Date: 1982-09-24
Speaker: LLEWELLYN JENKINS (democrat)
Chamber: S

President. American Bankers Association. Washington. D.C. DEAR PRESIDENT JENKINS: This letter concerns 8. 2879. the Depository Institutions Amendments of 1982 (8. Rept. 97536). and objections and suggested modifications. raised by the American Bankers Association regarding the legislation. During the past year and a half. the Committee has held hearings and considered legislative proposals dealing with the changing conditions within the financial system. In this process. we appreciated the ABAs willingness to provide the views of its members. especially the detailed analyses and views that it presented during Committee hearIngs and subsequent discussions between Committee members and the ALBA regarding S. 1720. While we recognize that 8. 2879. the legislation that was reported by the Committee on September 3. does not contain all of the provisions from S. 1720 which the ABA recommended be included. we emphasize that the Committee does not intend that S. 2879 mark the end of Committee consideration of structural changes within the financial system. In fact. during the markup session on S. 2879. we stated our intention to proceed with consideration of the GlassSteagall Act at the beginning of the next Congress. In addition to enhancing the ability of financial regulators to deal with troubled depository institutions. which was the principal impetus for financial institutions legislation last year. S. 2879 enhances the competitiveness and the stability of depository institutions by broadening and revising their lending and investment powers and by providing 111 depository institutions with a new. competitive deposit instrument. During the past two years. it has become increasingly evident that depository institutions must be provided with greater flexibility in order to compete against nondeposttory financial intermediaries. Although Congress mandated the phaseout of Regulation Q deposit interest rate controls just over two years ago. the need for further Congressional action to provide a new. marketsensitive deposit instrument has beeneamply shown by the fluctuating interest rates and the growth of investments in money market mutual fund shares. In an effort to provide for more consistent deregulation of the assets and liabilities of depository institutions. S. 2879 and the report accompanying it direct that a new deposit instrument fully competitive with the money market funds be adopted by the Depository Institutions Deregulation Committee and made effective within 60 days of enactnent of the bill. In the report. the Committee stated that "an initial minimum of no more than $10.000. or perhaps $5.000. would produce an account which would begin to permit institutions to compete effectively" with money market funds. The Committee also noted that it "is very concerned that imposing an interest rate ceiling on the new deposit instrument could interfere with the competitiveness of the instrument." While we endeavored to develop legislation in the Committee which would achieve the goal of a competitive and stable financial system. we want to ensure that It does so. Therefore. in light of the recommendations of the ABA. we as Senate floor managers of the bill will include the following in a Committee amendment to be presented when the full Senate considers S. 2879: TITLE Iu Repeal Title I of Public Law 94200 which mandates interest rate differentials on certain accounts: Remove any iterest rate differential that DIDC maintains on any existing account no later than 1/1/84. Upon the removal of any differential. if a ceiling is maintained. the Interest rate which banks are permitted to pay shall be raised to equal the rate permitted to thrifts. Direct DIDC to adhere to. or accelerate. any current differential phaseout schedules to remove any differential before 1/1/84: Prohibit DIDC from imposing any new Interest rate ceiling or differential on the new competitive instrument. Direct DIDC to create a new deposit account that is "directly equivalent to and compet.tive with" investment accounts offered by money market mutual funds. We intend the minimum balance for such account shall not be more than $5.000: Limit thrifts commercial checking authority to those persons having a business. corporate. commercial or agricultural loan relationship or to business entities for the sole purpose of effectuating payments by nonbusiness customers: and