conyers. Of course.
    Chairman Sensenbrenner. I think the best way to handle this 
is while we're voting on the journal vote is to resolve this 
problem. But the Chair notes the presence of a reporting 
quorum, and I think it would be a good idea to get the four 
bills that we have already debated reported out while we have a 
reporting quorum present.
    So the Chair asks unanimous consent----
    Mr. Weiner. Mr. Chairman? Mr. Chairman, in light of the 
fact that several of us had amendments to bills that have 
already been considered and you want to report out now, I move 
the Committee rise.
    Chairman Sensenbrenner. That is not in order. The motion to 
rise is not in order in a Committee session. The Chair asks----
    Ms. Jackson Lee. Mr. Chairman?
    Chairman Sensenbrenner. The previous question has been 
ordered on the four bills that were called up----
    Ms. Jackson Lee. Mr. Chairman, strike the last word.
    Chairman Sensenbrenner.--when a working quorum--the 
Committee is in recess----
    Ms. Jackson Lee. I move to reconsider the previous bills.
    Chairman Sensenbrenner. The Committee will be in recess 
until after this vote. Members will return----
    Ms. Jackson Lee. Thank you, Mr. Chairman.
    Chairman Sensenbrenner.--promptly, and had the Members been 
here promptly at 10 o'clock, they would have had a chance to 
offer their amendments rather than attempting to backtrack.
    [Recess.]
    Chairman Sensenbrenner. The Committee will be in order. The 
Chair notes the presence of a reporting quorum--working quorum, 
I'm sorry, correction.
    When the Committee recessed, pending was the Bachus 
amendment to the bill H.R. 3951. Mr. Bachus was speaking at 
that time. The gentleman from Alabama is recognized.
    Mr. Bachus. Mr. Chairman, exempting federally insured 
credit unions from the pre-merger notification requirements of 
HSR Act would in no way relieve credit unions from prohibitions 
found in section 1 of the Sherman Act, which outlaws every 
contract combination or conspiracy in restraint of trade or 
those found in section 2 of the Sherman Act. It would make it 
unlawful for a company to monopolize or attempt to monopolize 
trade or commerce. Nor would such exemption shield credit 
unions from section 7 of the Clayton Act which prohibits 
mergers and acquisitions in which the effect may be to 
substantially lessen competition or tend to create a monopoly.
    Credit union mergers involve institutions that hold only a 
small fraction of the deposits held for consumers in the 
Nation's financial system--it's actually less than 2 percent--
and are, therefore, far less likely than mergers of banks and 
thrifts to raise the anti-competitive issues that Hart-Scott-
Rodino review is designed to address. It makes--and this is the 
bottom line. It makes absolutely no sense to exempt banks and 
thrifts from this requirement and not credit unions, and that's 
what this--this is simply an amendment to offer equity to 
credit unions.
    I yield back the balance of my time and ask for adoption of 
the amendment.
    Mr. Watt. Would the gentleman yield?
    Mr. Bachus. I yield.
    Mr. Watt. I just wanted to revise the prior unanimous 
consent request to reflect what I understand to be what we 
should be technically doing, and so I would ask unanimous 
consent that on line 4, after 205(b), we insert (3), and on 
line 5, after 1785(b), we insert (3).
    Chairman Sensenbrenner. Without objection, the modification 
is agreed to.
    Mr. Bachus. Thank you.
    Chairman Sensenbrenner. The gentleman from Alabama.
    Mr. Bachus. I yield back the balance of my time.
    Chairman Sensenbrenner. The question--the gentleman from 
North Carolina, Mr. Watt?
    Mr. Watt. At the risk of prolonging this, I think Mr. 
Conyers and his staff may have had some problems about it 
because they thought this related to doing something 
substantially more than it really does. This is just a pre--a 
pre-exemption--pre-merger notification. It doesn't exempt 
credit unions from the provisions of the Clayton Act. It 
exempts them from just one minor pre-notice provision that 
banks and other financial institutions are already exempt from. 
If there were controversy, it really would have been 
controversy about the banks and other financial institutions 
being exempted, not the credit unions. Most of the credit 
unions aren't large enough to really have substantial antitrust 
implications, anyway. But I don't think there's a real problem 
with this, so I would ask bipartisan support for it.
    Chairman Sensenbrenner. The question is on agreeing to 
the----
    Ms. Jackson Lee. I have an amendment at the desk.
    Chairman Sensenbrenner. There is an amendment pending. Is 
this an amendment to the amendment?
    Ms. Jackson Lee. No. I'm sorry. Thank you, Mr. Chairman.
    Chairman Sensenbrenner. The question is on agreeing to the 
amendment offered by the gentleman from Alabama, Mr. Bachus. 
Those in favor will say aye? Opposed, no?
    The ayes appear to have it. The ayes have it and the 
amendment is agreed to.
    For what purpose does the gentlewoman from Texas seek 
recognition?
    Ms. Jackson Lee. An amendment at the desk----
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Ms. Jackson Lee. Ms. Waters and Ms. Jackson Lee.
    The Clerk. Amendment to Committee--to the Judiciary 
Committee Print of H.R. 3951, offered by Ms. Waters and Ms. 
Jackson Lee.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. And the gentlewoman from Texas, Ms. 
Jackson Lee, is recognized for 5 minutes.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I ask 
that this amendment be studied by my colleagues. This bill is 
not a balanced bill. It gives very little to consumers while it 
takes away some of the few rights consumers have. Section 607, 
for example, repeals the current 15-day period that merging 
banks must well--must wait before completing their merger. The 
reason behind the 15-day period is straightforward and very 
important. It provides groups and individuals with an 
opportunity to challenge a merger before it is improved--before 
it's approved.
    During the regular course of a bank merger process, both 
the Federal financial supervisory agency and the Department of 
Justice review the merger proposal for competitive concerns. 
The Federal financial agency also reviews the proposal for 
issues related to the Community Reinvestment Act and other fair 
lending laws. The Department of Justice does not undertake this 
second review.
    Once the Federal banking agency approves a merger, the 
Department of Justice has 30 days in which to challenge the 
merger on antitrust grounds. The merging banks must wait at 
least 15 days before completing their merger, regardless of 
whether the DOJ decides to file a suit.
    Under section 607, this minimum 35-day period would be 
eliminated in cases when the DOJ indicates it will not file 
suit challenging the merger, leaving the consumer without any 
relief. Unfortunately, eliminating the 15-day period also takes 
community groups, bank applicants, and other parties out of the 
loop. Right now those groups and individuals are able to file 
suit challenging the merger during the 15-day period whether or 
not the DOJ decides to file the suit. Eliminating that waiting 
period effectively removes any pre-consummation judicial review 
for any party.
    The 15-day waiting period provides the only tool community 
groups have to ensure that a Federal financial supervisory 
agency complies with this responsibility under the CRA. 
Specifically, the CRA requires such agencies to consider a bank 
merger applicant's record and meet the requirements and the 
needs of its community. Repealing the 15-day period provides 
regulatory relief to banks and other financial institutions at 
the expense of their communities. I would appreciate our 
colleagues joining us in support of our amendment, which does 
nothing more than strike the provision that removes the 15-day 
waiting period. Banks preparing to complete a proposed merger 
will not be injured by waiting 15 days, but community groups 
and individuals who are not given the opportunity to contest a 
proposed merger certainly will be.
    I would think my colleagues, in light of the climate that 
we're in as it relates to corporate reform and knowing that 
community groups are always at a disadvantage as it relates to 
the CRA, notice the ability to organize and to present their 
grievances should cause us to be convinced that leaving in the 
15-day period is in line with the horrific acts of the past 
that we've seen corporate--corporate involvement. We've seen 
unclean hands come to the table, and I believe the 15-day 
period is instructive, it is helpful, it balances this bill to 
include relief for the consumer. And I would hope that we would 
not want to pass this bill out of Judiciary where we are 
supposed to protect the rights of consumers under the 
Department of Justice by not having this provision in the 
legislation.
    With that, I will yield back my time.
    Chairman Sensenbrenner. The gentleman from Alabama, Mr. 
Bachus?
    Mr. Bachus. Mr. Chairman, an identical amendment to this 
one----
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Bachus. Thank you. An identical amendment to this one 
was offered by Ms. Schakowsky at the Financial Services 
Committee markup of this legislation, and it was defeated on a 
rollcall vote. Section 607 amends the Bank Holding Company Act 
by eliminating an existing minimum 15-day waiting period for 
banks and bank holding companies to merge with or acquire 
another bank or bank holding company. Currently, the Bank 
Holding Act provides a 30-day waiting period which may be 
reduced to 15 days upon a concurrence of the Attorney General 
and the relevant banking agency. As a result, this section 
provides the Attorney General and Federal banking agencies more 
flexibility in processing acquisitions and mergers that do not 
significantly adversely--have adverse effects on competition.
    The Justice Department is supportive of the additional 
flexibility provided by this section. The provision does not 
preclude challenges to acquisitions and mergers based on CRA. 
It only provides for expedited processing of acquisition or 
merger requests that the DOJ and responsible bank agencies deem 
not to pose a significant adverse effect on competition.
    I disagree with the gentlelady on her interpretation of the 
provision, of this provision. She says that the provision in 
its current stage will wipe out a party's ability--a party that 
think it's aggrieved to file suit to challenge a merger order 
by the regulator. Actually, the provisions of the bill and the 
way they stand will not wipe out anyone's ability to challenge 
a decision of merger on CRA grounds.
    The only preclusion will be to challenge the Justice 
Department on antitrust grounds. In fact, section 1848 of the 
Bank Holding Company Act gives the right for an aggrieved party 
to obtain a review of such an order, a merger order, and 
specifically will be maintained for CRA. So in that regard, Mr. 
Chairman, the purpose of this language, in fact, was brought to 
us by the Federal Reserve because it requires both notices as 
well as the Department of Justice to sign off on the antitrust 
issues.
    I yield back the balance of my----
    Mr. Conyers. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Michigan.
    Mr. Conyers. What we're doing here is saying that community 
organizations don't need 15 days to review a merger. Of course, 
the Department of Justice doesn't have any problem. They've got 
hundreds of lawyers, so 15 days one way or the other isn't 
going to mean that much, Mr. Bachus. What it does affect, 
though, are consumer organizations and people in minority 
communities who want to get information of fair lending 
practices, and people in rural areas, by the way, which you 
have some familiarity with. They're all--they're all getting 
wiped out. So, I mean, we are talking a couple of weeks.
    Mr. Bachus. Mr. Conyers, out of respect for the gentlelady 
from Texas and you----
    Mr. Conyers. And the gentlelady from California.
    Mr. Bachus.--I don't have any strong feelings about this 
amendment and would ask--I'm not going to urge its adoption 
because I have to defend the Financial Services Committee, but 
if I--an affirmative vote certainly wouldn't--I don't think it 
would have much effect.
    Chairman Sensenbrenner. Does the gentleman from Michigan 
yield back his time?
    Mr. Conyers. Yes, sir.
    Chairman Sensenbrenner. The question is on agreeing to the 
amendment offered by the gentlewoman from Texas, Ms. Jackson 
Lee. Those in favor----
    Ms. Jackson Lee. California.
    Chairman Sensenbrenner.--will say aye. Opposed, no?
    The ayes appear to have it. The ayes have it and the 
amendment is agreed to.
    Are there further amendments to the bill? If not, the Chair 
notes the presence of a reporting quorum. The question occurs 
on reporting the bill favorably as amended. Those in favor will 
say aye? Opposed, no?
    The ayes appear to have it. The ayes have it and the bill 
as amended is reported favorably. Without objection, the bill 
will be reported favorably to the House in the form of a single 
amendment in the nature of a substitute, incorporating the 
amendment adopted here today. Without objection, the Chairman 
is authorized to move to go to conference pursuant to House 
rules. Without objection, the staff is directed to make any 
technical and conforming changes, and all Members will be given 
2 days, as provided by the House rules, in which to submit 
additional dissenting, supplemental, or minority views.
                            Additional Views

    We support the version of H.R. 3951 as reported out of the 
Committee on the Judiciary, however, we wish to provide 
additional views regarding section 607 of the bill as it was 
reported out of the Financial Services Committee. This section 
amends section 11(b) the Bank Holding Company Act of 1956, 12 
U.S.C. Sec. 1849(b), and section 18(c)(6) of the Federal 
Deposit Insurance Act, 12 U.S.C. Sec. 1828(c)(6), by 
eliminating the minimum waiting period for banks and bank 
holding companies to merge with or acquire other banks or bank 
holding companies. Section 607 was struck from the bill in the 
Committee on the Judiciary and we which to share our strong 
support for the decision to eliminate this provision.
    Community organizations raised strong concerns about 
section 607 which repeals the pre-merger, mandatory 15-day 
waiting period with the Attorney General's approval. During the 
course of a bank merger process, both the Federal financial 
supervisory agency and the Department of Justice review the 
merger proposal for competitive concerns. After a Federal 
banking agency approves a merger, DOJ has 30 days to decide 
whether to challenge the merger approval on antitrust grounds. 
At a minimum, the merging banks must wait 15 days before 
completing their merger. Currently, banking law allows 3rd 
parties (other than Federal banking agencies or DOJ) to file 
suit during the post-approval waiting period. As proposed, 
section 607 would eliminate the minimum 15-day waiting period 
when DOJ indicates it will not file suit challenging the merger 
approval order.
    We believe that this provision is anti-Community 
Reinvestment Act (``CRA'') and strips the organizations' right 
to seek judicial review of Federal bank merger approval orders. 
Without such review, community organizations will be deprived 
of impartial means and mechanisms for ensuring that CRA 
performance obligations are taken into account when considering 
merger approvals. Community-based organizations use such suits 
to obtain information about the merger and ensure that the 
merger will not result in disproportionate branch closures in 
low-income or minority communities. We believe they play an 
important role in the public interest and would like to 
reaffirm our desire that the mandatory 15-day waiting period 
remain and that section 607, therefore, remain stricken from 
the bill.
    In addition, we must express concern about an amendment 
that was suddenly raised and passed at the mark-up that 
eliminates merger filing requirements for credit unions. Due to 
the small size and limited offices of most credit unions, we 
remain concerned about closures that could result without any 
input from the communities affected.

                                   John Conyers, Jr.
                                   William D. Delahunt.

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