I

103D CONGRESS

1ST SESSION H. R. 2955

To stimulate the economy by encouraging bank and thrift institution lending

to small- and medium-sized businesses and to consumers by reducing

and standardizing the leverage limit capital standard for safe and sound

depository institutions, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 6, 1993

Mr. KENNEDY introduced the following bill; which was referred to the

Committee on Banking, Finance and Urban Affairs

A BILL

To stimulate the economy by encouraging bank and thrift

institution lending to small- and medium-sized businesses

and to consumers by reducing and standardizing the

leverage limit capital standard for safe and sound depository institutions, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Business and

5 Consumer Lending Stimulus Act’’.
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1 SEC. 2. REDUCTION AND STANDARDIZATION OF LEVERAGE

2 LIMIT CAPITAL STANDARD APPLICABLE TO

3 QUALIFIED DEPOSITORY INSTITUTIONS.

4 (a) IN GENERAL.—In the case of any adequately cap5 italized insured depository institution, the appropriate

6 Federal banking agency may not impose or enforce, during

7 the 18-month period beginning on the date of the enact8 ment of this Act, any leverage limit with respect to such

9 depository institution which requires a ratio of tangible

10 equity to total assets greater than 3 percent.

11 (b) EXCEPTION.—Subsection (a) shall not apply with

12 respect to an insured depository institution which the ap13 propriate Federal banking agency determines—

14 (1) lacks sufficient loan loss reserves; or

15 (2) is operating in an unsafe or unsound man16 ner.

17 (c) DEFINITIONS.—For purposes of this section—

18 (1) ADEQUATELY CAPITALIZED.—Subject to

19 subsection (d), the term ‘‘adequately capitalized’’

20 has the meaning given to such term in section

21 38(b)(1)(B) of the Federal Deposit Insurance Act,

22 as implemented by each appropriate Federal banking

23 agency by regulation.

24 (2) APPROPRIATE FEDERAL BANKING AGEN25 CY.—The term ‘‘appropriate Federal banking agen-
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1 cy’’ has the meaning given to such term in section

2 3(q) of the Federal Deposit Insurance Act.

3 (3) INSURED DEPOSITORY INSTITUTION.—The

4 term ‘‘insured depository institution’’ has the mean5 ing given such term in section 3(c)(2) of the Federal

6 Deposit Insurance Act.

7 (4) LEVERAGE LIMIT.—The term ‘‘leverage

8 limit’’ means the capital standard relating to the

9 minimum ratio of tangible capital to total assets es10 tablished by the appropriate Federal banking agency

11 pursuant to section 38(c)(1)(A)(i) of the Federal

12 Deposit Insurance Act.

13 (d) DETERMINATION OF ADEQUACY OF CAPITAL.—

14 Any determination by any appropriate Federal banking

15 agency with regard to the capital adequacy of any insured

16 depository institution for purposes of this Act shall be

17 made without regard to any requirement in section 38 of

18 the Federal Deposit Insurance Act, or any regulation pre19 scribed under such section, relating to a leverage limit.

20 SEC. 3. REGULATION OF REAL ESTATE LENDING.

21 Subsection (o) of section 18 of the Federal Deposit

22 Insurance Act (12 U.S.C. 1828(o)) (as added by section

23 304 of the Federal Insurance Corporation Improvement

24 Act of 1991) is amended—
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1 (1) by redesignating paragraph (4) as para2 graph (5); and

3 (2) by inserting new paragraph (4) as follows:

4 ‘‘(4) CONSIDERATION OF IMPACT OF STAND5 ARDS.—In prescribing standards under paragraph

6 (1), the appropriate Federal banking agencies shall,

7 consistent with safety and soundness,—

8 ‘‘(A) consider the impact that such stand9 ards have on the availability of credit for small

10 business, residential, and agricultural purposes,

11 and on low- and moderate-income communities;

12 and

13 ‘‘(B) minimize the negative impact that

14 these standards have on the availability of cred15 it for such purposes and in such areas.’’.

16 SEC. 4. REAL ESTATE APPRAISAL AMENDMENT.

17 Section 1122 of the Financial Institutions Reform,

18 Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351)

19 is amended—

20 (1) by redesignating subsections (b), (c), (d),

21 and (e) as subsections (c), (d), (e), and (f), respec22 tively;

23 (2) by adding the following new subsection (b):

24 ‘‘(b) RECIPROCITY.—The Appraisal Subcommittee

25 shall encourage the States to develop reciprocity agree-
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1 ments among the States so as to readily authorize apprais2 ers licensed or certified in 1 State and in good standing

3 with such State’s appraiser certifying or licensing agency

4 to perform appraisals in any other State to the same ex5 tent as appraisers certified or licensed by such other

6 State.’’; and

7 (3) by adding at the end of subsection (a)(3)

8 the following new sentence: ‘‘A State appraiser cer9 tifying or licensing agency shall not impose excessive

10 fees or burdensome requirements for temporary

11 practice under this subsection, as determined by the

12 Appraisal Subcommittee.’’.

13 SEC. 5. REPORT ON CAPITAL STANDARDS AND THEIR IM14 PACT ON THE ECONOMY.

15 (a) STUDY.—

16 (1) IN GENERAL.—Before the end of the 90-day

17 period beginning on the date of the enactment of

18 this Act, the Secretary of the Treasury, after con19 sultation with the Federal banking agencies, shall

20 report to the Committee on Banking, Finance and

21 Urban Affairs of the House of Representatives and

22 the Committee on Banking, Housing, and Urban Af23 fairs of the Senate on the effect that the implemen24 tation of risk based capital standards, including the

25 Basle international capital standards, is having on—
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1 (A) the safety and soundness of insured

2 depository institutions;

3 (B) the availability of credit, particularly

4 to individuals and small businesses; and

5 (C) economic growth.

6 (2) RECOMMENDATIONS.—The report shall con7 tain any recommendations with respect to capital

8 standards that the Secretary of the Treasury may

9 determine to be appropriate.

10 (b) DEFINITIONS.—For purposes of this section, the

11 terms ‘‘Federal banking agency’’ and ‘‘insured depository

12 institution’’ have the same meanings as in section 3 of

13 the Federal Deposit Insurance Act.

14 SEC. 6. REGULATORY APPEALS PROCESS.

15 (a) IN GENERAL.—Before the end of the 180-day pe16 riod beginning on the date of the enactment of this Act,

17 each appropriate Federal banking agency and the Na18 tional Credit Union Administration shall establish an inde19 pendent appellate process within the agency which shall

20 be responsible for reviewing material supervisory deter21 minations made at insured depository institutions or credit

22 unions supervised by the agency.

23 (b) REVIEW PROCESS.—In establishing the independ24 ent appellate process required under subsection (a), each
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1 agency referred to in such subsection shall take such ac2 tion as may be appropriate to ensure that—

3 (1) any appeal of a supervisory determination

4 from any insured depository institution or credit

5 union, or any officer, director, employee or other

6 representative of any insured depository institution

7 or credit union, be heard and decided expeditiously;

8 (2) appropriate safeguards exist for protecting

9 the appellant from retaliation by agency examiners;

10 and

11 (3) the ruling agency officer have the authority,

12 where appropriate and as justice so requires, to stay

13 the supervisory determination pending completion of

14 the appellate process.

15 (c) APPEALS BY BORROWERS.—

16 (1) IN GENERAL.—The appeals process estab17 lished pursuant to subsection (a) shall provide for an

18 appeal of the cancellation of a loan, a reduction in

19 or the cancellation of a line of credit, or a change

20 in any terms or condition of a loan or other exten21 sion of credit which is substantially adverse to the

22 borrower or recipient by any borrower or recipient of

23 credit from an insured depository institution who

24 was in full compliance with the terms of the loan or

25 extension of credit at the time of such action.
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1 (2) AGENCY REQUEST TO LENDER OR CREDI2 TOR.—In reviewing any appeal, the appropriate Fed3 eral banking agency may only request a lender or

4 other creditor to state the reasons for, or a reconsid5 eration of, the decision to take any action described

6 in paragraph (1).

7 (d) COMMENT PERIOD.—Each agency referred to in

8 subsection (a) shall provide public notice and opportunity

9 for comment on proposed guidelines for an appellate proc10 ess not later than 90 days after enactment of this Act.

11 (e) DEFINITIONS.—For purposes of this section—

12 (1) AGENCY.—The term ‘‘agency’’ means the

13 appropriate Federal banking agency and the Na14 tional Credit Union Administration.

15 (2) INSURED DEPOSITORY INSTITUTION; AP16 PROPRIATE FEDERAL BANKING AGENCY.—The terms

17 ‘‘insured depository institution’’ and ‘‘appropriate

18 Federal banking agency’’ have the meanings given to

19 such terms in section 3 of the Federal Deposit In20 surance Act.

21 (3) MATERIAL SUPERVISORY DETERMINA22 TION.—The term ‘‘material supervisory determina23 tion’’ includes determinations relating to ratings on

24 examinations of insured depository institutions, the

25 adequacy of loan loss reserve provisions by such in-
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1 stitutions, and loan classifications on loans signifi2 cant to the institution.

3 (4) SMALL BUSINESS.—The term ‘‘small busi4 ness’’ has the meaning given to such term by the

5 Administrator of the Small Business Administration.

6 SEC. 7. STERILE RESERVES STUDIES.

7 (a) FEDERAL RESERVE STUDY.—Before the end of

8 the 90-day period beginning on the date of the enactment

9 of this Act, the Board of Governors of the Federal Reserve

10 System, in consultation with the Federal Deposit Insur11 ance Corporation, shall study and report to Congress on—

12 (1) the necessity, for monetary policy purposes,

13 of continuing to require insured depository institu14 tions to maintain sterile reserves;

15 (2) the appropriateness of paying insured de16 pository institutions with a market rate of interest

17 on sterile reserves, or in the alternative, providing

18 payment of this interest into the appropriate deposit

19 insurance fund;

20 (3) the monetary impact that the failure to pay

21 interest on sterile reserves has had on insured depos22 itory institutions, including an estimate of the total

23 dollar amount of interest and potential income lost

24 by insured depository institutions;
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1 (4) the degree to which the failure to pay inter2 est on sterile reserves has impacted upon economic

3 growth; and

4 (5) the impact that failure to pay interest on

5 sterile reserves has had on the ability of the banking

6 industry to compete with nonbanking providers of fi7 nancial services and with foreign banks.

8 (b) BUDGETARY IMPACT STUDY.—No later than 90

9 days after enactment of this Act, the Office of Manage10 ment and Budget and the Congressional Budget Office,

11 in consultation with the Senate and House Committees on

12 the Budget, shall jointly study and report to Congress on

13 the budgetary impact of—

14 (1) paying insured depository institutions a

15 market rate of interest on sterile reserves; and

16 (2) paying such interest into the respective de17 posit insurance funds.

18 (c) DEFINITION.—For purposes of this section, the

19 term ‘‘insured depository institution’’ has the same mean20 ing as in section 3 of the Federal Deposit Insurance Act.

21 SEC. 8. CREDIT CARD ACCOUNTS RECEIVABLE SALES.

22 Section 11(e) of the Federal Deposit Insurance Act

23 (12 U.S.C. 1821(e)) is amended by adding at the end the

24 following new paragraphs:
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1 ‘‘(14) SELLING CREDIT CARD ACCOUNTS RE2 CEIVABLE.—

3 ‘‘(A) NOTIFICATION REQUIRED.—An

4 undercapitalized insured depository institution

5 (as defined in section 38) shall notify the Cor6 poration in writing before entering into an

7 agreement to sell credit card accounts receiv8 able.

9 ‘‘(B) WAIVER BY CORPORATION.—The

10 Corporation may at any time, in the Corpora11 tion’s sole discretion and upon such terms as

12 the Corporation may prescribe, waive the Cor13 poration’s right to repudiate an agreement to

14 sell credit card accounts receivable if the Cor15 poration—

16 ‘‘(i) determines that the waiver is in

17 the best interests of the affected deposit

18 insurance fund; and

19 ‘‘(ii) provides a written waiver to the

20 selling institution.

21 ‘‘(C) EFFECT OF WAIVER ON SUCCES22 SORS.—

23 ‘‘(i) IN GENERAL.—If, under subpara24 graph (B), the Corporation has waived its
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1 right to repudiate an agreement to sell

2 credit card accounts receivable—

3 ‘‘(I) any provision of the agree4 ment that restricts solicitation of a

5 credit card customer of the selling in6 stitution, or the use of a credit card

7 customer list of the institution, shall

8 bind any receiver or conservator of the

9 institution; and

10 ‘‘(II) the Corporation shall re11 quire any acquirer of the selling insti12 tution, or of substantially all of the

13 selling institution’s assets or liabil14 ities, to agree to be bound by a provi15 sion described in subclause (I) as if

16 the acquirer were the selling institu17 tion.

18 ‘‘(ii) EXCEPTION.—Clause (i)(II) shall

19 not be applied so as to—

20 ‘‘(I) restrict the acquirer’s au21 thority to offer any product or service

22 to any person identified without using

23 a list of the selling institution’s cus24 tomers in violation of the agreement;
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1 ‘‘(II) require the acquirer to re2 strict any preexisting relationship be3 tween the acquirer and a customer; or

4 ‘‘(III) apply to any transaction in

5 which the acquirer acquires only in6 sured deposits.

7 ‘‘(D) WAIVER NOT ACTIONABLE.—The

8 Corporation shall not be liable, in any capacity,

9 to any person for damages resulting from

10 waiving or failing to waive the Corporation’s

11 right under this section to repudiate any con12 tract or lease, including an agreement to sell

13 credit card accounts receivable. No court may

14 issue an order affecting any such waiver or fail15 ure to waive.

16 ‘‘(E) OTHER AUTHORITY NOT AF17 FECTED.—This paragraph shall not be con18 strued as limiting any other authority of the

19 Corporation to waive the Corporation’s right

20 under this section to repudiate an agreement or

21 lease.

22 ‘‘(15) CERTAIN CREDIT CARD CUSTOMER LISTS

23 PROTECTED.—

24 ‘‘(A) IN GENERAL.—If any insured deposi25 tory institution sells credit card accounts receiv-
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1 able under an agreement negotiated at arm’s

2 length that provides for the sale of the institu3 tion’s credit card customer list, the Corporation

4 shall prohibit any party to a transaction with

5 respect to the institution under this section or

6 section 13 from using the list except as per7 mitted under the agreement.

8 ‘‘(B) FRAUDULENT TRANSACTIONS EX9 CLUDED.—Subparagraph (A) shall not be con10 strued as limiting the Corporation’s authority

11 to repudiate any agreement entered into with

12 the intent to hinder, delay, or defraud the insti13 tution, the institution’s creditors, or the Cor14 poration.’’.

15 SEC. 9. COORDINATED EXAMINATIONS.

16 Section 10(d) of the Federal Deposit Insurance Act

17 (12 U.S.C. 1820(d)) (as amended by section 301 of this

18 Act) is amended by adding at the end the following new

19 paragraph:

20 ‘‘(7) COORDINATED EXAMINATIONS.—Each ap21 propriate Federal banking agency shall, to the ex22 tent practicable—

23 ‘‘(A) coordinate all examinations to be con24 ducted by that agency at an insured depository

25 institution; and
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1 ‘‘(B) work with other appropriate Federal

2 banking agencies and appropriate State bank

3 supervisors to coordinate examinations to be

4 conducted at an insured depository institution,

5 so as to minimize the disruptive effects of such ex6 aminations on the operations of the institution.’’.

7 SEC. 10. STREAMLINED LENDING PROCESS FOR CONSUMER

8 BENEFIT.

9 (a) FEDERAL RESERVE STUDY.—Before the end of

10 the 1-year period beginning on the date of the enactment

11 of this Act, the Board of Governors of the Federal Reserve

12 System and the Secretary of Housing and Urban Develop13 ment shall jointly conduct a study and report to Congress

14 on ways to streamline the credit-granting process.

15 (b) FOCUS.—In carrying out subsection (a), the

16 Board of Governors of the Federal Reserve System and

17 the Secretary of Housing and Urban Development shall—

18 (1) identify ways to streamline the home mort19 gage, small business and consumer lending processes

20 so as to—

21 (A) reduce consumer inconvenience, cost

22 and time delays; and

23 (B) minimize cost and burdens on insured

24 depository institutions and credit unions with-
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1 out compromising the effectiveness of any provi2 sion of law relating to consumer protection;

3 (2) take such regulatory action, as appropriate,

4 to meet the objectives of paragraph (1); and

5 (3) provide Congress with legislative rec6 ommendations on changes necessary to carry out the

7 purposes of this section.

8 (c) COMMENT.—In carrying out the objectives of this

9 section, the Board shall solicit comments from other Fed10 eral banking agencies, consumer groups, insured deposi11 tory institutions, credit unions, and other interested par12 ties.

13 (d) DEFINITION.—For purposes of this section, the

14 term ‘‘insured depository institution’’ has the meaning

15 given to such term in section 3 of the Federal Deposit

16 Insurance Act.

17 SEC. 11. REPORTING ON LOANS TO SMALL BUSINESSES, MI18 NORITY-OWNED BUSINESSES, AND START-UP

19 ENTERPRISES.

20 Section 122 of the Federal Deposit Insurance Cor21 poration Improvement Act of 1991 (12 U.S.C. 1817 nt.)

22 is amended by adding at the end the following new sub23 section:

24 ‘‘(d) REPORTS ON LOANS TO SMALL BUSINESSES,

25 MINORITY-OWNED BUSINESSES, AND START-UP BUSI-
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1 NESSES.—The information required to be submitted by in2 sured depository institutions under subsection (a) shall in3 clude the following for the period covered by the report:

4 ‘‘(1) The total number of loans the principal on

5 which does not exceed $1,000,000.

6 ‘‘(2) The total number of loans to small busi7 nesses (as defined in regulations prescribed by the

8 Administrator of the Small Business Administra9 tion).

10 ‘‘(3) The total number of loans to minority11 owned businesses (as defined in section 21A(r)(4)(A)

12 of the Federal Home Loan Bank Act).

13 ‘‘(4) The total number of loans to businesses

14 which have been incorporated, or otherwise been in

15 existence, for less than 2 years.’’.

16 SEC. 12. ACCELERATING THE EFFECTIVE DATE OF THE SIS17 TER THRIFT EXEMPTION FOR WELL CAPITAL18 IZED INSTITUTIONS.

19 Section 11(a)(2) of the Home Owners’ Loan Act (12

20 U.S.C. 1468(a)(2)) is amended by adding at the end the

21 following new subparagraph:

22 ‘‘(C) TRANSITION RULE FOR WELL CAPITAL23 IZED SAVINGS ASSOCIATIONS.—

24 ‘‘(i) IN GENERAL.—Effective on and after

25 the date of enactment of this bill, every savings
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1 association that is well capitalized (as defined

2 in section 38 of the Federal Deposit Insurance

3 Act) without including goodwill in calculating

4 core capital shall be treated as a bank for pur5 poses of section 23A(d)(1) and section 23B of

6 the Federal Reserve Act.

7 ‘‘(ii) LIABILITY OF COMMONLY CON8 TROLLED DEPOSITORY INSTITUTIONS.—Any

9 savings association that engages under clause

10 (i) in a transaction that would not otherwise be

11 permissible under this subsection, and any af12 filiated insured bank that is commonly con13 trolled (as defined in section 5(e)(9) of the Fed14 eral Deposit Insurance Act), shall be subject to

15 subsection (e) of section 5 of the Federal De16 posit Insurance Act as if paragraph (6) of that

17 subsection did not apply.’’.

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