Date: 1985-03-07
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. I am today introducing the Financial Authorities Equity Act. a bill that closes the socalled South Dakota loophole. In the past few years. some States have granted their Statechartered depository institutions the authority to conduct a wide range of services not permitted under Federal law to Federal institutions or holding companies. In some instances. States have. in effect. made it easier for those powers to be carried on outofState rather than in the State that grants the powers. One result of these laws has been to make these Statechartered institutions attractive targets for takeover by firms that wish to exercise those broad powers across State lines. Because of concerns about the effects of such laws. particularly in the South Dakota situation. the House Banking Committee. as part of H.R. 5916. last year reported out a provision to close the loophole that allows these laws to take effect. The provision in H.R. 5916 had two aspects: First. an amendment to the Bank Holding Company Act. relating to insurance authorities. and second. a general section relating to the broad range of authorities of Statechartered institutions. The basic purpose of the provision was to place restrictions on the activities of these Statechartered institutions. without impairing the basic purposes of the dual banking system. The bill I am introducing today does nothing more than restate the text of the "South Dakota loophole" provisions of H.R. 5916 that was reported from the Banking Committee last July. but -that was not acted upon during the 98th Congress. I expect this issue. along with the others I discussed in my January 3 statement in the RECORD. to be the subject of serious consideration before the Banking Committee this year. A section by section analysis of the bill follows: Section 1 of the bill provides the short title. the Finincial Authorities Equity Act. Section 2 of the bill amends section 4(c)(8) of the Bank Holding Company Act to clarify and emphasize that a bank holding company may not provide insurance services (other than those fermitted under the GarnSt Germain Act) through a subsidiary or affiliated company. Section 3 of the bill provides that State chartered banks may only engage in activities outside of their home State if they are authorized for national banks to engage in directly under Federal law. or authorized by regulation under section 4(c)(8) of the Bank Holding Company Act. State chartered thrift institutions may only engage in activities outside of their home State if they are authorized for federally chartered savings associations to engage in directly. or authorized by regulation for multiple savings and loan holding companies under the Savings and Loan Holding Company Act. State chartered institutions may engage in activities in addition to those described above. as may be authorized by State law. but only in their home State and only for State residents. With respect to existing relationships which do not comply with these restriction. a 10year compliance period is provided. The Federal Reserve Board is given authority to enforce these provisions through cease and desist orders.e