Progress on Mutual Legislation

By Bob Davis

The House Financial Services Committee’s Subcommittee on Financial Institutions held a hearing on a number of ABA supported bills this past June, including H.R. 1660, the HOLA Flexibility Bill introduced by Rep. Keith Rothfus (R-Pa.). No obstacles were raised in the hearing, and ABA has worked aggressively to address any additional questions that have arisen from industry and Members of Congress. We continue to press lawmakers to support the bill as written and recently engaged with outside counsel to address tax and other questions raised about the bill.

Specifically, we sought opinion on whether or not an election by a federal savings association would trigger a recapture of pre-1988 reserves. As you will see, the letter indicates that H.R. 1660, if enacted as currently drafted, would not trigger such a recapture. Addressing such questions has helped to build support for the bill. ABA has worked to build support for the bill both in Congress and with other trade groups. Our efforts have helped to clear a path for the bill without amendment, which should make passage easier. The full House Financial Services Committee is expected to consider the bipartisan bill in the coming weeks.

We also are continuing to advocate for consideration of similar legislation by the Senate. Sen. Heidi Heitkamp (D-N.D.) indicated at an OCC mutual forum held in July that she supports the goals of H.R. 1660 and will work with us to advance legislation in the Senate. Passage of H.R. 1660 in the House Financial Services Committee will provide a further incentive for the Senate to act.

Rep. Rothfus has also introduced H.R. 1661, a measure ABA has been seeking to provide a new capital tool for mutual institutions. The development of a new capital tool is much needed, but also quite difficult given new Basel regulations and restrictions on capital. Nevertheless, getting a bill introduced was a key first step, one which has helped to bring regulators to the negotiating table. ABA staff experts continue to work with our mutual members, outside capital markets experts, and the bank regulators on recommendations to improve the legislation. We are moving forward here, though clearly more work remains to be done.

To further that effort, ABA’s Mutual Institutions Council Administrative Committee has approved taking steps to engage the bank regulators in discussions on creating a capital tool consistent with BASEL requirements. This effort envisions improvements to H.R. 1661 that could gain the support, or at least avoid the opposition, of the prudential regulators. Further work is being undertaken by ABA staff with outside experts and a subset of mutual members. We anticipate further developments and feedback from members to be discussed at the upcoming Mutual Institutions Council meeting during ABA’s Annual Convention in November.