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IBAA SUPPORTS CLINTON CREDIT CRUNCH INITIATIVES AS ESSENTIAL FIRST STEP

 WASHINGTON, March 4 /PRNewswire/ -- Now that President Clinton, Federal Reserve Board Chairman Greenspan and many members of Congress have acknowledged that bank regulatory burden is fueling the credit crunch, the administration and Congress must act promptly to solve the problem, the Independent Bankers Association of America (IBAA) said today.
 Testifying before the Senate Small Business Committee, IBAA President-elect James R. Lauffer said regulatory overkill facing community banks is a predominate cause of the credit crunch. Over- regulation and over-documentation are hampering small-business lending in particular, he said, slowing the economy's most dynamic job-creating sector.
 "Small-business loans are not being made to the extent needed to sustain the economy," said Lauffer, chairman/president/CEO of The First National Bank of Herminie in Irwin, Penn. "The credit crunch which has enveloped the nation for so many months continues. ... While there are some signs that the economy is beginning to recover, it is a recovery that has failed to create sufficient jobs."
 Although he voiced support for Clinton's regulatory-relief initiatives, Lauffer said administrative action is not enough to alleviate the credit crunch. Congress must repeal burdensome provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), he said, and restore prudent character lending.
 Lauffer cited Section 132 of FDICIA as an example of congressional micro-management. Section 132 requires federal regulators to set nationwide standards, including leveling standards, for a wide variety of bank internal procedures. This formula approach prevents banks from using innovative and creative methods to respond to credit needs, he said.
 "This micro-management constrains bankers by limiting their flexibility in meeting community credit needs," Lauffer said. "Many small businesses will fail to obtain credit and fewer loans will be made because of this legislative straitjacket. The pendulum has swung too far."
 Lauffer also said that Clinton's proposal to create 100 new community development banks would be "ineffective, inefficient and expensive." Instead, he said, existing institutions should be encouraged to increase their community-development efforts with incentives such as additional Community Reinvestment Act credits and funding for training and technical aid.
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 3/4/93
 /CONTACT: Gary Kohn of the Independent Bankers Association of America, 202-659-8111/


CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU: EXE

TW -- DC009 -- 2859 03/04/93 09:48 EST
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Date:Mar 4, 1993
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