Magazine article American Banker

Action Slated on NY Bill Amended to Widen Thrifts' Powers

Magazine article American Banker

Action Slated on NY Bill Amended to Widen Thrifts' Powers

Article excerpt

NEW YORK -- An omnibus banking bill amended to broaden the powers of state-chartered thrifts will see action on the State Senate floor today, according to the chairman of the Senate Banking committee.

The chairman, Jay P. Rolison, R- Poughkeepsie, said the bill is "probably the most significant legislation in temrs of thrift powers in this session."

The three amendments to the bill were based on recommendations from a temporary state commission on banking, insurance, and financial services. The commission's findings are known as the DeWind report, after committee chairman Adrian W. DeWind, a New York attorney. A key component of the bill, following the recommendations of the panel, would allow commercial banks to underwrite insurance.

The amendments include provisions for:

* A "prudent person" rule for a thrift's investment in securities. Currently, thrifts are governed in their securities investments by detailed criteria that "undermine prudent investment," according to the committee's report.

The report said high interest rates have forced a need for fewer restrictions on investing, particularly in the many new investment instruments that have been designed recently.

* Eliminating the state's lending restrictions. Currently, thrifts may invest up to 20% of their assets in real estate up to 20% of their assets in real estate mortgages outside New York and adjoining states, provided that no more than 50% of the total investments in an adjoining state are made on real property located further than 75 miles from any of their offices.

However, the rise of secondary mortgage markets has led to thrifts placing mortgages in areas where housing growth has been faster than in New York, making current restrictions outdated, the DeWind report said.

* Broader authority for banks to manage and make equity investments in real estate -- for example, to be a joint venturer with a real estate developer, to be a general partner in a real estate limited partnership, or to take an equity interest in a project being financed by the bank. …

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