Date: 1987-05-20
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. On March 27 of this year. the Senate passed S. 790. the Competitive Equality Banking Act of 1987. Section 105 of that bill generally provides that the Federal home loan banks . cannot make advances to member institutions unless such institutions meet the new qualified thrift lender test established by the bill. Inasmuch as this provision does not contain any separate reference to its effective date. it would become effective upon enactment of S. .790 should. S. 790 or other legislation containing this provision become law. In the meantime. the existence of this provision in the Senate passed bill has cast a cloud over the legal validity of ongoing commitments to make advances and agreements in the nature of letters of credit between the banks and their member institutions pending ultimate enactment into law or other disposition of this provision. To rectify the situation and to make it clear that in adopting section 105 of S. 790. the Senate intended It to have only prospective effect. the chairman of the Senate Committee on Banking. Housing. and Urban Affairs. Senator PROXMIRE. and the committees ranking member. Senator GAwN. in a letter response to an inquiry from the Federal Home Loan Bank of New York clearly established that section 105 was intended to be purely prospective in nature and even should it be enacted into law. it would not affect the ability or authority of the banks to make advances or other extensions of credit to member institutions pursuant to commitments or agreements entered into prior to the date upon which section 105 became law. This response. In pertinent part. states: This is to advise you that. as chairman and ranking minority member. respectively of the Senate Banking Committee. we believe that the Senate Banking Committee and the Senate intended section 105 of S. 790 to have only prospective effect. Accordingly. we believe that. if it were to become law. section 105 would not affect the ability of the FHLBNY or any other FHLB to make advances or other extensions of credit to members pursuant to binding agreements so long as such binding agreements were entered into by the FHLB prior to the date upon which section 105 became law. even if such members did not. either at the time of such agreement or at the time of such advance. satisfy the qualified thrift lender asset test contemplated by section 105. My opinion has also been sought. I want to point out that S. 790 and its provisions are a long way from enactment into law. There is no way to predict which sections of S. 790 might be accepted by the House. I fully concur in the conclusion reached by my counterpart in the other body and by the ranking member of his committee as to the effect to be accorded section 105 of S. 790. I believe the Federal home loan banks advances program is important to their member thrift institutions and should not be jeopardized while the Congress deliberates what should be done with respect to a qualified thrift lender asset test and what. if any. effect such a test should have on the ability of the banks to make extensions of credit. and advances to member institutions.