House Passes Bank Reforms, S&L; Funds

On a lopsided, bipartisan vote, the House approved sweeping bank reform legislation Monday providing $10.8 billion for the beleaguered federal insurance fund that guarantees deposits in the nation’s savings and loan institutions.

The bill, which is expected to be approved quickly by the Senate, provides new banking protections for consumers--including a rule that banks must clear out-of-state checks and make funds available from them within four days of a customer’s deposit.

Interest Disclosure

Other provisions would require banks to tell customers the maximum amount of interest payments for which they would be liable under adjustable rate home mortgage loans and ban the creation of additional “non-bank banks” run by department stores and other businesses.

If President Reagan signs the legislation, as he is expected to do, new funds would become available immediately to shore up the Federal Savings and Loan Insurance Corp. The money would be generated through sales of long-term bonds and would not come from the federal Treasury, sponsors said.

“We’re trying to send a message of confidence to bank customers,” Rep. Bruce F. Vento (D-Minn.) said. “There are now 461 federally insured S&Ls; across the nation that are insolvent, and they represent $125 billion in deposits. People need to know their money is safe.”

Other members noted that the FSLIC, which is losing an estimated $10 million a day, needs an immediate infusion of at least $6 billion to meet its obligations to bank customers across the nation, and probably much more to stabilize the jittery savings and loan industry.

However, a handful of critics said that Congress was rushing its approval of the bill, which is a compromise between earlier versions passed by the Senate and House. Rep. David Dreier (R-La Verne) said that the far-reaching legislation contains a multitude of other provisions--some controversial--that needed a “full and open hearing” before votes were taken.

Under the bill, which was approved on a 382-12 vote, Congress would create a new financing corporation to borrow up to $10.8 billion to insure S&L; deposits. The corporation, which would be controlled by the nation’s 12 Federal Home Loan Banks, could use up to $3.8 billion of that amount to bail out threatened deposits in any one year.

Sponsors called the banking reform legislation a boost for consumers, many of whom, they charged, are victimized by devious banking procedures.

The rule requiring banks to clear funds from out-of-state checks within four days of deposit, for example, was hailed by Rep. Frank Annunzio (D-Ill.) as perhaps “the most significant consumer legislation we will pass in the 100th Congress.”

He and other members noted that banks make an estimated $290 million a year on the short-term interest--or “float”--from such deposits, which often take two weeks to clear.

Critics zeroed in on a section of the bill banning creation of new “non-bank banks,” which offer commercial loans or accept deposits, but not both. These institutions--usually run by department stores and other private businesses--have been criticized by banking officials because they are not subject to federal banking laws and, as a result, are not required to meet federal standards of insurance protection for deposits.

Dreier and other members defended these increasingly popular banks, saying that they meet the needs of consumers and should not be driven out of the market. They pledged to bring the issue up again in separate legislation sometime next year.

“I have yet to hear of one difficulty caused to one consumer anywhere by one of these banks,” said Rep. John J. LaFalce (D-N. Y.). “This is a clear case of over-regulation . . . . We have no business getting involved in this.”