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 WASHINGTON, Feb. 24 /PRNewswire/ -- Waving stacks of documents as examples of the regulatory obstacles facing banks, NationsBank (NYSE: NB) Chairman Hugh McColl explained to Sunbelt lawmakers today how balanced regulatory relief could provide a powerful nationwide economic stimulus.
 McColl appeared on a panel of Sunbelt business leaders and educators discussing economic development for the region. The forum was hosted by the Sunbelt Congressional Caucus, a group of U.S. Representatives from 17 southern and southwestern states that focuses on issues of importance to the region.
 McColl said labor and capital are the keys to greater prosperity for all Sunbelt residents. For the region to be globally competitive, the quality of the workforce must continue to improve, he said. More immediately, the weight of banking regulations must be lightened to allow capital to flow to where it is needed, McColl said.
 Holding a two-inch thick stack of loan documents, McColl told the lawmakers that a typical mortgage loan from a national bank must comply with more than 260 separate regulatory requirements. A bank representative opening a basic interest bearing checking account for a customer must follow approximately 500 pages of laws and instructions from regulators, McColl said.
 "My associates and I are paid based upon how much money we can lend," McColl said. "But fulfilling the role of the banker has become increasingly difficult. A crush of regulations has transformed bankers into bureaucrats. The steady build-up of documentation and record- keeping requirements over the last 25 years has reached the breaking point for borrower and lender alike -- and ultimately the economy.
 "This glut of regulation seeks to take judgment out of a judgment business, to completely eliminate risk rather than allowing professionals to manage risk," McColl continued. "The result is not a true regulation of the flow of credit but a vice slowly clamping off the lifeblood of the economy."
 In addition to loosening credit for the struggling economy, McColl said balanced regulatory relief that does not sacrifice consumer safeguards would allow banks to build their capital levels and create more stability for the banking industry.
 Citing the widespread failures of savings and loans as a major factor in the volume of bank regulations, McColl made a proposal.
 He volunteered to lead an effort to raise $30 billion from the banking industry to replace the $30 billion line of credit the Treasury Department has extended to the FDIC to bolster the Bank Insurance Fund, which is used to bail out depositors of failed banking institutions. The industry line of credit would be secured by industry obligations to pay deposit insurance premiums over the next several years.
 "I believe we can be successful in such an effort and both the government and the taxpayer stand to benefit," he said.
 McColl repeated his appeal for legislation allowing multi-state banking companies to merge the banks they own, referred to as interstate branching. To signal the importance of the issue to the industry, he pledged to invest the $50 million NationsBank estimates it would save annually in low-income and under-served communities for a period of time agreed to by NationsBank and Congress.
 As a group, multi-state bank holding companies account for approximately 60 percent of all U.S. banking deposits and roughly two out of every three loans, he said.
 Citing studies by the U.S. Department of Treasury and McKinsey and Co., multi-state bank holding companies would save a total of $5 billion to $10 billion a year through interstate branching. If used as capital, the savings could generate up to $100 billion in new loans, three times the size of President Clinton's proposed short-term economic stimulus package.
 "President Clinton said at his economic summit that any economic stimulus would be "peanuts" compared to the increase in lending that could result from level-headed regulatory relief," McColl said. "And he was right."
 Other members of the panel were BellSouth Corporation Chairman and Chief Executive Officer John L. Clendenin, University of Texas System Chancellor Dr. William H. Cunningham and Delta Wire Corporation President George F. Walker.
 NationsBank Corporation is the fourth-largest banking company in the United States with full-service banking centers in nine states and the District of Columbia.
 Following is the text of an address by NationsBank Chairman Hugh McColl before the Sunbelt Congressional Caucus Economic Forum, 2212 Rayburn House Office Building, Washington DC, February 24, 1993, 8:30 a.m.-10:30 a.m.:
 It's a great privilege to take part in this panel and address such a prestigious forum.
 I am a son of the South ... one who was born there, raised there, educated there, stationed as a Marine there and employed for 33 years there. Since our company moved into Texas in 1988, I've been enlightened by more than a few Texans about the rich history, culture and quality of life in the Southwest. I spend as much time there as I can and think of it as a second home. So the opportunity to participate today -- to identify mutual goals for the entire Sunbelt which policy makers and the business community might achieve together -- is uniquely appreciated.
 I'd like to speak to you this morning in plain southern language ... about some of the issues facing our region and ways the banking industry can play a larger role. And I'd like to start with some good news. According to a recent report by the Federal Reserve Bank of Atlanta, much of the Sunbelt will experience greater economic growth than the nation as a whole in 1993. Industries such as textiles, furniture, appliances and lumber should lead the way as the region builds on the momentum of the second half of last year.
 But along with high hopes, the report also delivers a strong dose of reality for our region. Looking ahead, the Fed's researchers have this to offer -- and I quote: "The region's above-par performance will depend in the longer term upon its ability to attract capital and labor ... and its response to underlying structural changes in the domestic economy and in international competition." (End quote.)
 Capital and labor -- More than any others, those two factors will decide whether our region's economy continues to struggle against the vestiges of its past ... or seizes its inherent strengths to lead the economy of our country.
 Assessing the region's progress in 1986, the Commission on the Future of the South found the region to be -- quote -- "Half Way Home and a Long Way to Go." "The sunshine on the Sunbelt," the commission reported six years ago, "proved to be a narrow beam of light." Last year, the Commission met again. And while the region has moved a little further past half-way ... and the sunbeam has widened to include more of the region's population ... it found we still have a ways to go.
 So much distance remains because we have set an ambitious but necessary goal ... for the region to become not simply nationally competitive but globally competitive. Toward that end, we should take encouragement in the accomplishments of our region, such as:
 -- An increase in the percentage of adults with a high school diploma -- from 59 percent in 1980 to 70% in 1990 ... but still short of the national standard of 75 percent;
 -- The emergence of some of the nation's most promising and economically dynamic urban areas; and
 -- A significant shift over the past two decades from traditional manufacturing to emerging industries as represented in the accomplishments of Mr. Clendenin and Bell South in telecommunications.
 Those are some of the mileposts our region has passed. What about those that mark the road ahead? They include:
 -- Training and involving more of our region's under-utilized workforce -- especially African-Americans, women and residents of rural areas;
 -- Increasing the Sunbelt's international exports from the current 6.4 percent of manufactured goods to at least the national norm of 7.8 percent;
 -- Improving the success rate for new Sunbelt business -- which failed five times faster than the nation as a whole over the past five years; and,
 -- Upgrading the infrastructure across the region to improve our chances of attracting more plants like the $250 million BMW plant under construction in South Carolina.
 Measures of economic progress vary widely. Each of you has your own vision for your state and for our region. I have mine. But none of our visions will become reality without a labor pool that is up to the job. As noted in a recent study by Manpower Development Corp., the Sunbelt's workforce can be -- quote -- "the engine that drives the region's economy or the brake that halts it."
 Our region's workforce CAN compete not just nationally but globally ... it CAN be the engine and not the brake -- and the institutions represented here this morning prove it.
 -- With a purely native workforce using the latest statistical management methods, Delta Wire competes internationally -- and successfully.
 -- Through concepts such as "just-in-time" training, BellSouth prepares workers trained in yesterday's schools for the demanding, high- tech jobs of today -- and tomorrow.
 -- And, institutions of higher education such as the University of Texas annually turn out those who will lead the next generation of Sunbelt workers.
 Delta Wire, BellSouth and the University of Texas represent new horizons for the Sunbelt workforce. In the same way, banking companies like ours and others represent new financial horizons for our region -- and that brings me to the second critical factor raised by the Federal Reserve report -- capital.
 One of the bright spots for our region in the last decade is the emergence of a new breed of Sunbelt-based financial institutions. For decades past, no home-grown institution could fully serve the region's business and industry. But, no longer must Sunbelt businesses turn to the money center banks of New York or Chicago for their largest or most complex financing needs. Today, a group of super-regional banking companies, having raised unprecedented amounts of capital for the region, stands ready to fuel the economic expansion of the Sunbelt.
 For customers, the advantages stretch beyond banking with industry leaders. The emergence of these institutions means the availability of programs designed to meet highly specific needs.
 -- For a small business in San Antonio, Texas, it means specialized lending efforts, such as my company's Business Banking unit, which concentrates purely on businesses of no more than $4 million in annual revenues.
 -- For the owner of a child care center in Charleston, South Carolina, the financial muscle of a company like ours enables us to offer a below-market-rate loan as part of a special child-care loan fund.
 -- For middle-class parents in Nashville, Tennessee, and the six million other households that NationsBank serves, it means the ease of dealing with one financial institution in setting and meeting any financial goal ... from saving for a college education to planning for retirement.
 -- And, for the segments of our region's population yet to feel the warmth of the sunshine on the Sunbelt, it means the commitment to harness our power on their behalf ... such as my company's commitment to pump $1 billion a year into under-served, low- and moderate-income neighborhoods over the next decade.
 As our region grows, so too will this new breed of banking companies.
 Now, having said all of that, I want to acknowledge a fact: My company, and my industry, HAS NOT been lending enough money -- to businesses or to individuals. And I'd like to explain why.
 Pundits have put forth the idea that banks would prefer to invest in government bonds -- because there is no risk. Nothing could be further from the facts. My associates and I are paid not on whether we can engineer profits through bond trading but on how much money we can lend. We are bankers -- not eighties-style high-finance profiteers. We want to invest in our communities -- from tiny Harmony, North Carolina to giant urban centers such as the Dallas metroplex -- because our company is only as healthy as its communities.
 But fulfilling the role of the banker has become increasingly difficult. In short, a crush of regulations has transformed bankers into bureaucrats. The steady build-up of documentation and record- keeping requirements over the last 25 years has reached the breaking point for borrower and lender alike ... and ultimately the economy.
 Let's take a typical home mortgage from a national bank as an example. Borrowing money to buy or improve a home is the single most- important piece of banking most Americans will ever do. Housing-related loans also set off positive economic ripples throughout the economy. Many of you know from personal experience how complex the process has become. But here (holding up example file) is what it means for lenders. This is a file for a modest $40,500 mortgage loan to a self- employed carpenter in Lewisville, Texas with 20 years experience. It's a typical file for a home mortgage loan from a national bank. It includes information required by more than 260 separate regulatory requirements.
 Making home-related loans is made all the more difficult by the Home Mortgage Disclosure Act -- a well-intentioned law but one that today requires lenders to collect and report 19 separate pieces of information for every application we receive -- with no allowable margin for error. For a company like ours, we report 2.5 million to 3 million pieces of information each year and we are subject to penalty for any errors. In other words, we must be perfect, and perfection exacts a high cost on our economy.
 Providing basic deposit products is no easier. (holding up second file) This notebook contains 500 pages of laws and instructions covering the 200 regulatory requirements for a basic, interest-bearing checking account.
 Finally, Chairman Henry Gonzales of the House Banking Committee, whom I respect immensely, along with Secretary Bentsen express concern that banks are not serving the small customer. But the truth is that every day my associates face a dilemma: Should they turn away a potential low- or moderate-income borrower who cannot fill out the complex paperwork ... or the small business owner who cannot furnish the sophisticated cashflow projections required by regulations? Or should they book the loan and run the risk of it becoming listed by regulators as a troubled asset?
 This glut of regulation seeks to take judgment out of a judgment business ... to eliminate risk rather than allowing professionals to manage risk. But it simply can't work that way. And the result is not a true regulation of the flow of credit ... but a vice slowly clamping off the lifeblood of the economy.
 I use these examples simply to show you -- as lawmakers -- the proliferation of regulation and interpretation that results from your votes. And I make the case for regulatory relief not as head of one of the country's largest banks but as a representative of the industry. In fact, balanced regulatory relief would be especially beneficial to small community banks, which spend an estimated 24 percent of their net income meeting regulatory requirements -- not including those imposed by the FDIC Improvement Act. By freeing up only a portion of these resources, community banks would build capital, lend more to their communities and minimize their chance of burdening the FDIC.
 As for larger, multi-state banks there is one simple way to achieve the same goals --to build capital, create more stability for the industry and loosen up more lending dollars for the economy. That is by allowing multi-state banks simply to merge the banks they already own.
 With this one step, you could ease the flow of credit from the largest segment of the banking industry. In the Sunbelt alone, 65 multi-state banking companies operate 434 different banks. They account for more than half of all deposits and loans. The nationwide impact is even greater. Multi-state banking companies in the U.S. account for roughly 60 percent of all deposits and two of every three loans.
 Just how high is the cost of these regulations? Requiring multi- state banks to operate separately chartered banks for each state results in separate boards of directors, separate examinations, separate audits, separately prepared legal and regulatory filings and so on ... none of which help us serve customers or manage the company. Let me explain. NationsBank is organized to pursue specific customer groups -- commercial businesses, large corporations, mortgage customers, bank card customers, trust customers and so on. But regulations require us to break our company apart and rebuild it on paper on a state-by-state basis for no reason other than to meet reporting requirements.
 As a result, our subsidiaries must prepare roughly 14,000 internal and regulatory reports a year. Who is being served here? The public? I doubt it. Consolidating our banks into one company would cut that number to under 3,000.
 And that is just the beginning. According to conservative estimates by the Treasury Department and McKinsey and Company, elimination of these duplications would result in savings for all multi- state banks of $500 million to $2 billion a year. Because the estimates assume banking consolidation will continue -- and market forces dictate it will -- those savings could reach $5 billion to $10 billion a year. If that addition to capital is leveraged conservatively, the result could be $50 billion to $100 billion in new loan dollars for our economy.
 I feel strongly about this -- if it doesn't show -- and I am willing to show you how strongly. We estimate that NationsBank could save roughly $50 million a year if we could consolidate the banks we already own. If used as capital, these savings could be leveraged conservatively into $500 million in new loans for our region.
 Here is my offer: NationsBank is willing to invest these funds in our neediest neighborhoods -- HOWEVER -- the White House or Congress would like -- for an agreed-upon period of time. My point is we would much rather invest that $50 million in feeding our communities instead of feeding a bureaucracy.
 Let's continue to ask ourselves -- Who is being served here? Let me be clear: What the banking industry does not need is DEregulation. Some banks have been guilty of misleading borrowers about interest rates and other borrowing costs. But the safety of the consumer and the safety of the industry can be achieved through balanced regulatory relief.
 Perhaps the greatest cause of the volume of regulations is the yoke of the savings and loan debacle that still hangs around the necks of Congress and, in turn, the banking industry. But there is widespread agreement that the FDIC Improvement Act amounted to overkill.
 To help remove the yoke of the savings and loan disaster, I have another proposal. Like me, I am sure you are concerned that the Treasury Department has extended a $30 billion line of credit to the FDIC to bolster the Bank Insurance Fund. I propose to take the Treasury off the hook for funding the FDIC and am willing to lead a bank consortium effort to replace the Treasury's line of credit with a $30 billion line of credit from the banking industry. The line would be secured by the industry's obligations to pay deposit insurance premiums over the next several years.
 I believe we can succeed in such an effort, and both the government and the taxpayer stand to benefit.
 In conclusion, I want to come back to the purpose of this forum -- to find common ground, to achieve greater economic prosperity for our region, to broaden the band of sunlight on the Sunbelt. Business and policy makers must act interdependently in pursuit of that goal . . . or we won't make it.
 This morning, I have proposed what my company is willing to do for our region and what my industry could do for the country -- proposals that could make a real difference in the lives of our neighbors. Clearly, we have seen the alternative. Chilled by onerous regulations, bankers prolonged the recession by contributing to a credit crunch. But bankers are in business to be part of the solution.
 As our nation debates the size and shape of an economic stimulus, I am reminded of what President Clinton pointed out at his economic summit. He noted that any economic stimulus would be -- quote -- "peanuts" compared to the increase in lending that could result from level-headed regulatory relief. And he's right. As I have said, legislation simply allowing multi-state banks to consolidate the banks they own could free up as much as $100 billion in new loan dollars -- three times the size of President Clinton's largest economic stimulus proposal.
 Banks can be a greater part of the solution -- through regulatory relief that allows capital to flow to where it is needed and allows bankers to once again be bankers.
 -0- 2/24/93
 /CONTACT: Lynn Drury, Corporate Public Relations, NationsBank Corporation, 704-386-8153 or (home) 704-544-0510/

CO: NationsBank Corporation ST: North Carolina IN: FIN SU:

CM -- CH005 -- 9828 02/24/93 10:45 EST
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Date:Feb 24, 1993

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