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H.R. 3951—THE FINANCIAL SERVICES REGULATORY RELIEF ACT OF 2002
THURSDAY, APRIL 25, 2002
U.S. House of Representatives,
Subcommittee on Financial Institutions and Consumer Credit,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:10 a.m., in room 2128, Rayburn House Office Building, Hon. Spencer Bachus, [chairman of the subcommittee], presiding.
Present: Chairman Bachus; Representatives Weldon, Roukema, Baker, Cantor, Grucci, Hart, Capito, Tiberi, Waters, Bentsen, and Hinojosa.
Chairman BACHUS. The hearing will come to order. The Chair recognizes himself for the purpose of making an opening statement. And what we do, for witnesses who have not been here before, we have brief opening statements; they will be brief. And then some of the Members wanted to introduce the witnesses who are from their home States. We will do that. The Ranking Member will speak after I speak. And then we will go right into your testimony.
We have—I don't know if any of you were told—we have a 5-minute rule. But we will waive that as long as you don't go 10 or 15 or 20 minutes. But don't—we are not going to be—some of the audience is shaking their head don't waive the 5-minute rule. But we will not be very strict on that.
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The subcommittee meets today for its second hearing on H.R. 3951, the Financial Services Regulatory Relief Act of 2002. We just call that ''reg relief.'' This bipartisan legislation was introduced last month by two of my colleagues on the subcommittee, Mrs. Capito and Mr. Sandlin.
I am an original co-sponsor, as is the Chairman of the Full Committee, Mr. Oxley of Ohio.
So I commend you, Mrs. Capito, for your hard work on this.
And at our first meeting on H.R. 3951 last month, the subcommittee heard testimony from a wide range of Federal and State banking regulatory agencies whose technical assistance and expertise has been invaluable to the subcommittee in the development of this legislation.
Having heard from the regulators, today we hear from the regulated, those institutions that must contend with the reams of bureaucratic red tape that issues forth from this city every year.
Testifying will be five of the leading financial services trade associations, representing large banks, small community banks, savings institutions and credit unions, in no particular order. I could read that the other way around.
As Chairman Oxley and other Members pointed out at our first hearing, the regulatory burden shouldered by depository institutions increased significantly last year with the enactment of the anti-money laundering provisions of the U.S.A. PATRIOT Act.
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Just this week, the Treasury Department issued new regulations implementing a key provision of that act requiring financial institutions to have in place programs designed to detect money laundering and terrorist financing.
In testimony before this subcommittee, and I think this is very good news for you all as representatives of you all's organizations, the FBI and other Government agencies have praised—and lavishly praised—the financial services industry for its cooperation with law enforcement in the post-September 11 investigations of al Qaeda and other terrorist organizations operating in the country. The cooperation of the institutions you represent couldn't have been better, and they have led to successful seizures.
It has often been said that banks and other financial institutions are our Nation's first line of defense in the financial war on terrorism that the Bush Administration is waging so effectively.
Last week's governmental warning that terrorists might be planning attacks against U.S. financial institutions in the Northeast brought home the banking industry's front line role in the fight against terrorism in stark terms.
So as we consider this important legislation to give financial institutions and their customers much needed regulatory relief, we should also take a moment to recognize the very real contributions to homeland security made by vigilant bank tellers and other financial services professionals across the country.
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I now recognize the Ranking Minority Member, Ms. Waters, for an opening statement.
Ms. WATERS. Thank you very much, Mr. Chairman.
I would like to thank you for holding this hearing today. I would like to say that this hearing is certainly necessary. But, we have to remember that the name of the subcommittee is Financial Institutions and Consumer Credit. I worry that we tend to focus too much of our time on the financial institution part of the subcommittee's jurisdiction, and not enough time on issues that are very, very vital to consumers.
I am certainly not opposed to the principle of reasonable regulatory burden relief, and I will even concede that consumers could possibly experience some minor cost savings as a result of regulatory relief, but I think some of the provisions may go too far.
In particular, I am concerned about Section 301 of the bill, which would permit privately insured credit unions to become members of the Federal Home Loan Bank system. Membership in the Federal Home Loan Banks is desirable to credit unions, but is currently only open to those with Federal insurance. Unfortunately, in the past, there have been failures of private and State insurance funds.
In addition, this change could cause a number of credit unions to abandon their Federal charters and create a potential race to the bottom by State regulators to attract credit unions to their State.
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We recently completed Federal deposit insurance reform legislation in this subcommittee, and while we may have had our differences on some issues, we all shared the goal of maintaining a strong and safe deposit insurance system. I can't imagine that we want to turn around and create incentives for credit unions to switch from safer Federal insurance to riskier private insurance.
H.R. 3951 needs to be a bit more balanced. There is nothing here for customers, and there are some very critical matters that need attention in that arena. For example, the numerical provisions in the Truth in Lending Act are so hopelessly outdated that many automobile loans fall outside of the act's capped amounts, which must be raised to have any meaning.
In addition, basic protections for credit card consumers are solely needed, and it is virtually an unregulated industry except for a few basic disclosures. These cards are used to entice people to take on debt that they can ill afford without giving them the tools they need to make an educated decision.
In order to meet relief from regulatory burden, there should be some regulations in place to begin with. Over the last quarter century, entire industries sprung into being largely outside of the boundaries of Federal regulation. I am talking about the check cashiers, the payday lenders, the mortgage services, and the subprime lenders who fly below radar in many of their activities.
So, Mr. Chairman, I hope that this bill develops a little bit more balance as it moves forward, because at this point, again, I am not so sure that I could point to very much for our consumers. However, I do look forward to hearing the witnesses today, and I must reiterate that I am supportive of getting rid of unnecessary burdens for our regulatory agencies. But, I would hope to have some initiation of discussion on some of those areas that I have pointed to, at some point in the work of this subcommittee.
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Thank you very much.
Chairman BACHUS. I thank the Ranking Member.
Mrs. Capito, sponsor of the bill, we want to recognize you.
Mrs. CAPITO. Yes, thank you, Mr. Chairman. I appreciate you holding another day of hearings on this regulatory relief bill, and I want to thank our panel for taking the time to travel to Washington to appear before us today. I want to extend an especially warm welcome to Charlene Gaither, who comes to us today from my beautiful home State of West Virginia, and I look forward to providing the subcommittee with a more formal introduction in a few moments.
Mr. Chairman, as my colleagues will recall from our last hearing on this issue, Chairman Oxley, Mr. Sandlin and I introduced this bill in an effort to help reduce the substantial regulatory burdens imposed on the financial services industry.
While the Federal regulations play an important role in protecting consumers, instilling confidence and ensuring a level playing field, overregulation can depress innovation, stifle competition, and actually retard our economy's ability to grow.
Periodically reviewing and questioning the regulations put in place over time will ensure that as industries and technologies change, so too will the rules that govern them.
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As I mentioned in our last hearing, I believe we have put together a good and balanced bill that will benefit both consumers and business. But this legislation is by no means a final draft.
These hearings are designed to flush out any potential problems that may exist, be they mistakes of omission, simple drafting errors or unintended consequences of what at first glance appear to be merely technical changes. I hope that today's witnesses will feel free to provide us with their expert opinions. I look forward to working with the Chairman as we move closer to the markup, and I thank the Chair again. Thank you.
Chairman BACHUS. Thank you.
At this time, Mrs. Roukema, do you have an opening statement?
Mrs. ROUKEMA. No.
Chairman BACHUS. We welcome you to the subcommittee.
Are there any other opening statements? Well, at this time we are going to allow Members to introduce the witnesses that are from their home States. And at this time I recognize the Ranking Member, Ms. Waters.
Ms. WATERS. Thank you very much. Mr. Chairman and Members, I would like you to join with me in welcoming Mr. Bill Cheney, who is the president and CEO of the Xerox Federal Credit Union in El Segundo, one of the small cities adjacent to my district.
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Mr. Bill Cheney, who is the President and CEO of Xerox Federal Credit Union has a broad background in financial services, including more than 15 years working in the credit union industry.
Bill joined Xerox Federal Credit Union, which by the way had more than $590 million in assets in 1997, after more than 10 years with Security Service Federal Credit Union in Texas. This credit union serves employees from Xerox Corporation and related companies nationwide through 18 credit union offices in nine States, including California, New York, Illinois and Texas. In addition, the credit union owns 39 percent of Xerox Credit Union Corporation, a brokerage and insurance company serving multiple credit unions and their members throughout offices in 15 States.
Welcome, Mr. Cheney.
Chairman BACHUS. Thank you. Mr. Cantor.
Mr. CANTOR. Thank you, Mr. Chairman.
I have the distinct pleasure to welcome two fellow Virginians today. Always, hopefully inspiring to be the Virginia gentleman that Mr. Stone is, I will go to the lady first.
It is my pleasure to introduce Ms. Elizabeth, or Betsy, Duke. She is a lifelong resident of the Commonwealth and began her career in banking in 1975. She started as a drive-in teller and worked her way to President and CEO of the Bank of Tidewater by 1991.
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She has also served as an instructor on the banking industry in numerous locations and is a past member of the Board of the Richmond Federal Reserve. She currently serves on the board of the American Bankers Association and is Chairman of the ABA's Government Relations Council. She is also President of SouthTrust Bank, Virginia Beach. I consider Betsy a friend, a valuable resource on banking industry resources and look forward to her testimony. Again welcome.
I would also like now to welcome, Mr. Chairman, a constituent of mine, always an honor, and he is a true Virginia gentleman, Mr. Pierce Stone. Pierce is the Chairman, President, CEO of the Virginia Community Bank in Louisa, Virginia. He is also the Chairman of the Independent Community Bankers of America.
He earned his Bachelor of Science Degree in Business Administration from the University of South Carolina and is a graduate of the School of Banking of the South. He also served as a Director of the Federal Reserve Bank of Richmond from 1990 to 1992. He was appointed by the Governor of Virginia to serve as a Director on the Virginia Real Estate Appraisers Board.
Long active in the ICBA, Mr. Stone has served as Chairman of the Long-Term Planning and Marketing Committee and is an ICBA State Director. He serves on the board of the ICBA Credit Life Company. He is a member of the Virginia Association of Community Banks, and is past President of this organization.
He helped organize and was Chairman of Community Bankers Bank of Virginia. Other businesses and activities include many, Mr. Chairman. He is Director of a weekly newspaper company, a radio station, as well as Rockingham Group, which is a property and casualty mutual company. He is the former treasurer and board member of the Lions Club in Louisa, and most importantly, he is married and has two children.
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I would say, Mr. Chairman, it is a real honor for me to welcome Pierce. He is a leader in our community, and I am proud that he is here today and look forward to his testimony. I yield back.
Chairman BACHUS. I will say this, Mr. Stone. You have been before the subcommittee before. And, Mr. Hage, you are no stranger to the subcommittee. So normally we only introduce folks that are coming before the subcommittee for the first time. But this time, in this case Mr. Cantor, since he was introducing Ms. Duke, he was afraid not to reintroduce you. And, Mr. Stone, so that you know, that is probably very diplomatic to do.
Mr. Hage, I want to commend you on your recent appointment to the President's Task Force on Retirement Savings. And, as he knows, he was appointed by Speaker of the House Denny Hastert. I think that is quite a recognition of your accomplishments and professionalism. So I commend you on that. You have important work ahead of you.
Are there further opening statements? I am sorry. Mrs. Capito. You have not introduced the gentlelady from West Virginia, have you?
Mrs. CAPITO. No, not in full.
Chairman BACHUS. All right. Thank you.
Mrs. CAPITO. Thank you. Mr. Chairman, I want to welcome Charlene Gaither to Washington and to thank her for taking her time to provide the subcommittee with her expertise on the regulatory burden facing our Nation's credit unions. I had the opportunity yesterday to spend some time with Charlene, and I was very impressed with her dedication, not only to her members but with her extensive knowledge of the industry.
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As one of seven full-time employees, Charlene currently serves as the manager of Eastern Panhandle Community Federal Credit Union in Martinsburg, West Virginia. The Community Federal Credit Union is a $14 million credit union that serves more than 2,000 members. Charlene has handled the duties of Chief Financial Officer and Chief Marketing Officer during her tenure, and is a volunteer board member of the West Virginia Credit Union League.
Charlene's 17 years of experience gives her, I think, a unique perspective on how the regulatory relief bill will help both consumers and business. I am pleased to have her here, my fellow West Virginian, and I look forward to her testimony.
Chairman BACHUS. Thank you. And we will start, Ms. Gaither with your testimony. And you can maybe explain to us starting out how Martinsburg has a 5-story FAA building. But if you don't want to you don't have to.
STATEMENT OF CHARLENE R. GAITHER, MANAGER, EASTERN PANHANDLE COMMUNITY FEDERAL CREDIT UNION, MARTINSBURG, WV, ON BEHALF OF CREDIT UNION NATIONAL ASSOCIATION
Ms. GAITHER. Chairman Bachus, Ranking Member Waters and Members of the subcommittee, especially my own Member, Representative Capito, thank you for the opportunity to provide comments on H.R. 3951 and your efforts to design legislation to lessen the regulatory burden on insured depository institutions.
I am Charlene Gaither, Manager of the Eastern Panhandle Community Federal Credit Union, a $14 million credit Union in Martinsburg, West Virginia. I appear before you today on behalf of the Credit Union National Association.
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We congratulate Representative Capito for introducing this bill and including the legitimate needs of credit unions for regulatory relief. I would like to emphasize that my testimony today will focus on the provisions in the bill which pertain to credit unions as well as those we would like the subcommittee to include in any final bill.
We understand that the ABA and other bank trade associations oppose all or parts of this bill because of the credit union provisions. We will not lower ourselves to their level and attack provisions pertaining to them.
While my written statement includes a thorough analysis of each of the credit union provisions, I will only touch on a few of them in my oral statement this morning.
CUNA strongly supports Section 301 of the bill, which permits State-chartered, privately insured credit unions to become members of the Federal Home Loan Bank. This provision was originally introduced as H.R. 2796, the Federal Home Loan Bank Membership Act of 2001, by Representative Bob Ney.
As incorporated into H.R. 3951, it would provide a needed funding source for home ownership for many credit union members as well as strengthen the dual chartering system of credit unions. These 216 institutions with 1.3 million members are regulated by the States in which they were chartered. They are subject to safety and soundness requirements from the State regulator as well as the private insurer.
We also want to commend Representative Capito for including Section 306 in the bill, which incorporates legislation previously introduced by Representative Ed Royce, H.R. 760, the Faith Based Lending Protection Act. This amendment, which we strongly support, is designed to exclude loans made by Federal credit unions to non-profit religious organizations from the statutory member business loan limit of 12.25 percent of the credit union's total assets. According to the recent testimony of NCUA Chairman Dennis Dollar, these are the safest of all loans made by credit unions.
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Another very important part of the bill is Section 307, which allows Federal credit unions to cash and sell certain checks to non-members of the credit union as long as they are eligible to join or are within the field of membership of the credit union. Many of these individuals live from paycheck to paycheck and do not have established accounts for a variety of reasons, including the fact that they do not have extra money to keep on deposit.
Finally, Section 308 would clarify the Federal Credit Union Act by allowing voluntary mergers of healthy credit unions and conversions involving multiple common bond credit unions without numerical limitations. The amendment is a big step forward in facilitating voluntary mergers as other financial institutions are permitted to do.
At this point, I will turn to the additional provisions we would like to see included in a final bill. Again, my written statement fully covers what we believe are some of the worst examples of statutory micromanagement that have placed unreasonable constraints on the ability of credit unions and their boards to function efficiently and in the best interests of their members. Given time constraints, however, I will focus only on two of these items.
First, recall that H.R. 3951, as drafted, permits credit unions to cash checks for individuals within their field of membership, even if they are not members. Our original request also asked for the ability to provide wire transfer services to non-members within the field of membership.
Such an amendment would help credit unions reach the unbanked and underserved and provide an affordable and financially sound alternative to high cost payday lenders. Those who do not have access to a credit union or other financial institution must use wire services that charge outrageously high fees, up to 28 percent of the amount transferred in some cases, to execute the transaction.
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Perhaps one of the most important provisions we are asking to be included in a final version of H.R. 3951 is one that would permit credit unions to issue some form of additional or alternative capital.
As the Chairman of the subcommittee notes, this issue was first raised in this subcommittee during the markup of the Deposit Insurance Reform bill. An amendment was introduced, discussed, then withdrawn. While some consideration was given to reintroducing the amendment at the full committee markup, out of deference to the Chairman it was not.
The purpose of allowing some form of alternative capital would permit credit unions to augment the only current source of capital that they have, retained earnings. Alternative capital would allow a credit union that needs to do so to quickly build its capital.
Advantages of alternative capital are that it would provide additional stability, allow growth, permit product and service enhancements and could meet a portion of statutory and regulatory capital requirements, And, frankly, although CUNA has a strong position regarding the concept of allowing some form of alternative capital for credit unions, our position regarding how to achieve that is evolving.
We are currently in discussion with various Members and staff of the subcommittee and are seeking a consensus on how to best achieve this goal while maintaining certain guiding principles. Foremost of these guiding principles is that any form of alternative capital must not compromise the cooperative nature of credit unions.
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This capital must not give its holder any voting or control rights. Additionally, this capital must not be insured and it must therefore be at risk to the investor. We continue to work on an appropriate approach that will accomplish these purposes and seek advice and guidance from Members of the subcommittee.
In conclusion, CUNA is grateful and pleased that H.R. 3951 includes several provisions that will significantly increase the effectiveness of credit unions in serving their members. And while we strongly support this bill, we urge the subcommittee to support our efforts to include the additional provisions we described in this testimony.
Thank you again for the opportunity to present CUNA's views on this very important legislation, Mr. Chairman, and I would be glad to answer any questions of the subcommittee. Thank you.
Chairman BACHUS. Thank you, Ms. Gaither.
Mr. Cheney.
STATEMENT OF WILLIAM CHENEY, PRESIDENT AND CEO, XEROX FCU, EL SEGUNDO, CA, ON BEHALF OF NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS
Mr. CHENEY. Thank you, Mr. Chairman.
Good morning, Mr. Chairman, Ranking Member Waters and Members of the subcommittee. My name is Bill Cheney. I am the President and CEO of Xerox Federal Credit Union, located in El Segundo, California. I am here today on behalf of the National Association of Federal Credit Unions to express our views on the Financial Services Regulatory Relief Act of 2002.
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Xerox Federal Credit Union was chartered in 1964 and currently serves over 72,000 members through 18 offices in nine States, and is the only credit union chartered to serve Xerox employees in the United States.
Credit Unions represent a significant cross-section of all of America's consumers. The Nation's 10,000-plus credit unions serve a different purpose than other financial institutions and have a fundamentally different structure, existing solely for the purpose of providing financial services to our members.
All members of a credit union have an equal say in the operation of the credit union. One member, one vote, regardless of the dollars in their accounts. Credit unions are second to none in providing their members with quality personal service at the lowest possible cost. According to the 2001 American Banker/Gallup Consumer Survey, credit unions had the highest rated service quality of surveyed financial institutions.
Despite their very limited market share, credit unions have been under assault by the banking industry for nearly 2 decades. The 1998 Supreme Court decision in the field of membership case brought these issues to a head. Congress' prompt passage of the Credit Union Membership Access Act, or CUMAA, in 1998 was seen as a significant victory for credit unions.
Recognizing a growing trend of credit union conversions from Federal to State charter, totaling $33 billion over the past 5 years, and accounting for over 10 percent of all assets in the Federal credit union system, NAFCU has singled out the erosion and the perceived value of the Federal charter as an important issue.
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Starting with a task force convened to work on ways to enhance the Federal charter, we have identified a number of provisions in both law and regulations which, if changed, would improve the way Federal credit unions serve their members.
NAFCU believes that H.R. 3951 is a positive step in addressing many of the regulatory burdens and restrictions on Federal credit unions that have caused a number of Federal credit unions to either consider or to convert to State charter.
NAFCU applauds Representatives Capito and Sandlin for their leadership in introducing this bill and strongly supports many of the provisions in the legislation, including the sections dealing with expanded investment authority, clarification of the ability for credit unions to merge voluntarily, easing the limitation on loan terms, credit union service organization investments, check cashing services, member business lending to religious non-profit organizations, and land leasing.
We believe H.R. 3951 takes a balanced approach to regulatory relief. Nevertheless, I would like to call the subcommittee's attention to some additional issues.
First, credit unions should be exempted from the pre-merger notification requirements of the Hart-Scott-Rodino Act to the same extent as other regulated financial institutions.
Second, the usury ceiling for credit unions should be adjusted. As the Members of the subcommittee realize, Federal credit unions are the only type of insured depository institution subject to Federal usury limits on consumer loans.
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Third, Congress should remove the word ''local'' from the definition of community charters. Today's dynamic financial marketplace characterized by cyber-banking technology rather than bricks and mortar makes the word ''local'' an extraneous limitation.
Fourth, eliminate the preference imposed by CUMAA for the formation of new credit unions over the addition of groups to an existing credit union. Oftentimes an existing credit union is better suited to meet the needs of a group and offer them better services than a new credit union.
Fifth, relax the reasonable proximity requirement on credit unions seeking to add additional groups to its field membership. This requirement is an undue burden requiring them to have a physical presence within a reasonable proximity of the group that the credit union wants to add to its field of membership. With the increase in internet and remote banking, this requirement is unnecessary.
Sixth, relax the current member business loan restriction imposed by CUMAA and restore the member business lending rules that were in effect prior to the passage of CUMAA.
Seventh, NAFCU supports allowing all insured credit unions, not just corporate credit unions and those designated as low income, to include secondary capital accounts when calculating net worth under regulations promulgated by NCUA.
Finally, the Federal Credit Union Act contains many antiquated credit union governance provisions that may have been appropriate in 1934, but today are outdated. NAFCU supports including language in H.R. 3951 that would give the NCUA board greater authority in establishing appropriate governance procedures.
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I would like to conclude by noting that the state of the credit union community today is strong and the safety and soundness of credit unions is unquestionable. NAFCU would, however, urge the subcommittee to carefully assess the trend of conversions from Federal to State charter. We believe that H.R. 3951 is an excellent first step.
Mr. Chairman, I appreciate the opportunity to appear before you today, and I will be happy to answer any questions.
Chairman BACHUS. Appreciate that.
Mr. Stone.
STATEMENT OF PIERCE STONE, CHAIRMAN, PRESIDENT AND CEO, VIRGINIA COMMUNITY BANK, LOUISA, VA, ON BEHALF OF INDEPENDENT COMMUNITY BANKERS OF AMERICA
Mr. STONE. Good morning, Chairman Bachus, Ranking Member Waters and Members of the subcommittee. My name is Pierce Stone. I am a community banker from Louisa, Virginia. I also serve as Chairman of the Independent Community Bankers of America.
Chairman Bachus, I want to thank you and congratulate you for the ongoing efforts on behalf of community banking, especially your leadership in advancing the important deposit insurance reform bill. Community bankers across the Nation are truly indebted to you. I also want to thank the subcommittee staff for the outstanding work that they did on this bill.
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I have been asked to testify on H.R. 3951, the Financial Services Regulatory Relief Act of 2002. ICBA supports a bank regulatory structure that fosters the safety and soundness of our Nation's banking system and recognizes the fact that community banks pose a very different risk to the banking system than larger banks.
We urge Congress and the agencies to continue to adopt policies that recognize this important distinction.
In the interest of time, I will limit my remarks to just a few sections of the bill. Let me first address the provision in the bill that is very important for community banks, Section 101, dealing with Subchapter S corporations.
This section removes a restriction in current law that makes it difficult for community banks to qualify for Subchapter S status. Subchapter S is very important to community bankers, because it allows them to escape double taxation by paying income tax only at the shareholder level.
Unfortunately, many small banks are having trouble qualifying for Subchapter S under the current law and cannot benefit from Congress' intended tax relief. Section 101 addresses the director/shareholder restriction in the law by making it easier for banks to comply with the requirement that directors be shareholders.
ICBA supports reducing the frequency of safety and soundness exams for small, healthy banks and supports minimally intrusive examinations. Section 601 gives the Federal banking agencies the discretion to adjust the exam cycle of insured depository institutions to ensure that examiner resources are utilized in the most efficient manner. ICBA strongly supports this position.
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ICBA recommends the subcommittee include a provision in the bill to amend the Securities Investor Protection Corporation statute to provide community banks with the same protection afforded other investors and other depository institutions for their brokerage account assets when a broker dealer fails.
SIPC does not protect against market risk or fraud. It allows investors to get back their stock, bonds and cash held by a broker dealer in the event of a brokerage firm collapse. Unfortunately, banks are specifically excluded from SIPC coverage when acting on their own behalf. Thrifts and credit unions are not excluded from SIPC coverage. The change we seek in the statute simply affords banks the same SIPC protections as credit unions and thrifts.
Mr. Chairman, I would now like to address a few provisions in the bill that cause ICBA some concerns. One issue is the provision that repeals the prohibition on national and State banks to expand into another State through de novo branching. We believe that the individual States should decide whether an out-of-State national or State bank should de novo branch into their State. We believe States should be free to make this decision, because they know best what the banking structure in their State should be. Congress should not preempt this basic State right.
Chairman Bachus, there are also several credit union provisions in this bill which ICBA opposes. Our specific concerns are outlined in our written statement. Let me just say generally that Congress should tread carefully in granting credit unions new powers in areas where they do not have the experience or expertise to assure safe and sound operations.
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Credit unions and community banks both serve the community and offer many of the same products and services. However, there is one major difference. Credit unions generally do not pay taxes and are not subject to CRA, giving them an enormous advantage over taxpaying and highly regulated banks and thrifts. We believe the expanded powers granted to credit unions in this bill goes against the spirit of the Credit Union Membership Act of 1998, as well as their basic charter.
Chairman Bachus, thank you for the opportunity to testify before you today on H.R. 3951, and thank you again for your stellar work on deposit insurance reform. I will be happy to answer any questions from the subcommittee.
Chairman BACHUS. Thank you.
Mr. Hage.
STATEMENT OF CURTIS L. HAGE, CHAIRMAN AND CEO, HOME FEDERAL BANK, SIOUX FALLS, SD; CHAIRMAN, AMERICA'S COMMUNITY BANKERS
Mr. HAGE. Mr. Chairman, Ranking Member Waters and Members of the subcommittee. I am Curt Hage, Chairman and CEO of Home Federal Bank in Sioux Falls, South Dakota. I am testifying today as Chairman of America's Community Bankers.
Thank you for this opportunity to testify on H.R. 3951. I would like to commend the bill's primary sponsor, Representative Shelly Moore Capito, as well as Representative Max Sandlin. In addition, I would like to thank Chairman Oxley and the committee staff for working with ACB in developing this legislation.
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ACB strongly supports many of the provisions contained in H.R. 3951. By eliminating unnecessary and costly regulations, these provisions will make it easier for financial institutions to better serve our customers and communities.
I would like to touch on some key provisions. A more detailed analysis of the bill can be found in my written testimony.
ACB vigorously supports Section 201, which would correct the existing statutory disparity in the way trust and fiduciary activities of savings associations are treated vis-a-vis those of banks.
Currently, savings associations do not enjoy the same exemption that banks do from the Investment Advisors Act and the Securities Exchange Act for trust and fiduciary activities. As a result, only savings associations face dual supervision and regulation when serving the trust and fiduciary needs of their customers. We are pleased that Section 201 provides a much needed fix for this problem.
ACB also supports Sections 401 and 105 of the bill. Section 401 would remove unnecessary restrictions on branching by national and State banks. Section 105 would eliminate the unnecessary requirement that a national bank meet the same capital requirements imposed by States on their banks. We commend the bill's sponsors for including those provisions in H.R. 3951.
ACB also recommends that the subcommittee include additional provisions in H.R. 3951. First, we strongly urge the subcommittee to consider adding a provision that would modestly increase the business lending limit for savings associations. Currently Federal savings associations are subject to a 10 percent limit on commercial lending authority and a 10 percent bucket for small business loans.
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With more and more small businesses depending on smaller associations as community credit providers, those limits pose an ever increasing constraint on credit availability for small businesses. This is particularly true in smaller communities where there are fewer credit providers.
Congress should repeal the lending limit restrictions on small business loans and increase the aggregate lending limit on other commercial loans to 25 percent. By doing so, Congress can accommodate the credit needs of small business without altering the basic asset requirements of the statutory qualified thrift lender test.
Let me emphasize this last point. We are not asking for a change in the QTL test. We are only asking that redundant caps on business lending be lifted, particularly for small business loans.
In addition, ACB urges the subcommittee to consider including in H.R. 3951 the following proposals detailed in my written testimony: Repealing the $500,000 per unit limit in the residential housing development exception in the Homeowners Loan Act; increasing the limit on commercial real estate loans from 400 percent to 500 percent of capital; and permitting reimbursement for the production of corporate and organizational records under the Right to Financial Privacy Act.
Finally, Mr. Chairman, we would like to raise our strong concerns about Section 301, which would permit privately insured credit unions to join the Federal Home Loan Bank System. Unlike these institutions, every depository institution that is currently a member of the Federal Home Loan Bank must be, and is, federally-insured and regulated.
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This provides a substantial layer of security for the Federal Home Loan Bank System. Permitting privately insured credit unions that undergo no Federal regulatory scrutiny to borrow from the system would undermine the careful balance Congress achieved in the Gramm-Leach-Bliley Act.
ACB also opposes the lending limit increase in Section 304, check cashing for non-members in Section 307, and the undermining of the common bond in Section 308. These sections would allow tax-exempt credit unions to assume new bank-like authorities without having to pay taxes or meet community reinvestment requirements. ACB strongly urges the subcommittee to strike those provisions.
Again, Mr. Chairman, thank you for holding today's hearing. I look forward to addressing any questions that Members of the subcommittee might have.
Chairman BACHUS. Thank you.
Ms. Duke.
STATEMENT OF ELIZABETH DUKE, SENIOR VICE PRESIDENT, GOVERNMENT RELATIONS, SOUTHTRUST CORPORATION, VIRGINIA BEACH, VA, ON BEHALF OF THE AMERICAN BANKERS ASSOCIATION
Ms. DUKE. Mr. Chairman, Ranking Member Waters and Members of the subcommittee, I too want to thank you for holding this hearing. I would also personally like to thank Mr. Cantor for the introduction, therefore I don't have to use my 5 minutes explaining who I am.
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Regulatory relief is critically important for banks. We appreciate the bipartisan effort in this and previous Congresses to preserve safety and soundness while reducing unnecessary regulations. I would especially like to recognize the contributions made over the years by Mrs. Roukema.
Regulation costs banks and our communities billions of dollars every year. It also puts a huge strain on manpower.
SouthTrust is a large banking firm with $48 billion in assets. We have 65 full-time employees devoted to compliance.
Small banks simply do not have this luxury. There are 3,800 banks with fewer than 25 employees and a thousand banks with less than 10 employees. As a former CEO of a community bank, I know that these banks don't have the manpower to both run the bank and to read, understand and implement thousands of pages of regulations, directives and reporting modifications that they receive each year.
Simply put, too much time and too many resources are consumed by compliance paperwork, leaving too little time to provide actual banking services. H.R. 3951 contains many important improvements that genuinely reduce unnecessary regulatory burdens.
Unfortunately, the bill also contains provisions that are not directed at reducing regulatory red tape, but to enhance the competitive position of credit unions over taxpaying banks.
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Let me mention a few of the key provisions that we support. The ABA strongly endorses Section 201, which provides thrift parity for trust activities and would eliminate an additional and unnecessary layer of examination.
We also support Section 501, which would allow all financial holding companies engaged in merchant banking to cross-market products and services. These provisions have the strong support of our industry and the Federal Reserve.
Section 502 would help banks preserve benefit plans for our employees, such as 401(k)s, without worrying about triggering aggregation rules for ownership of any one company.
We also support provisions, including Section 601, which allow discretion for regulators to adjust the exam cycle to more effectively allocate examination staff; Section 101, which enables banks to choose Subchapter S status to retain qualified directors; and Section 202, which makes the community development authority of savings institutions parallel to that of banks.
The ABA has major concerns with provisions that expand credit union powers and promotes further consolidation of the credit union industry. These provisions enhance the competitive position of credit unions over taxed financial competitors and expand the credit union tax subsidy.
Section 305 expands the authority of credit unions to invest in credit union service organizations. These CUSOs can engage in activities beyond those authorized for the credit unions themselves.
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Furthermore, since most CUSOs are formed as limited liability corporations, they are taxed at the credit union's marginal tax rate of zero. Thus, any expansion of CUSOs is an expansion of the credit union tax subsidy.
Section 308 also would permit mergers at any time among credit unions. This would further the trend of large credit unions buying up small credit unions and is in direct conflict with legislation enacted just a few years ago. Specifically, Congress directed NCUA to promote the creation of independent credit unions and to limit the merger of credit unions with over 3,000 members to situations involving a troubled credit union.
We also oppose Section 306, which would exempt from the legal lending limits loans to non-profit religious organizations. We do appreciate the intent of the provision's author. However, we are first concerned with eliminating any categories of business loans from the business cap. There are already exceptions to the business lending cap. We oppose the addition of yet another.
Second, the provision is so broad that businesses with only a remote connection to a religious organization could qualify. Moreover, many religious organizations operate significant business enterprises, therefore allowing for a substantial increase in business lending.
There are two provisions related to credit unions that could reasonably be considered to eliminate burdens without expanding powers or enhancing competitive position. The first authorizes a 15-year maturity limit for loans, and the second provides additional investment authority for credit unions.
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In conclusion, Mr. Chairman, reducing unnecessary paperwork is a serious long-term goal. The ABA is committed to working with you and the Members of this subcommittee to achieve this objective.
Thank you, Mr. Chairman.
Mr. BACHUS. Thank you. That was interesting testimony. That was actually more exciting and entertaining than I thought it would be.
Were any of you all home-schooled? None of you? You all went to public school, right? Have you ever been in a food fight? You know, food fights get you in trouble when you are in school. They usually are not that constructive.
Our aim here is to have win-win situations. It is to take regulations, things the regulators are doing, things that cost you money that you don't have available to loan out, and try to eliminate those regulations that make no sense, or barriers that make no sense.
Now, one of the ones that has been discussed here is this Section 301 of the bill, privately insured credit unions authorized to become members of the Federal Home Loan Bank Board. I know the banks are all opposed to this. One of the things is they are not banks. Or insurance companies participate in the Federal Home Loan Bank Board. Insurance companies can go to them, and really something that I am not sure that every banker knows, but those that are federally insured go to the Federal Home Loan Bank Board. So there are already credit unions participating in the Federal Home Loan Bank Board system.
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The statement was made that credit unions should not participate. They already participate. So it is just a distinction on whether they are privately insured or federally insured.
We have every provision and belief that those that are privately insured through the right regulatory scheme will, the taxpayers will be fully protected. That is one thing.
Another thing that I really know the bankers are sensitive to, and I would be sensitive to it, too, if credit unions were taking over large amounts of bank business, just a tremendous amount of market share, and there is actually a belief out there that that is in fact happening. One of my best friends who is a banker told me that the credit unions have basically tripled their business while we have lost business. That is anecdotal evidence.
First of all, his bank has tripled in size in the past 10 years. I found no credit union in his home county that has grown anywhere near that amount. But then I came back to Washington, this was probably 4 years ago, and I asked are credit unions eating into bank share? I don't know whether you all can answer that. Are you aware of what the answer to that is? The answer is no. The credit unions are not. As a total share of assets under deposit, it has gone from, financial assets, I think it has gone from 1.4 to 1.7 in 23 or 24 years.
We do not want to do anything in this bill that will give a credit union an unfair advantage over a bank, an unfair advantage. What we want to concentrate on is, as I said, win-win. Here are provisions that will help us.
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Section 301 was not something that this Chairman actually put in the bill. It was put in there by the Full Committee Chairman, which is even more significant, if you have been around this place. When he did that, my red flag went up, because I am sensitive to bankers in my area that tell me that the credit unions have an unfair advantage. But, a lot of what has been said about it, I would have to agree with the credit unions. The arguments simply, when you look at them, they do not have as much substance as they should.
I am not sure we will get a bill. If we continue to argue about whether credit unions get something—and the last two bills did not have anything for credit unions—but, we want everybody treated fairly, and there are some of the proposals that, for instance, we do not want anything added anymore for the credit unions. They have proposals to let them sell money orders to their membership, or to be able to kick off a board member. That is their ability to manage their own organization. I cannot understand how that is unacceptable.
Let me tell you, I am not motivated about helping one group or the other. I believe we can get a bill that helps all the organizations.
But, I want to encourage all sides, if you could demonstrate that it is unfair and it ought not happen, that is one thing. But if you already have credit unions participating in the Federal Home Loan Bank Board, and some already do, I am not sure that the argument is going to fly.
I would use your dynamite and your political might in looking at things that will benefit your institutions and the consumers you serve in eliminating barriers.
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A good example which the credit unions have come with is doing a money order, I think it is a wire transfer. Why should they not be able to offer that to their members? I can't see any reason why they should not. I was one of 7 people that voted against the credit unions on the floor of the House in that famous bill, so I do not think I can be accused of carrying a lot of water for the credit unions. Four of the people that voted with the banks on that bill were not running for reelection. So I am not afraid to stand up for the side I think is best.
If we are to get a bill out, then there is going to have to be some of this. You are going to have to pay more attention to what would benefit your institutions and your association and their members than say seeing that somebody else gets something that they do not have now.
Ms. Waters.
Ms. WATERS. Thank you very much, Mr. Chairman. I think you did a good job of basically representing how many of us are feeling about this legislation. It appears that there is going to be some relief that you will all benefit from. There is a little competition going on here. We understand that.
At the same time, we are often made to believe that all of you laissez-faire capitalists believe in competition, and that we should support that, and Government should get its hands out of the business of protecting one industry over the other. So, I think that I am going to lean to the right a little bit and join with my colleague in just saying to you that it is in the best interests of our citizens and all of us to have you operating in ways that will service the citizens of this country to the best of your ability.
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Now, I want to tell you, I like the idea that credit unions will be able to provide products that they have not been able to provide to the credit union members. I do not like freestanding check cashers who do not provide any other services but to cash checks and take a percentage of those earnings from hard-working people. I don't like freestanding payday loan folks who simply tie people up for the rest of their lives lending over and over again with checks that are kind of signed in advance. I like institutions that provide multiple services, and all of you do that. You provide multiple services. And, to the degree that you do that, I think that we provide better products for our taxpayers out there.
As our Chairman has said, this bill is attempting to do the right thing for everybody and not really take sides. I think there are some legitimate questions on Section 301, but I think that you guys can work that out. The Chairman makes a good point: If you already have credit unions that are in the Federal Home Loan Bank system, it is hard to make an argument to say that somehow there are some that should be kept out.
We do want to just remind you that the numerical provisions in the Truth in Lending Act are kind of outdated, and I hope that we have an opportunity to look at that, particularly as it relates to automobile loans. The limits have failed to keep pace with inflation, and many of those loans are not covered by the limits of the act. So, we may be looking at an amendment to bring TILA up to date and index the numerical provisions for inflation so we do not have that problem.
For those of you who represent credit unions who want to lend more money to the churches, I think you need to talk to some of us. I am told that there are all these ministers who want this. I have not heard from any of them, and I do not know what that means. I do not know if that means that a disproportionate share of your resources are going to end up proliferating more and more churches, or take away from some of your business loans. I do not know what it means. So, I think I would like to hear from the advocates of eliminating that from the caps in the credit unions.
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With that, let me just say we have an opportunity to tighten up this legislation a bit and have everybody in support of it, and I would hope that we would all use those opportunities prior to our votes on markup to do that. I yield back my time.
Mr. WELDON. [Presiding.] The Chair will announce it is his intention to recognize Mrs. Capito for 5 minutes of questioning, and then recess for 20 minutes so that Members will have an opportunity to go to the floor and vote and then come back for further questions.
The gentlewoman from West Virginia, I believe the co-author of the legislation under consideration, is recognized for 5 minutes.
Mrs. CAPITO. Thank you, Mr. Chairman. Thank you all for your testimony. I think I mentioned in my opening statement that it is a work in progress, and I think all of your testimony shows that there is some work that you all would like to see from every angle, and I think that is a good thing. That is why hearings such as this are of great benefit to us as Members.
I would like to ask Ms. Gaither about a conversation we had in my office yesterday when we talked about the fact that credit unions cannot expel members or remove members from their membership roles. I would just like for you to maybe tell a little bit about that story and a personal situation that you had in your office.
Ms. GAITHER. Thank you. Yes, yesterday we were talking, I had explained to Representative Capito that we had actually had a member come into our office who was dissatisfied for one reason or another and actually told one of my tellers that if he ever saw her outside the credit union, he was going to punch her. We had no means at that point to be able to expel this member other than calling a full membership meeting.
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Mrs. CAPITO. Does this bill in the present form give you that power? It will give you that power?
Ms. GAITHER. Yes, we would be able to expel for just cause.
Mrs. CAPITO. I would like, and anybody can answer this question from your different perspectives, to ask, in terms of more access for consumers to all of your institutions, it would seem to me—you mentioned, Ms. Duke, that you have what, 75 regulators that—compliance officers in your bank. I would imagine that having to deal with fewer regulations, less duplicative regulations, would not only maybe give you some relief in terms of staffing issues, but also would provide greater access along with insurance protection to the consumer that we would like to see.
Do you envision this bill in any way, because of the fewer time and the fewer details in some instances that you are going to have to work on, that it will go to the benefit of an individual consumer using one of your institutions?
Ms. DUKE. Yes. As I stated, any time that you can spend less of your resources actually working on regulations and the implementation of regulations gives you more time to serve the customer and it also—frankly, many of these regulations that are designed to protect the consumer are often more confusing to the consumer than the original issue.
The other thing, when I talk about manpower, and this goes to my experience as a community banker, is as these regulations come out, you do not have the people who are trained to actually read them, so the CEO and the upper level management of the organization are the ones that end up having to spend time with those.
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When FDICIA was passed, I believe it spawned 64 separate regulations. At that time I had 65 employees. So if I had assigned one regulation to each employee and given the courier the time off, that is what it would have taken for us to actually go through and look at each one of those regulations.
Mr. CHENEY. Thank you, Congresswoman. Given the member-owned nature of credit unions' expenses, I think it is safe to say if we could reduce our expenses associated with regulation and compliance, that those funds within the credit union would either go toward expanded services for our members, or to capital to make the credit union stronger and support our growth.
Mr. STONE. I have 62 employees in my bank, and what is really expensive is when we have to seek outside counsel to interpret regulations, from CPAs to attorneys. That really is very, very expensive when some of them can bill $200 and $300 an hour. You get regulation, and we must comply and want to comply, and we get help from the regulators we have, but we still have to get outside help so many times from an outside organization.
Mrs. CAPITO. Mr. Chairman, I yield back. I would like to say that the Financial Services Roundtable has testimony they would like to submit for the record.
Mr. WELDON. Without objection.
Mr. WELDON. The Chair announces a recess for 20 minutes.
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[Recess.]
Mr. WELDON. You are a great group. I did not have to bang the gavel and you came to order.
The Chair recognizes the gentleman from Texas for 5 minutes.
Mr. BENTSEN. Thank you, Mr. Chairman. I thank our panel for being here.
I want to say, Mr. Chairman, at the outset, I know that the Chairman of the subcommittee talked about the food fight aspect, but I do want to say it is somewhat of an historic moment to see that the testimony of the American Bankers Association praising the community bankers, the savings & loan industry, in such great detail, and wanting to give them more rights. It is something I may get framed just to hold on to, and actually expanding their charter to some extent as opposed to eviscerating or eliminating their charter.
I have a couple of questions. I will say on that point, with respect to the broker-dealer, I have some history in that, and I do hope that, assuming that we pass this bill and we give equal treatment for broker-dealer trust operations with thrifts, that as I hope the SEC is doing working with the Comptroller and the Fed, that the rules are equivalent to those required of broker-dealers which are under the auspices of the Securities and Exchange Commission. I am one that felt that it ought to just be the same regulation. I know the banks have felt differently about that. But at least, if nothing else, you ought to do the series 6 and 7 and all of the others and have similar requirements.
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I have two issues I am interested in in this bill. One has to do with cross-marketing restrictions from Gramm-Leach-Bliley, and the other has to do with Riegle-Neal. I think I will talk about Riegle-Neal very quickly to the independent bankers.
We had the regulators before the committee a month or so ago, and I asked about the provision that would preempt Riegle-Neal's interstate banking preemption. That is an issue that obviously has been very important in my State and other States. The argument was made by the Fed that in fact this was a small bank issue, that the intention here was to help smaller banks, particularly those who want to branch across the border to another bank. But since you represent the smaller banks, obviously that is not the way you all see it?
Mr. STONE. We think it is a States' Rights issue. The States know better what their market situation is. In Virginia—we were just discussing that at the break—that I think in Virginia we have reciprocal agreements with all of our, off the top of my head, all of our States, and we do branch back and forth across those lines. But, you know, if you have a State that has a neighbor that is not so gracious to do that, it seems like to me that would be their choice.
Mr. BENTSEN. Let me go to the cross-marketing restrictions. Perhaps you all can refresh my memory. When we did the Gramm-Leach-Bliley, we allowed certain types of cross-marketing to occur within a financial services holding company. We put restrictions on third parties and the like because of concerns about privacy and others.
I guess at the end of the day when we allowed for the merchant capital subsidiary or affiliate under the holding company, we decided, for some reason, to impose cross-marketing restrictions, at least as it applied to securities firms as opposed to insurance firms. I am not sure exactly why we did that at the time and, I do not know, maybe the ABA, since you are a proponent of this provision of the bill, you may want to refresh my memory as to why we did that and why we should not.
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I see again that the ICBA is opposed to that and would like to keep the current law as it is. I would like to have some discussion from you all on that.
Ms. DUKE. I am afraid I cannot tell you why you did it for the insurance affiliates rather than the securities affiliates, because that is exactly our point. We do not see the difference between an investment bank by an insurance underwriting affiliate versus a securities writing affiliate, and we think they ought to have the same cross-marketing provisions.
The cross-marketing provisions, as I understand them, include statement stuffers and internet websites, and the restrictions on merchant banking in those investments are fairly narrow in order to avoid the merger of banking and commerce. There are anti-tying restrictions. The Board must determine that the affiliation is within the public interest and does not undermine separation of banking and commerce and is consistent with safety and soundness. We feel within those regulations there is certainly no reason that the securities affiliates should not have the same powers as the insurance affiliates.
Mr. BENTSEN. Mr. Chairman, with your indulgence, if I could get Mr. Stone's comment, because I do not understand if what is good for the goose is not good for the gander, why wouldn't we do that?
Mr. STONE. Well, here again, we strongly believe in the separation of the financial services industry and commerce. Wal-Mart would be a good example of someone that we do not think should be in the banking business. I believe the Japanese and the Germans as well have had some unfortunate experiences, and I do not know all the details on that, other just what I read, that the mixing of commerce and the financial institution business has not worked that well, and some of the banks have suffered in Japan, particularly for that.
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Mr. BENTSEN. If I can have your indulgence, Mr. Chairman, on this. State Farm owns a bank. It may be operated as a holding company, I am not quite sure, but at the same time, why should they have a broader use if they establish a merchant capital subsidiary than Bank of Virginia or Chase or your bank if you choose to go down that route?
Mr. STONE. I would answer by saying I do not think they should have that right. I do not think they should be allowed in commerce. But the law is there and we would not have supported that at that time, either, when it was passed.
Mr. BENTSEN. Thank you. Thank you, Mr. Chairman.
Mr. WELDON. The Chair recognizes himself for a question.
Mr. Hage, you recommended exempting savings associations from the Securities and Exchange Act and the Investment Advisors Act. Would this affect consumer or investor protections?
Mr. HAGE. Our request is to be put on the same parity that bank trust departments already are. It would be my opinion that consumers' protection would not be weakened or put in jeopardy by including savings associations in that law.
Mr. WELDON. You have also asked for an increase in business lending authority for Federal savings institutions. How will this increase the authority and affect your ability to serve your communities? Can you comment on that, please?
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Mr. HAGE. Yes, I can. The increase in this authority would enhance the thrift charter as a continuing charter that can serve communities better. I can tell you in my own bank institutional case, we are in Sioux Falls, South Dakota. We are a bank that is $700 million in size. In the last 10 years we have consciously established a strategy to offer small business loans as well as our core housing lending. Today our balance sheet is pushing the limit of the statutory limit on commercial lending. We are serving more customers. We are being asked to serve even more customers and are going to have to face a choice about how we either turn off that lending or change our charter.
There are many advantages to the thrift charter that we think we would like to preserve. So to have relief on this limitation, which seems artificial and certainly seems to restrain and constrain the credit available to communities, does not seem to make sense.
I would add that changing the formula as we proposed would not threaten the QTL test which is a core test to establish the thrift charter definition. So we think it makes sense to do this. It would allow us to offer more loans to more small businesses to more consumers.
Mr. WELDON. I assume you maintain your support for home and consumer loans if that moves forward?
Mr. HAGE. I would tell you that our portfolio has grown many times over in the last 10 years as we have continued to add services. What we found is that many of the small business people will then bring all of their business to us, including their home lending business, and we also get access to new employees that they are bringing into the community so we can provide home lending and consumer lending to these folks as well.
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Mr. WELDON. Thank you very much. I want to thank all of the witnesses for their testimony.
Mr. BENTSEN. Could I ask a follow-up question to this?
Mr. WELDON. Sure. Go ahead.
Mr. BENTSEN. I understand what you are saying is that at some point you are going to get the ABA back going against you, because at some point they are going to say why don't you convert to a bank charter? You are going to go to 25 percent commercial lending and then more.
But let me ask you, because you raised the thrift provisions, in your testimony you raised concern about the ability to branch, interstate branch thrifts. I thought federally chartered thrifts had national interstate branching authority already. Unless I misread your testimony, why would that need to be corrected in some way?
Mr. HAGE. We are not asking for a correction on the thrift branching. We are supporting the ABA request to have comparable branching for commercial banks.
Mr. BENTSEN. So it is a mutual appreciation issue. OK.
Thank you, Mr. Chairman.
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Mr. WELDON. Again, I thank all of the witnesses for their testimony. The subcommittee will keep the record open for 5 additional days for further questions for the witnesses and further statements.
The hearing is now adjourned.
[Whereupon, the hearing was adjourned.]