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Banks Get a Break.

ARKANSAS' BANKS CAN SOON say so long to the usury provision in the state Constitution that never did what it was intended to do.

It's been done away with in the soon-to-be signed federal legislation that overhauls the financial services industry.

And what does it all mean to the average Arkansan?

Probably not much. Most banks already had found ways to circumvent the Depression-era laws through various loopholes and waivers.

It does, however, correct an inequity by allowing Arkansas banks to compete evenly with the rest of the nation's banks, which set interest rates based on market forces rather than some artificial limit set by government.

Although not the main focus of the measure, it's certainly a plus for any Arkansas financial institution that deals with federally insured deposits.

While banks get a break from the state restrictions, it's unfortunate that other businesses in Arkansas are still saddled with the usury law. Since the banks were the primary backers of past reform efforts, it seems unlikely there'll be much interest in eliminating the usury provision from the Constitution.

The main thrust of the bill was to reform parts of the Glass-Steagall Act of 1933 and the 1956 Bank Holding Company Act by allowing banks, securities brokers and insurance companies to enter one another's businesses.

The most Visible impact will be the increased pace of mergers in the banking industry, some buying up securities firms and possibly insurance firms, and the creation of one-stop "financial supermarkets."

While it is true that many financial firms have been expanding into supposedly forbidden areas for years, constantly pushing the limits of the law, the changes do bring regulations in line with reality in the financial world by lifting barriers that made such combinations complex and cumbersome.

With trillions of dollars in consumers' savings and investments up for grabs, we should all brace ourselves to be getting even more of those dinner-hour telephone sales pitches from credit-card and mortgage companies you've never heard of.

Investors will be the biggest beneficiaries, but consumers also will benefit in several ways. Competition should drive loan rates down and, with banks buying up securities firms or insurance companies or vice versa, more useful products will be offered. We're thinking of generous checking privileges for investment portfolios, or homeowners insurance for mortgage loans.

European companies have long offered financial products ranging from mutual funds to life insurance and credit cards. These changes make it easier for U.S. financial companies to compete in the global marketplace.
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Publication:Arkansas Business
Article Type:Brief Article
Geographic Code:1USA
Date:Nov 1, 1999
Previous Article:Correction.
Next Article:6 Billion.

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