WASHINGTON - The House passed legislation 415 to 2 on Wednesday that would ease regulations for banks and thrifts, but it remains unclear if the bill can be enacted this year.
The Senate has yet to introduce its version, and lawmakers have a short legislative calendar in the face of upcoming midterm elections. Industry representatives are also worried the bill could be sidetracked by other issues, including Wal-Mart Stores Inc.'s application for an industrial loan company charter.
It is also uncertain if Senate Banking Committee leaders will support a key industry request to reduce required anti-money-laundering filings. Industry sources said Wednesday that Senate Banking Chairman Richard Shelby may oppose a provision that would let banks stop filing currency-transaction reports on seasoned business customers. Currently, banks and thrifts must file one for any cash transaction of more than $10,000.
The provision - included in the House bill - was lauded by lawmakers from both parties during the vote Wednesday.
"We heard from Fincen [the Treasury Department's Financial Crimes Enforcement Network] that the masses of useless CTRs impeded law enforcement and were often not even looked at," said Rep. Carolyn Maloney, D-NY.
Rep. Michael Oxley, the chairman of the House Financial Services Committee, said most CTRs are filed on "unremarkable" transactions.
Many in the industry consider the provision central to the regulatory-relief effort. But industry sources said that Sen. Shelby has expressed reservations about it.
A spokesman for Sen. Shelby would say only that lawmakers "would have to be careful about changing" the reporting procedures in case new standards had "a negative consequence on our efforts to combat terror finance and laundering."
Sen. Michael Crapo, R-Idaho, who is writing the Senate's relief bill, said last week that he hoped to have it introduced and voted on by the committee this month. Sen. Crapo said he supported creating more exemptions for CTR filing.
But the Senate bill faces problems over other issues.
The House bill contains a provision that would make interstate branching and mergers easier for banks but would prohibit interstate branching by industrial loan companies that are owned by commercial firms.
The provision was the result of a compromise among House lawmakers. It would extend ILC branching powers only to parent companies with at least 85% of their revenue from financial service activities.
The provision was spurred by concern that Wal-Mart would apply for an ILC; it finally did so last summer. The retail giant said it would use its Utah ILC for back-office processing of debit and credit cards, but community bankers - and many lawmakers - fear it intends to use the bank to open branches in its stores.
The situation creates a unique problem on the Senate Banking Committee, where Sen. Robert Bennett, R-Utah, the second-highest ranking Republican on the panel, is a strong advocate for ensuring that ILCs have the same powers as banks. Industry observers are unsure if Sen. Bennett will support the House compromise. A spokeswoman for him did not return calls seeking comment.
Industry representatives said they hope the bill will not be scuttled while lawmakers debate the issue.
"There's plenty of other issues to discuss without dragging the ILC issue into the debate," said Steve Verdier, the director of congressional relations for the Independent Community Bankers of America. "That's been a sticking point on these reg-relief bills."
House lawmakers said Wednesday that their compromise addresses the problem.
"It remains my belief that these institutions need to be reined in, and that the historic wall between banking and commerce should remain strong," said Rep. Paul Gillmor, R-Ohio.
And Ben Bernanke, the chairman of the Federal Reserve Board, said Wednesday that Congress should consider barring commercial companies from owning ILCs, because their doing so would breach that wall.
"Congress has made it clear that they've affirmed the principle of keeping banking and commerce separate. This loophole circumvents that principle," Mr. Bernanke said Wednesday in a question-and-answer session at an Independent Community Bankers of America conference. "It would be good to move to a policy that eliminates that loophole."
