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Legislators to referee fight between large, small banks.

Legislators To Referee Fight Between Large, Small Banks

Holding Companies Want To Go Beyond $15.5 Billion Deposit Limit

As the 78th General Assembly opens in Little Rock, key Arkansas lawmakers are braced for the worst -- like having to referee another battle between the state's large and small banks.

And they're not happy about it.

"I begged them [the banks] to come up with a consensus bill and we would pass it," recalls Sen. W.D. "Bill" Moore of El Dorado, who obviously fears that this isn't happening.

Moore chairs the Senate Insurance and Commerce Committee, which will be the battleground if a mysterious draft bill many have heard about but few have seen is introduced. The bill would allow a few, big state bank holding companies to get even larger.

Other business issues facing the legislature -- worker's compensation changes, health insurance, and restructuring the Pollution Control and Ecology Commission -- may not be as tough.

Existing state law bars a bank holding company from controlling more than 15 percent (about $2.3 billion) of the total individual-partnership-corporation (IPC) bank deposits in the state. The state IPC total as of Dec. 31, 1989, was nearly $15.5 billion.

Not included in the base are savings and loan deposits, public funds, correspondent bank deposits and credit union monies. Reportedly, the draft bill would enlarge the base on which the 15 percent is figured by including the $4.5 billion to $5 billion in Arkansas savings and loan deposits.

Bumping The Cap

The cap kept Worthen Banking Corp., with just over $2 billion in IPC deposits when 1989 ended, from acquiring both insolvent Independence Savings and Loan Association and healthy North Little Rock-based Twin City Bank last year. Worthen opted to take the S&L and convert its deposits because of its branches, thus creating a second controversy that might land in the lawmakers' laps.

Though Worthen is the one "bumping" the cap, Lindley Smith of Tuckerman, president of the Independent Bankers Association, suspects First Commercial Corp. is the one preparing the bill. First Commercial's IPC deposits totaled nearly $1.5 billion at the end of 1989.

Charlotte May, director of the Arkansas Association of Bank Holding Companies, is mum, saying only that her organization is still surveying its 130 members on the issue. She recalls, however, that Rep. L.L. "Doc" Bryan of Russellville told her group last fall that a bill redefining the deposits base was likely.

Smith says his 190-member Independent Bankers Association sees "no need to let one organization get any larger" and opposes any change. Even under existing law, he says it's conceivable seven holding companies could control all the deposits in Arkansas, though he concedes this is unlikely to happen.

A special 1987 legislative session hammered out a law to phase in statewide branch banking by 1998 with branches in contiguous counties allowed by 1992. The same law authorized interstate banking in Arkansas.

The picture changed dramatically late last year when the U.S. Eighth Circuit Court of Appeals ruled the federal law creating the Resolution Trust Corp. overrode state law, clearing the way for Worthen to acquire the Batesville-based Independence S&L and its branches.

Smith says his organization opposes any moves designed to speed up the branch banking timetable or remove the restrictions entirely, though he admits some banks are saying they want the option to keep pace with Worthen. "We've already compromised on this issue" with the existing law, he declares.

The Arkansas Bankers Association, made up of large and small banks, usually stays neutral on such family squabbles, and that's what it is doing this time, says Executive Director Bo Carvill.

Besides, Carvill adds, the banking community is more worried about what's going on in Washington than in Little Rock now that the Bush Administration wants all banks to contribute 1 percent of their deposits to shore up the Federal Deposit Insurance Corp.'s stressed treasury.

The typical American bank makes considerably less than 1 percent a year on its deposits, Carvil says, so if the administration succeeds, most bank profits will be wiped out. Banks in many states could recoup by hiking loan interest rates, but this can't be done in Arkansas because "that would be usury," he explains.

If bills to change the bank holding company deposit cap and branch banking don't materialize, the bankers can be expected to focus on getting the General Assembly to create a state government central filing system for liens against agricultural crops.

The General Assembly tried to do this before, but Secretary of State Bill McCuen botched it by getting a computer that couldn't do the job. Now McCuen wants out of the picture, but Smith says a central filing system is "dreadfully needed" and McCuen is "painfully misinformed" if he thinks otherwise.

Arkansas bankers also are insisting on representation on a new commission to appraise properties for loans from thrifts. The federal government mandated creation of such state commissions as part of the S&L "bailout." Banker representation appears likely, so Smith says the real issue now is at the federal level -- whether the minimum loan size for an appraisal should be $50,000 or $100,000. Appraisals cost money, so "I wish they'd look at $100,000 or higher," he says.

Changing Composition

The 1991 legislative session is starting with the independent bankers wary of what the silent big banks may be planning. But uncertainty doesn't end here because business is facing a Senate Insurance and Commerce Committee with a new makeup and new chemistry.

Moore remains chairman, but Sen. Jerry Jewell of Little Rock, a black dentist, is the new vice chairman because Sen. Jerry Bookout of Jonesboro opted to head the Public Health, Welfare and Labor Committee. Bookout remains a committee member.

Two veterans, Sens. Max Howell of Jacksonville and Clarence Bell of Parkin, are still on the committee. But in addition to Jewell, there are two other newcomers, though both have been in the Senate for decades -- Nick Wilson of Pocahontas and Eugene "Bud" Canada of Hot Springs.

These three replace two Old Guard stalwarts, Knox Nelson of Pine Bluff and Paul Benham of Marianna, both defeated in last May's Democratic primary, and Ben Allen of Little Rock, the fiery veteran with a populist streak who retired.

Bookout is another senator who voices resentment at being asked to settle "family feuds" during pressure-cooker, sixty-day sessions. He says they turn to the legislature because both sides think they can outwit or outmuscle the other. He, too, wants consensus.


The Senate Public Health, Welfare, and Labor Committee used to handle workers' compensation issues because Knox Nelson was its chairman. Now, they will go to Moore's Insurance and Commerce.

The Workers' Compensation Commission administers the assigned risk pool for employers who can't otherwise get coverage. The legislature wants to shift this to the state Insurance Department. The Commission's George Harris says it has "no objections."

Legislators are being told that Arkansas has the highest worker's compensation insurance rates in the country -- for example, it accounts for $60 of every $100 of payroll costs for a logger -- and the lowest benefits. Rep. Pat Flanagin of Forrest City is sponsoring a study to find out if this is true and, if so, why.

Meanwhile, State Insurance Commissioner Lee Douglas held a recent hearing on the National Council of Compensation Insurer's application for an average 24.8 percent rate increase.

Douglass' decision and the study results by the Legislative Council's Fred Vandriesum probably will arrive about the same time -- in the middle of the session. One or the other, or both, could be the catalyst for major action in this area.


Rep. Dave Roberts of North Little Rock, long the legislative leader on standard insurance matters, tackled the generally recognized crisis in health insurance last year and has come up with two prefiled bills.

House Bill 1114 would establish a pool for the alleged thousands of Arkansans who, "because of health conditions, rather than an unwillingness and inability to pay premiums," cannot obtain health insurance.

People who use the pool would pay premiums, probably extraordinary ones of up to 200 percent above normal, and benefits would not exceed $250,000.

Robert's bill contains no mechanism for financing the pool. Roberts, Gov. Bill Clinton and others decided to get the enabling legislation enacted first and confront the financing later -- perhaps at a special session.

Twenty-four states have health insurance pools. Louisiana pays for its pool with lottery money, but many others assess insurance companies and then let the firms deduct it from the premium taxes they pay the state.

Just how much controversy is generated by the pool insurance idea will be dictated by who -- or what -- pays the freight and the ease with which it can be passed on to the taxpayers.

Roberts' second measure, House Bill 1117, is for businesses with fewer than 50 employees -- those which have said they can't afford group health insurance policies, largely bacause of all the coverages the state requires. Those coverages include "in vitro" fertilization, pre- and post-natal care, well-baby care, podiatry, psychological counseling and chiropractors.

"These mandates should never have been in there in the first place," Roberts declares. "The effect has been to increase premiums and it has caused almost all large businesses -- and state employees -- to go to self-insurance. Self-insurance plans aren't regulated and they pay no premium tax, so everybody loses."

Roberts' bill would allow small businesses to adopt a group plan containing whatever medical coverages the businesses and their workers want and are willing to pay for.

He says he patterned his bill after a Virginia law that has been on the books 18 months. In the Old Dominion, Roberts continues, Blue Cross & Blue Shield has come up with a basic small business group plan with a premium 30 percent below the standard fare.

Chiropractors opposed Roberts' bill at a hearing last fall because they want mandated coverage for their profession. And, the state AFL-CIO objects, but hasn't given any convincing reason yet.


Conservationists are pressing the legislature to restructure the state Pollution Control and Ecology Commission, saying it has a "built-in bias" for polluters. The 11-member body has five members appointed by the governor, one each representing industry, mining, agriculture, municipalities, and conservation, which was added in 1985.

The other six members are agency heads of their designees -- the Soil and Water Conservation Commission, Game and Fish Commission, Forestry Commission, Oil and Gas Commission, Health Department, and the Geological Commission.

Conservationists argue for a five or seven-member commission with no one representing a designated constituency such as industry. A new group called Arkansans for Environmental Reform wants the commission to appoint a three-member hearing board to hear appeals from agency decisions and to have the commission appoint the director rather than the governor.

The Federation of Water and Air Users, an industrial organization with backing by the Poultry Federation and the state Chamber of Commerce, vigorously opposes the changes, arguing that the system "ain't broke" and doesn't need fixing.

Based on a hearing before the Joint Interim Committees on State Agencies and Governmental Affairs in December, the PC&E restructuring Clinton may offer appears headed for a legislative graveyard. If this happens, the conservationists say they will start gathering petitions to get the issue on the 1992 general election ballot as an initiated act.

Finally, a committee of Soil and Water Conservation Commission members -- all from East Arkansas -- has drafted a bill to regulate groundwater withdrawals in designated critical areas. It appears the Commission staff may have worked hard enough to head off the bitter fights focused on regulating groundwater that marred the 1983 and 1985 legislative sessions.

PHOTO : MUM'S THE WORD: Charlotte May, director of the Arkansas Association of Bank Holding Companies, isn't saying much about the IPC deposit bill. She notes, however, that Rep. L.L. "Doc" Bryan of Russellville told her group last fall that a bill redefining the deposits base was likely.

PHOTO : BUMPING THE CAP: Worthen Banking Corp. is pushing the limits of a state law which bars a bank holding company from controlling more than 15 percent of the total individual-partnership-corporation (IPC) bank deposits in the state. A draft bill, which is supported by Worthen and other large banks, would enlarge the base on which the 15 percent is figured by including the $4.5 to $5 billion in Arkansas savings and loan deposits.

PHOTO : BANK BATTLE: The Senate Insurance and Commerce Committee, chaired by Sen. W.D. "Bill" Moore, may become a battleground if large and small banks don't come up with a consensus bill on individual-partnership-corporation bank deposits, which totaled nearly $15.5 billion in 1989.

PHOTO : BILLS OF HEALTH: Tackling the health insurance crisis is on Rep. Dave Roberts' agenda for the 1991 legislative session. One of his measures calls for allowing small businesses to adopt a group plan containing whatever medical coverages they and their workers want.

PHOTO : LEGISLATIVE STUDY: Lawmakers will be looking into why Arkansas has the highest workers' compensation rates and the lowest benefits in the country.
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Author:Griffee, Carol
Publication:Arkansas Business
Date:Jan 14, 1991
Previous Article:Arkansas Business of the Year 1990.
Next Article:The project that won't go away.

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