Federal Savings Association Charter Flexibility Act of 2017

Mr. Speaker, I thank my good friend for yielding.

I thank my colleagues on both sides of the aisle for their support of this important bipartisan legislation, and especially the lead Democratic cosponsor, Representative Jim Himes from Connecticut.

The Federal Savings Association Charter Flexibility Act is a commonsense reform bill that will help to ensure that community banks, many of which have histories stretching back generations, can continue to serve the needs of Main Street businesses and families.

Specifically, this bill focuses on Federal savings associations, also known as thrifts. These institutions are similar to national banks in the sense that they are both chartered and regulated by the Office of the Comptroller of the Currency and the FDIC.

But these banks are constrained in their ability to pursue certain lines of business under the Home Owners' Loan Act, also known as HOLA. Specifically, HOLA subjects Federal thrifts to commercial lending limits.

Under what is known as the qualified thrift lender test, at least 65 percent of a Federal thrift's portfolio assets must comprise certain mortgage and consumer-related assets. These institutions are also constrained in their ability to hold commercial loans, paper, or corporate debt. In contrast, national banks enjoy the ability to engage in a much wider range of lending activities.

These restrictions originally made sense because thrifts also enjoyed advantages not afforded to national banks. But changes in law have eliminated or curtailed many of those benefits, and some thrifts have expressed frustration that these restrictions prevent them from being able to meet the changing needs of their local communities. Unfortunately, thrifts have not been immune to the industrywide trend of consolidations and closures that has accelerated over the last decade.

The Federal Savings Association Charter Flexibility Act provides these banks with additional flexibility to adjust to changing times and continue to serve their communities, despite these persistent headwinds.

Under current law, the only option available to Federal savings associations is a costly and complicated conversion to a national bank charter. This is a particularly burdensome process for mutually chartered Federal thrifts since it requires that they first convert to stock form before converting their charter.

The Federal Savings Association Charter Flexibility Act provides another, less disruptive option. Under my bill, Federal thrifts will have the ability to pursue a path that will allow them to operate with the same rights and duties as a national bank. But these banks will not have to go through the costly and cumbersome process of converting to stock form and then rechartering. Instead, the bill sets up a simple 60-day election process that will allow these institutions to become covered savings associations.

It will also require the OCC, which has been supportive of this legislation and has responsibility for regulating Federal savings associations and national banks, to establish an orderly and streamlined transition process.

This bill also includes important safeguards to prevent potential fire sales of assets and subsidiaries during the transition process, and it protects the OCC's ability to prevent firms from abusing the new structure.

Altogether, this effort will help to ensure that time-tested community financial institutions will continue to be able to serve their customers for years to come.

The Federal Savings Association Charter Flexibility Act has the support of the American Bankers Association and the Independent Community Bankers of America. It is also bipartisan, and it passed the Financial Services Committee with a 55-0 vote. Similar language has been included in the bipartisan Senate Banking Committee package, also.

In short, this bill represents the sort of reasonable, commonsense, across-the-aisle reform that our constituents want to see.

I want to briefly share some comments from the Pennsylvania Bankers Association, which represents a wide range of banks in the Commonwealth of Pennsylvania. In their letter of support for this bill, they wrote: ``. . . this legislation represents sound, sensible regulatory relief.''

They also added that ``Federal savings associations are known for being responsive to their communities' needs, and this legislation will help them to expand and continue to do so.''

I ask that my colleagues support H.R. 1426, the Federal Savings Association Charter Flexibility Act.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1426) to amend the Home Owners' Loan Act to allow Federal savings associations to elect to operate as national banks, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on this bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, mutual savings banks, cooperative banks, and mutual savings and loan associations are essential community-based financial institutions that have a long history of serving their neighbors and promoting small-town economic growth.

However, many of the benefits once given to Federal savings associations, also known as thrifts, that encouraged community growth and financial well-being have been stifled by changes initiated under the Dodd-Frank Act. While Dodd-Frank eliminated many of the benefits provided to Federal savings associations, the HOLA restrictions, unfortunately, remain.

These restrictions have left Federal savings associations at a disadvantage and without the flexibility needed to adapt to meet community needs and, as a result, are forcing many mutual banks to either close or merge with other institutions, meaning fewer and more expensive choices for consumers hoping to finance important purchases.

H.R. 1426, Mr. Rothfus' bipartisan legislation that passed out of the Financial Services Committee unanimously, would help to preserve these important community financial institutions by providing mutual banks with a framework to become covered savings associations. This process would provide thrifts the ability to operate with the same rights and duties as national banks without subjecting them to a complex, time- consuming, and costly charter conversion process.

Providing thrifts the flexibility to exercise national bank powers without changing their charters would give institutions the ability to exceed the commercial and consumer loan limits that apply under the Home Owners' Loan Act but continue to benefit from their structure for purposes of consolidation, merger, dissolution, conservatorship, and receivership.

Because the Office of the Comptroller of the Currency already supervises both national bank and Federal savings association charters, it is uniquely positioned to provide the structural framework for the election process that would transition the rights and duties of a national bank to a thrift.

Mr. Rothfus' bill instructs the OCC to develop a series of rulemakings to outline this election process, while also requiring safeguards to prevent malpractice in the transition process, as well as abuses in the new structure once it has been instituted.

Community financial institutions should be given the tools they need to lend effectively to their communities, and this bill creates the legislative landscape for savings associations to do just that.

Ultimately, the bill creates opportunities for families and small businesses to access financing for their important purchases, from buying a home to expanding a business.

Federal savings associations have a long, proud history of being responsive to their communities' needs, and this legislation will help them to enhance and continue that record.

I cannot give more emphatic support for this commonsense, bipartisan legislation, and I urge my colleagues to support this measure.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 5 minutes to the gentleman from Pennsylvania (Mr. Rothfus), vice chairman of the Financial Services Subcommittee on Financial Institutions and Consumer Credit. He is also the sponsor of this legislation.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, currently, the Home Owners' Loan Act imposes limitations on the portfolio mix of loans and investments that a thrift institution can make. Such limitations include the amount of commercial and consumer loans that a thrift can hold and a requirement that they hold a certain percentage of qualified thrift investments. These restrictions are not currently faced by national banks and other financial institutions.

If a thrift decides that it wants to engage in more commercial lending or otherwise seeks to expand its product offerings beyond what is allowed under current law, they have to undergo a time-consuming process of converting the stock form of their organization in order to apply for a national bank charter. For smaller thrifts in particular, the charter conversion process can be costly.

H.R. 1426 solves this problem by amending the Home Owners' Loan Act and creating an election process for thrifts to operate as a national bank without having to convert their charter to a national bank.

This proposal originated from former Comptroller Curry in 2014 to give thrifts flexibility with respect to the current limitations on the amount of commercial and consumer loans that a thrift can hold.

While the terms and conditions of a charter are important, we should be careful about blurring lines. Therefore, I am pleased that the OCC can reject providing the flexibility to a particular thrift under this bill and can take other supervisory actions to promote safety and soundness.

According to the FDIC, there were 768 thrifts as of last September, compared to nearly 5,000 State and national banks, and all but 15 of these thrifts have less than $10 billion in assets, which underscores that this bill will mostly help small institutions better serve their communities.

Former Comptroller Curry described the proposal as a tool for enabling ``Federal thrifts to diversify their loan portfolios, maintain their Federal charter, and retain the OCC as their regulator.''

I thank Mr. Rothfus and Mr. Himes for introducing this bipartisan bill, and I urge my colleagues to support it.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield back the balance of my time.