Magazine article American Banker

Phil Gramm's Top 5 Gripes on 'Sunshine'

Magazine article American Banker

Phil Gramm's Top 5 Gripes on 'Sunshine'

Article excerpt

Senate Banking Committee Chairman Phil Gramm is upset. The notoriously dogged Texas Republican claims regulators got it wrong when they proposed rules to enforce provisions of the new financial reform law requiring disclosure of certain Community Reinvestment Act pledges. "In five major areas, the proposed regulations not only violate the spirit of the law, but they violate the letter of the law," Sen. Gramm told American Banker in his first interview since regulators released their proposal May 10. "I'm hopeful that when I'm through, they will." The so-called sunshine provisions were part of a compromise to ensure Sen. Gramm's support of the Gramm-Leach-Bliley Act of 1999. They require banks and community groups to disclose the terms of certain CRA-related agreements. Banks must file annual reports on these agreements, and each year community groups must describe how they used the funds. As promised, Sen. Gramm and his staff have gone over the 140-page proposal with a fine-tooth comb. They consider it too vague to produce the type of disclosure and reporting detail Sen. Gramm intended to achieve. Regulators privately grumble that the law itself is unclear, but Sen. Gramm disagrees. "The bill goes through in great detail -- I know it because I wrote it exactly that way -- outlining exactly what will be reported so that there would be no ifs, ands, or buts about the fact that if you got more than $10,000 in cash, or if you were a party to a commitment in loans for more than $50,000, you are going to have to report what you did with the proceeds of those transactions," he said. During the interview, Sen. Gramm put aside his usual folksy style to deliberately outline his five concerns. First, disclosure reports should be filed whenever banks pledge to make community development grants, even if there is no signed contract with a community group. Sen. Gramm pointed out this passage from the proposal: "A bank holding company unilaterally issues a press release announcing that its subsidiary banks have established a goal of making $100 million of community development grants in low- and moderate-income neighborhoods over the next five years. The unilateral pledge is not a contract, arrangement, or understanding entered into with a person and, therefore, is not a covered agreement." Not true, says the law's co-author. "Under our bill, if there is any contact or potential contact related to CRA, then there is a reporting requirement," Sen. Gramm said. "To exclude unilateral commitments will initially exclude half of the CRA payments and will ultimately exclude all of them. So that has to be changed." Sen. Gramm's second worry is that the only contacts that must be reported are those with a regulatory agency or bank about protesting -- or not protesting -- the institution's CRA performance in regard to a merger application. "Again, that is a huge loophole because, as this whole process has become more and more sophisticated, banks go out and work out CRA agreements before they ever file to merge or acquire. So by simply saying ... the CRA contact has to be related to the submission of comment or testimony would exclude probably 90% of all CRA contacts. …

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