Home Loan Bank Board already possesses the delegated authority to apply the securities laws regarding broker practices and underwriting disclosures for the protection of the investing public.) I want to continue to participate fully in all aspects of housing finance, including these new products, and I ask you to consider a change to permit all federal not just those which are holding company affiliates

associations

to underwrite and deal in conventional mortgage-backed securities.

In another area, I am not convinced of the advisability of the creation of a whole new class of federally-insured depositories which this legislation classifies as "consumer banks." I realize that the non-bank bank loophole in the Bank Holding Company Act is a confusing problem for the Federal Reserve and is difficult to address. However, inviting non-financial firms to set up these consumer banks with unlimited real estate investment and consumer loan operations seems to me to confuse the situation further.

Finally, let me ask whether these is any chance for relieving us from the massive paperwork burden of compliance with the Truth-in-Lending law on home loans? The supposed purpose of that complex requirement is to encourage shopping for loans. In the typical real estate transaction the buyer is already under contract when financing it sought and has the advice of a realtor who wants to see a sale consummated. However, under Garn-St. Germain, the realtor is declared by law not to be an "arranger of credit" which is certainly hard to fathom. All that the Truth-in-Lending law accomplishes in regards to real estate loans is a fee-producing opportunity for clever lawyers. Repeal it.

Thank you again for this opportunity to comment on your Financial Services Competitive Equity Act, Senator. We're proud of your leadership in addressing the needs of savings institutions for the benefit of the citizens of Utah and the country.

The CHAIRMAN. Thanks, very much.
Mr. Hawkes and Mr. Mobley.

STATEMENT OF R. BLAIR HAWKES, CHAIRMAN, LEGISLATIVE COMMITTEE, WESTERN INDEPENDENT BANKERS, ACCOMPANIED BY ROBERT MOBLEY, MEMBER, LEGISLATIVE COMMITTEE; AND JON C. BEDNERIK, EXECUTIVE DIRECTOR

Mr. HAWKES. My name is R. Blair Hawkes. I am legislative committee chairman of the Western Independent Bankers Association. Testifying with me today is Robert L. Mobley, a member of that committee. I am president of Ireland Bank in Malad City, Idaho, and Mr. Mobley is senior vice president of the Bank of A. Levy in Ventura, Calif. Mr. Mobley will begin our testimony.

Mr. MOBLEY. Western Independent Bankers is the only multiState regional association of banks in the United States. Our membership consists of over 500 banks in the 13 States, of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

Part of the special character of our organization comes from the makeup of our member banks-they are independent in operation and are closely in touch with the communities that they serve and are a part of.

WIB was founded in 1937 to foster a strong State and Federal dual banking system in the United States and to represent the viewpoint of the independent, community bankers located in the West.

Historically, State banking laws followed a more restrictive pattern in the other parts of the country and banking operations there tended to be more regimented. In the West, the small community banks had more wide-open competition. WIB members have faced the giant competitors in the marketplace. Through our members' ability to serve the local community and to effectively manage their banking operations, we have survived and grown.

It is the underlying belief of our membership that regulatory impediments and legislative imposed operational restrictions lead to artificial distortions of the marketplace. This seems always to lead to unfair advantages for some segment of the competition which then leads to further outside interference.

The WIB favors an atmosphere where the elements of service, management capability, and customer satisfaction are the keys to our success, not who has found and exploited the current legal loophole.

WIB urges this committee, the Congress, and the administration to complete the fullest and most rapid total decontrol of financial institutions that can be accomplished.

We believe that the public interest is best served and well protected by competent supervision and examinations carried out at the State and Federal levels.

We encourage early passage of the bill S. 2181 with some modification. The legislation should be treated as a package and efforts to deal with only a few of the provisions, while leaving others for later consideration, will diminish chances for enactment.

We await anxiously the report of the Vice President's Task Group on Regulation of Financial Services and hope that their legislative recommendations will further the early simplification of supervisory roles of the responsible agencies of Government.

CONSTANT RULE CHANGES CREATE UNNECESSARY DIFFICULTY AND

EXPENSE

It seems to us that the constantly changing rules applied to banks and other financial institutions create unnecessary difficulty and expense in operations. We feel that the other types of financial institutions are frequently less burdened by legal requirements and regulations, at the same time they are competing for the same customers that we are. We do not fear the competition from the business world; we are frustrated by Government interference in our business operation.

Since S. 2181 generally moves toward deregulation, when taken as a whole, WIB supports the thrust of the legislation. But we do not feel that S. 2181 is sufficient to correct all existing problems nor moves far enough toward total deregulation.

There are several provisions which might be labeled decontrol, but which cause serious impact on us since other aspects of our operations are not freed from limitations.

Mr. HAWKES. Thank you.

TITLE I-FINANCIAL INSTITUTIONS COMPETITIVE EQUITY

The concept introduced in this legislation setting concentration limits applicable to the largest 25 or so institutions to prohibit combinations of business entities-has not been considered by WIB before this time. While we appreciate the intention to somehow protect a segment of the industry such as ours, we are generally opposed to artificially contrived limitations being established. We do not embrace the view that largeness is inherently bad or that it adversely affects the public interest. We shall continue to examine this provision.

Our view of the definition of a "bank" is that the language of S. 1609 is preferred with regard to commercial loan transactions. We believe that the eligibility for FDIC insurance ought to be sufficient for the definition of a bank without regard to the "two-prong" test further provided in S. 2181.

As strong supporters of the dual banking system, we endorse the provisions calling for State approval.

WIB supports the granting of expanded powers for bank holding companies and further recommends that banks' outside holding companies be granted these powers. It is necessary to enlarge the services that such institutions can provide if they are to compete successfully in the present and future marketplace.

We approve of the proposed procedural changes to Federal Reserve Board action. We note that unitary savings and loan holding companies would continue to have no restrictions on nonsavings and loan activities under S. 2181. This is one area where the inequity of regulatory treatment should be corrected. Anything that gives one segment of the industry a favored status ought to be

eliminated. WIB has taken no position yet on the section dealing with service corporations.

TITLE II-CREDIT UNION AMENDMENTS

We have some concern that credit unions should be treated equally with banks and other institutions, but have no specific comment on title II at this time. Credit unions have been accorded varying treatment under some State and Federal laws with respect to taxes and reserves.

TITLE III-BANKERS BANK

WIB supports, in concept, a strong bankers bank structure. We support the provision that a bank holding company can be a bankers bank and authorization for investment in exporting and trading companies.

TITLE IV-COMPETITIVE SAVINGS INCENTIVE

Regarding the payment to banks of interest on certain reserves, we are hesitant to endorse what might appear to be a beneficial provision. We believe that the Federal Reserve System should pay interest for the use of reserve funds held against all accounts. This, however, should not be taken as a specific trade-off against other sections of S. 2181 which would impact severely on our segment on the industry. Certainly big banks would benefit far more than our smaller, community institutions from the adoption of this lan

guage.

We support the provision, but point out that it is of limited value to independent, community banks.

TITLE V-CONSUMER LEASES AND RENTAL PURCHASE AGREEMENTS

It is our understanding that a number of amendments to this section are being drafted now. Leasing seems to have been somewhat more prominent in the West than other places and we shall work with the Members of Congress most active in the legislative development of this subject. When the additional amendments have been made available for us to review, we shall provide detailed comment on this section.

TITLE VI-FAIR DEPOSIT AVAILABILITY

The Western Independent Bankers oppose this section on specific grounds. The check clearance process in this country has developed over years and handles a staggering number of transactions each day as checks flow through the system. The need for placing holds on checks stems from the inherent delays in check return processes. As banking transactions have become more complex and customers have greater geographic interests the process has become more time consuming. The establishment of individual hold policies reflects the various collection delays that exist within the system. It is extremely difficult to announce a single hold policy since different transactions call for different processing times and many factors can affect the time required. Each bank is best able to determine how to acquaint its customers with this matter.

The great distances in the West between offices and between cities make the problem more difficult in our States.

We have urged and are urging our member banks to disclose to their customers their general hold policies and to draw attention to any specific hold that may be placed on an unusual transaction.

WIB opposes mandatory disclosure rules because we feel that such regulations may turn out to be unnecessarily complicated, expensive and may require a longer hold period to be set than are actually necessary to insure safety for the bank.

WIB members, who are themselves small- and medium-sized businesses, are not equipped to make the direct notification within 24 hours of determination of nonpayment for checks over $250. Many questions of procedure, adequate legal compliance, liability for error and the like make this provision to us unreasonable.

The mandated placement standard for endorsements could also prove difficult.

TITLE VII—CREDIT DEREGULATION AND AVAILABILITY

In keeping with our philosophy of deregulation, WIB favors the removal of interest rate ceilings on agricultural, business, and consumer loans. The preemption of State usury laws-with the preservation of the right of States to reject the preemption-accords with our view on dual bank regulation and further decontrol is an issue best left for marketplace determination.

TITLE VIII-INTEREST ON DEMAND DEPOSITS

This provision is one which has the potential for greatest impact on our member banks. Our opposition to this provision in Senate 2181 is based upon the fact that many other operating limitations and expensive operating procedures remain for independent banks. This provision represents a serious negative potential for our members until all other constrictions are removed from setting of rates, fees, and procedures, lines of business and such. We believe it will have a more severe impact on our size bank than on the larger institution. Their capabilities to analyze accounts, set charges, and command compensating balances are greater than ours. Furthermore, they have a better opportunity to purchase funds on a regular basis and the staff and time to do so, while many or our member banks do not; thus, our reliance on these noninterest-bearing accounts is greater. Small businesses can utilize various interest-bearing accounts now if they wish.

TITLE IX-FRAUDULENT USE OF CREDIT CARDS AND DEBIT CARDS

WIB applauds the inclusion of the provisions on abuses of credit cards.

TITLE X-INTERSTATE BANKING

WIB is a regional banking association. We believe that problems and solutions in banking and related services do not stop at the State line or any other geographical point. Our membership has not taken a position on the interstate banking issue, although we expect to be studying it closely in the coming months.