Preserving Independence of Financial Institution Examinations Act of 2003

Mr. Speaker, on November 24, 2003, the Senate passed unanimously S. 1947, the ``Preserving Independence of Financial Institution Examinations Act of 2003.'' This bipartisan legislation was introduced by Senator Hatch and Senator Leahy, the Chairman and ranking Member on the Senate Judiciary Committee. The bill would update two provisions of the Federal Criminal Code enacted in the mid-1900s.

As the Nation's banking system has consolidated, it has become extremely difficult for bank examiners to obtain credit cards or mortgages for themselves because of these outdated provisions. This affects the hiring, retention, morale, and work of our Nation's bank examiners.

To alleviate this problem, the bill would amend sections 212 and 213 of title 18 of the United States Code to reflect the changes in our Nation's banking system. Under current law, these sections prohibit examiners from borrowing from banks they have examined, and prohibit a financial institution from extending credit to anyone who examines or has authority to examine that institution. These provisions have been interpreted to cover all kinds of borrowing, including standard credit cards and mortgages.

In a December 4, 2003, letter the Legal Division of the Board of Governors of the Federal Reserve System explained that:

[under current law] . . . an examiner could commit a crime by

obtaining a department store credit card that is ultimately

issued by a bank the examiner examined five years ago.

Examiners also have encountered difficulty in obtaining home

mortgage and other loans at the best available rates because

of restrictions on the range of permissible lenders.

The proposed legislation updates the Criminal Code allowing for narrow exceptions to the statutes for bank examiners who hold credit cards and residential home mortgage loans on standard terms from the banks they are examining.

I urge my colleagues to support this legislation.

The Senate bill was ordered to be read a third time, was read the third time, and passed, and a motion to reconsider was laid on the table.

Mr. President, today's passage of the Preserving Independence of Financial Examinations Act of 2003 is an example of solid, efficient bipartisan work on a needed legislative reform. I am pleased to have seen its passage so swiftly through the U.S. Senate and I thank my friend from Utah, Senator Hatch, for his assistance and advice.

The bill provides a logical and necessary modification to important, but outdated, criminal statutes originally written to ensure the objectivity and integrity of financial institution examinations. Sections 212 and 213 of title 18 of the United States Code, first drafted in 1948, appropriately provide criminal penalties for bank examiners who are offered, or who accept, a loan or gratuity from the financial institution they are examining. This bill exempts from the law's reach ordinary credit card and residential home mortgage loans sought and held by bank examiners in their everyday lives.

Several factors supported the proposed blanket credit card and residential loan exceptions. Most important, consolidation within the banking industry made it increasingly difficult for examiners to obtain nationally available credit cards and mortgage loans and for the banking agencies to assign examiners to work.

The Leahy-Hatch bill strictly defines the circumstances under which the exceptions to the criminal statute apply with a keen eye on preserving the independence of financial institution examinations and the original legislative intent of the statute.

I thank Senator Hatch for his assistance in this bill forward and making it possible for bank examiners to engage in arms-length and routine business transactions without fear of prosecution. I also thank our friends in the banking agencies, including the Federal Reserve Bank, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation for bringing this important issue to our attention.

Mr. President, I rise to join my friend and distinguished colleague, Senator Leahy, in the introduction of the Preserving Independence of Financial Institution Examiners Act of 2003. This bill modifies two criminal statutes, sections 212 and 213 of title 18 of the United States Code, which impose criminal penalties on bank examiners who are offered, or who accept, a loan or gratuity from a financial institution they are examining. These revisions are needed to reflect the changes in our national banking system.

When originally enacted, the criminal statutes were designed to ensure that bank examiners were not subjected to undue and improper influences from the subject banks. With the increased consolidation and globalization of the banking industry, it is difficult in today's banking economy for examiners, particularly those who examine credit card banks, to obtain nationally available credit cards. The statutes, which were originally enacted in 1948, include no exception for routine, ordinary business transactions that were never intended to fall within the ambit of the statutes. The proposed legislation provides an exception to the statutes for bank examiners who hold everyday credit cards and residential home mortgage loans from the banks they are examining. The exceptions are narrow and the purposes of the statutes to prohibit such conflicts of interest will remain intact.

I want to thank Senator Leahy for his willingness to address this problem. I urge my colleagues to support this measure and quickly pass it.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. 1947, which was introduced earlier today.

Mr. President, I further ask unanimous consent that the bill be read three times and passed, the motion to reconsider be laid upon the table, with no intervening action or debate; and that any statements relating to this measure be printed in the Record.

Mr. Speaker, I ask unanimous consent that the Committee on the Judiciary be discharged from further consideration of the Senate bill (S. 1947) to prohibit the offer of credit by a financial institution to a financial institution examiner, and for other purposes, and ask for its immediate consideration in the House.