Senate Panel Clears Banking Bill Legislation Overhauls Rules For Financial Institutions

The Senate Banking Committee on Wednesday passed a bill that cuts regulations for banks, but the panel avoided a brawl over revisions to a fair lending law, the Community Reinvestment Act.

The Senate panel’s work was one of several actions on financial legislation. A House Banking subcommittee began work on a measure that combines the thrift and banking industries and rescues the ailing Savings Association Insurance Fund.

Another House Banking subcommittee held oversight hearings on the Federal Home Loan Bank System, which plays an important behind-the-scenes role in making home loans available.

House Banking Chairman Jim Leach, R-Iowa, criticized the FHLB system which provides funds to mortgage lenders - for “operating far removed from its original mission and growing at rates greater than private institutions …”

In the Senate, the committee passed a deregulation bill that eliminates certain credit disclosures for home mortgages, streamlines rules on hiring bank officers and directors and gives the Federal Reserve greater flexibility in allowing foreign banks into the United States.

Perhaps the bill’s most significant feature is what was not included: the measure doesn’t tinker with the Community Reinvestment Act, or CRA. The Clinton administration and Democrats strongly support the law and the president has threatened to veto a House bill that sharply curtailed CRA, which requires banks to lend in neighborhoods in which they take deposits.

Senate Banking Chairman Alfonse M. D’Amato, R-N.Y., said CRA was dropped so the overall bill wouldn’t become bogged down. D’Amato said he wants to revist the issue later.

There are other controversial parts of the bill. Four consumer groups criticized provisions that would revoke consumers right to sue if banks violate the Truth and Savings Act requirements. And the Treasury Department criticized provisions that could weaken restrictions on entry of foreign banks into the U.S.