Alfonse D’Amato

Mr. D'AMATO

Mr. D'AMATO. Mr. President, I ask unanimous consent that the Committee on Labor and Human Resources be authorized to meet for a hearing on Substance Abuse: the Science of Addiction and Options for Treatment during the session of the Senate on Tuesday, July 28, 1998, at 10:00 a.m.

Mr. D'AMATO. Mr. President, the Committee on Veterans' Affairs would like to request unanimous consent to hold a markup on pending legislation. The markup will be held at 4:15 p.m., on Tuesday, July 28, 1998 in room 418 of the Russell Senate Office Building.

Mr. D'AMATO. Mr. President, I ask unanimous consent that the Special Committee on Aging be permitted to meet on July 28, 1998 at 10:00 a.m. to 1:00 p.m. in Hart 216 for the purpose of conducting a hearing.

Mr. D'AMATO. Mr. President, I ask unanimous consent that the Committee on Banking, Housing, and Urban Affairs be authorized to meet during the session of the Senate on Tuesday, July 28, 1998, to conduct an oversight hearing on mandatory arbitration agreements in employment contracts in the securities industry.

Mr. D'AMATO

Mr. D'AMATO. I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 3339 (Purpose: To amend the bill with respect to review of regulations and paperwork reductions, consultation with State supervisory agencies, and the field of membership exception for underserved areas, and to require a study by the Secretary of the Treasury of member business lending)

Mr. D'AMATO. Mr. President, I would like to send to the desk a managers' amendment that has been approved by both sides and ask for its immediate consideration.

Mr. D'AMATO. Mr. President, let me say that I am deeply appreciative of the problem that my good friend, the senior Senator from Alabama, Senator Shelby, expresses as it relates to community banks. I believe they do need help. Indeed, I think we have to give them some tax relief. I think we can and we should. That is why I have cosponsored the Small Business Financial Institution Tax Relief Act. I believe Senator Shelby is also a cosponsor. And I believe the Presiding Officer is a cosponsor as well. There are other things we can do. I think we have to examine CRA as it applies to those who have outstanding records year after year. Should they be subjected to the same compliance requirements or shouldn't there be some way to relieve them of the annual reporting process? Shouldn't there be more flexibility, if an institution has been exemplary for X number of years? Let us discuss that in a different arena and let us not put it on this bill. We can work towards a solution on this important issue and other relief for small banks so they can continue to compete and serve in communities that otherwise would be left without. So I am sympathetic to the issue of CRA. But again, to put it on this bill, when the administration said clearly they will veto it, I say, will only undo all the effort put into preserving credit unions and making them safer and sounder. I urge restraint on the part of my colleagues, notwithstanding the fact that we need to do something to help that segment of our community which is so vital--the community bank.

Mr. D'AMATO. I am happy to yield.

Mr. D'AMATO. I not only give that assurance to you, but to all of my colleagues in the Senate and the House. I think we can do a better job ensuring that small community banks have the ability to compete. We will address some of the requirements that are placed upon them that preclude them from using chapter S corporations in the bill Senator Allard has introduced. And while we are at it, we will review some of the regulatory requirements for reporting as required by CRA and we will look for ways to diminish the burdens these requirements place on banks that have exemplary CRA records. That would be the absolute priority of this Senator, starting now. We will begin with holding hearings, and from the information we gather, we will craft and seek the support of legislation. Certainly I think next year we will be able to come forth and pass, in both Houses, and get signed into law, the kind of relief that does not jeopardize the legitimate use of CRA but, by the same token, does not compromise those institutions that are doing a good job. I believe my colleagues on the Democratic side would join with us in that effort, but not here, not now, without study and careful craftsmanship. Again, I understand the need to make these reforms.

Mr. D'AMATO. Mr. President, I understand my colleague, the Senator from Alabama, has yielded back the time.

Mr. D'AMATO. I move to table the amendment and I ask for the yeas and nays.

Mr. D'AMATO. Mr. President, I move to reconsider the vote.

Mr. D'AMATO. Mr. President, I urge adoption of the amendment.

Mr. D'AMATO. The Senator is correct. Community development credit unions must meet the bill's capital requirements like any other credit union. At the same time, there is a transition period, and the bill's prompt corrective action provisions give the NCUA sufficient flexibility to work with undercapitalized community development credit unions that have an acceptable plan for meeting the bill's capital requirements.

Mr. D'AMATO. Yes. I think that the Senator has set forth a good analysis of the challenges community development credit unions face.

Mr. D'AMATO. Yes, it is possible that some community development credit unions may require added time to increase their capital.

Mr. D'AMATO. Mr. President, I move to reconsider the vote by which the bill was passed.

Mr. D'AMATO. Mr. President, I thank all of my colleagues, not only for the final vote on this important legislation, but for the manner in which an excellent debate was conducted. I very much appreciate Senator Lott scheduling this important bill. But a special commendation is in order to a number of people, starting with the ranking member, my friend, Senator Sarbanes. I thank him for his steadfast support in developing the opportunity for Members to be heard, and for Members to have their concerns listened to, and debated, resulting in final passage of the bill, notwithstanding some very contentious issues. I believe that the credit unions, not only of Maryland but of this country, have a demonstrated champion in Senator Sarbanes. The fact is that credit unions support the little guy. Historically, credit unions have invested in people and in communities when others would not--yes, when others would not. Credit unions have provided the basic financial services without excessive fees, and they continue to do that. We need them in this day of consolidations and megamergers to be out there to service all communities, especially the small communities and, again, the little guy. I don't mean ``little'' in terms of size and stature, because they are the hard-working, middle-class Americans who are the backbone of this country. Indeed, they set a standard and they challenge, even when others don't like that challenge. And likewise, there may be unfair burdens on some of the community banks, and we have to deal with that challenge. But you don't do it at the expense of an organization of the thousands and thousands of credit unions and the hundreds and hundreds of members who work in these credit unions on a voluntary basis, without pay, and in many cases, without any compensation. Yes, truly, America can be proud of our credit unions. Credit unions care about hard-working Americans. None of this could have been possible without staff because I believe that we have had the best staff that anyone could have, both Republicans and Democrats, working to bring about substantial improvements over the legislation that came from the House--I mean substantial. For the first time, we set rigorous standards to protect the taxpayers of the United States--that is right--to protect them. For the first time, we limit--and I think prudently so--commercial lending activities that credit unions can undertake while giving them the opportunity to continue doing so and to continue serving their communities. And again, I believe we applied limits to commercial lending in a prudent manner. Mr. President, I take this opportunity to thank the hard-working staff, a bipartisan staff. I want to acknowledge Senator Sarbanes' staff--Steve Harris and Marty Gruenberg and Dean Shahinian. And Phil Bechtel, Madelyn Simmons, Rachel Forward, and our staff director Howard Menell, I thank them for their hard work on this bill. They have done a unique job in working together, never allowing political differences to interfere with the people's work. Let me say, Mr. President, that the House is to be applauded for moving so speedily on their legislation. I hope that they will accept the improvements that we have made without the necessity of going to conference. Representatives Kanjorski and LaTourette took the lead on this bill in the House. I am hopeful they will view the Senate's well-considered modifications to the original bill as positive changes to enhance the safety and soundness of credit unions and expedite the enactment of this legislation. I also commend Chairman Leach and the House leadership in sending us H.R. 1151 as speedily as they did, because were we not to have gotten it in such a timely manner, we could never have completed the legislative changes that we have made part of the legislation. Mr. President, again, I thank all of my colleagues for their outstanding work and for their cooperation, notwithstanding the differences that may have existed. We passed a good bill for working Americans. I yield the floor. Mr. SARBANES addressed the Chair.

Mr. D'AMATO

Mr. D'AMATO. Let me address something here. Let's put this in perspective. For the first time, this committee has limited, limited severely--there were no limits before now--when you said you can't do more than 12\1/4\ percent of your assets. If every institution were to do that--which they are not and no one says they are, not even the proponents of this legislation claim that they are going to be doing this--you still would amount to less than 3 percent of all of the commercial loans, if every credit union maximized its commercial loan potential, and they are not doing that. There is no effort to do so. To come in and arbitrarily say, ``No, no, now we will take a limit''--you place a limit of 12\1/4\ percent--``but this is not good enough, so we will lower to 7. In addition, now we will take the small loans that 5,000 of these institutions make and we will require you to have a person with 2 years' business lending experience on staff to make even the smallest of loans.'' I wonder if my friend knows that is one of the provisions in this amendment. Now, let's take a look--you will hear that this lending cap is to ``Save the taxpayer.'' That is hokum. If you took all of the ``chargeoffs'' on bad loans, it is .23 percent from commercial banks. And guess what? Credit unions are at .19 percent. Again, we are for the first time imposing strict standards that credit unions never had before. Now my gosh, if we came with the same bill that the House put here, then I would be here to join my colleague in saying: ``No, we need to make sure that they are well capitalized. No, we will not let banks that are not adequately capitalized and that are in trouble make loans. No, we are going to see to it that you have the kind of loan offices that commercial banks have.'' Why do we want to weight this down? How many angels on the head of a pin? That is the type of debate we are having. Should it be 7 percent? Well, why did we come up with 12\1/4\? Because there would be some disruption, but credit unions could handle it. Now we want to go in and create a situation where you will have 177 credit unions that now make 8,700 loans, $360 million, and they will have to begin to disengage. Will some of the commercial banks like that? Sure, sure they will. Let's understand what this will do. Some of the small bankers, you can go back and say, ``Look what we did, we got them out of the business.'' That is what it comes down to. I just suggest, if the Senator's amendment is serious, why not go to 6 percent or 5 percent? What about the tax issue? I have heard more mutterings about that. There is a genuine effort because people don't like the competition. In some cases they perceive it as unfair, and, indeed, where a small community bank is paying taxes and he is side by side with a local credit union that is every bit as large and they are doing a good job and they are not paying taxes, I understand and I feel for that person. I am cosponsoring the legislation offered by our good friend from Colorado, Senator Allard, who has introduced a way to begin to help some of the banks. Maybe we have to look at other ways in which we can help community banks. But let's not unfairly go from where we had no cap whatever with a good-faith effort, working with the administration, working with the National Credit Union, working with the credit unions themselves. We came to 12\1/4\ percent and somebody says, ``No, we can do better; we will make it 7 percent.'' There is no rationale, no tie- in, to the amount of the commercial loans. If you had a staggering loss coming from commercial loans, I would say yes, do it. There is no evidence of it. The record does not support that. So why are we doing it? I yield the floor.

Mr. D'AMATO. Mr. President, let me address something, because the more you get into this, you begin to learn. Soundness and safety: It is an issue that we are all concerned about, because we have been here. We have gone through this. And we have seen some extraordinary situations, which cost the taxpayers. That is why the committee, the ranking member, and the Republicans and Democrats working together, said we have a structure for the first time of provisions that will address that--we have done that--risk-based capital, based upon soundly capitalized institutions--6 percent for some, and 7 percent for the others-- and giving to the administration the ability to close these places down. Now, look, when we start talking about commercial loans posing a problem historically and looking at where we are today, they haven't. That is a canard. Indeed, if we take a look and see what it constitutes in terms of their total portfolios, it is under 2 percent. All of their loans are under 2 percent without any limitation. So let me suggest to you, I think when we come in and say we are going to limit business lending no matter what, we are saying to each credit union, those that do--forget about the thousands that don't-- under no circumstances are you going to go up over 12.25. To say that safety and soundness is going to be protected because somehow we are limiting commercial loans, that doesn't square up with the facts. It just does not. If, indeed, the credit union commercial loan failure rate has been less than those same loans made by commercial banks, how can you say that limiting this activity will provide greater safety and soundness? That is the record. The failure rate has been less from credit unions than it has from commercial banks in commercial lending, and they loan less, including the loans for under $50,000. And why are we opposed to counting those loans for less than $50,000? I will tell you why. Because you are going to keep honest people honest. Maybe I shouldn't say this because the guy who is the entrepreneur who wants that loan will come to his credit union. OK, they say it is a commercial loan, and you are going to begin getting into businesses or classifying whether it is personal or whether it is commercial. So they said, look, up to $50,000, we know the people; they are dealing within the institution. It is a member. We are not going to get into the business of classifying whether it is commercial or not. We are going to say, presumptively, any loan up to $50,000 gets an exemption. We don't go through this business of having to classify these loans then have staff making loans meet certain experience levels which this amendment does. The present situation is that for making those business loans over $50,000, you must have 2 years of lending experience. Now, why did the National Credit Union Administration do that? Because they recognized the need as credit unions got into loans of higher cost and more exposure. It is prudent to have somebody on staff who has that experience. That is why they did it. Now the consequence of this amendment will be a burden where credit unions are going to have to hire loan officers to make small, commercial loans of $25,000, $20,000, $15,000, or $30,000. Do you really think that this isn't going to have an adverse impact on the small credit union that would have to do this? Heretofore, small business loans were on the basis of knowing that member, knowing that he or she has a good record, knowing that there is a good business investment opportunity. Now, look, in addition to that, we have tightened those standards and said credit unions can't even make business loans unless they hit certain criteria of capital. We didn't have any capital standards before. Yet, I think when one says this is safety and soundness, it is not. The record doesn't indicate that. What it is--and I respect those who say we want to limit their ability to develop this business and say under no circumstances will it be more than what your capital is--that is what it is doing. It is limiting the ability of credit unions to involve themselves in commercial lending. I think including the $50,000 loans will be going too far. That is why the credit union people and people who represent small businesses urge that we not support this amendment because what it will do is make it harder to get loans. I have a letter from the Small Business Survival Committee. I am going to ask it be made a part of the record. The American Small Business Association similarly asked us not to restrict the availability of commercial credit any further. Times are booming today, but they may not always be booming. Then where do people go? Now you can go to your local bank, and they seem to have plenty of money to go around. What happens when things tighten up? Then we are going to make it difficult, if not impossible, for people who would have had the ability, if necessary, to go to their credit unions and to get maybe that $25,000 small business loan. I ask unanimous consent these two letters be printed in the Record.

Mr. D'AMATO. I withdraw my request, Madam President. Let's start it from there. Several Senators addressed the Chair.

Mr. D'AMATO. Madam President, I ask unanimous consent that at 9:45 on Tuesday, the Senate resume consideration of the Shelby amendment, and there be 15 minutes of debate equally divided prior to a motion to table. I further ask consent that no amendments be in order prior to the vote. This has been cleared by both sides.

Mr. D'AMATO. Madam President, how much time is left to the proponents of the measure?

Mr. D'AMATO. I move to reconsider the vote.

Mr. D'AMATO. Mr. President, I rise in strong opposition to the amendment submitted by the Senator from Nebraska. I don't believe that the Senator intends to hurt the credit unions, but I think an unintended consequence of his amendment will impose some very real burdens, burdens on 4,000-plus credit unions, the small mom- and-pop credit unions, by including in that cap those loans that are made for $50,000 and under. And, indeed, they are made to the members who want to start businesses, who have an idea, and they believe, given sufficient capital, they can go out there and take an entrepreneurial idea, or maybe they have been working for someone and want to start that business with a small loan. Who better to know and judge than a fellow member? Indeed, it requires a burden as it relates to the kind of people who will now have to be utilized to make that loan. That is a burden. Are we now going to be getting in there, micromanaging the small, well-capitalized credit union with better than 7 percent, 8 percent, 9 percent? I think that this will have an unintended consequence. I know it will. I have heard from people inside credit unions. They have told me. Now, Mr. President, people will ask, how do we get to 7 percent? And, by the way, how did we get to 12.25 percent? Those are interesting questions. Who determines where a credit union s business lending should or shouldn't stop? Let's start with the history of this provision. There was no limitation, Mr. President, none whatsoever, prior to the markup. There wasn t any in H.R. 1151. We approached this in the best way we could. There were no risk-based standards. For the first time we set them up, and we say 7 percent for well-capitalized. That was never intended to be the criterion--to say, ``Therefore, you can only make commercial loans up to 7 percent.'' To take one application when we, for the first time in the history of the credit union movement, say, ``Well-capitalized, 7 percent; adequate capital, 6 percent; and, by the way, if you go under that 6 percent, you can't make any commercial loans,'' I think that is a tremendous step, because we recognize we can't do business as usual. We want to protect the taxpayer, and that is exactly what we did. We came up with 12.25 because we did not want to create chaos, and we wanted to give those who were involved in commercial loan activity an opportunity to disengage without creating a problem that would be difficult, if not impossible, to handle. By setting that, there will still be a significant number at 12.25 percent. There will be 85 institutions that make 5,400 loans for $250 million, and they will be given 3 years to comply with the cap. So we looked at institutions, and we looked at the numbers of members and we arrived at a number. The amendment at the desk, in addition to creating a burden that is going to be very difficult for small credit unions to make in terms of who can and can't grant these business loans, it now picks up an additional number of institutions. Mr. President, 177 already exceed the cap. We are talking about well-capitalized institutions that are making loans, have been making loans, and don't have problems, and because we arbitrarily come to 7 percent--and I say ``arbitrarily.'' There is no reason to suggest again that because we deem a bank to be well-capitalized at 7 percent, therefore, we should cap the whole industry at 7 percent. I don't understand it. We will now throw 8,700 of those loans, $360 million, and 177 institutions into an area where they have to begin to disengage to get under this arbitrary number. And it is arbitrary. We worked with the credit unions for quite a while and with the administration in attempting to come to a number. They weren't happy about our imposing these standards, but we did because it was the right thing to do to protect the taxpayer. Let me say this to you. Let's look at the totality of this. The unintended consequences of this are going to say, where we have some well-run institutions that are providing their members and their community with these loans and, obviously, there is a need for them, that we are going to preclude them and say, ``Oh, no; just 7 percent.'' Heretofore, we had no limit. I think really we can second-guess everybody and anything, and we can make an appeal to the community bankers: ``We're your best friends, because look what we did.'' Do I really think that is what we should be engaging in? I hope not. Only 13 percent of all of the institutions--that is, 1,551 out of 11,000--make these loans. Let me leave you with one last thought. If every institution were able to--and I am talking about every credit union, all 11,000, recognizing that only 13 percent make commercial loans--were to be engaged in business lending, the total would come to something under $40 billion nationwide by 11,000 institutions. Come on, I say to my colleagues, let's be serious. What are we trying to do here? That would be approximately 3 percent of all the commercial loans, $1.1 trillion in commercial loans that are out there. What are we doing? What are we saying? I think what we are doing is trying to say we are the friend of the community banker, and this is what we are going to do, we are going to be limiting these folks. Instead of saying we have limited, instead of saying this bill does now limit, this bill does have criteria which we never had before, we are going to one-up it, and that is not going to help. You may say the credit unions will accept this. I have to tell you, we will go to conference, and little does one know what will take place when we get into that conference. I would like to avoid that. I would like to say we have done something that even the Secretary of the Treasury has supported in his letter to Majority Leader Lott. Mr. President, I ask unanimous consent that this letter be printed in the Record.