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LETTER TO HONORABLE PHIL GRAMM

Dated: February 3, 1999

The Honorable Phil Gramm
Chairman, Committee on Banking, Housing and Urban Affairs
Senate Dirksen Office Building
Room SD-534
Washington, D.C. 20510

Dear Mr. Chairman:

As the only non-profit trade association exclusively representing the interests of bank and savings institution directors, the American Association of Bank Directors urges the Banking Committee to consider legislation that would help alleviate directors’ unreasonable risks of liability from banking agency enforcement actions.

The hysteria that overcame the U.S. Congress and many in the banking agencies in the late 1980s and early 1990s about the survival of the banking industry and the "S&L crooks" taking over the industry is gone, but the legislation enacted during that period that took direct aim at bank and savings institution directors remains on the books. Some of the more objectionable language allows the agencies to impose huge potential liability on bank directors from regulatory enforcement actions without adequate due process protections.

There is nothing in H.R. 10 or in the Senate’s version of H.R. 10 in the 105th Congress that amends the offensive language. We urge that the Committee include provisions in the banking bill that it is currently drafting that will redress the legitimate concerns of bank directors.

I have enclosed recent correspondence AABD has had with Senator Shelby and Chairman Leach. Our Constitutional Rights Task Force studied many of the objectionable provisions and issued a highly critical report in 1993, questioning the fairness of the laws, as well as raising public policy issues involving whether these laws serve the purpose of promoting the safety and soundness of the banking industry. I have also enclosed a copy of my testimony before the House Banking Committee on November 17, 1993 and will provide you with a complete copy of the Constitutional Rights Task Force Study under separate cover.

In our view, the banking bill cannot be complete without provisions that will assure bank directors with reasonable protection against liability from excessive federal banking agency actions. We would be pleased to meet with your staff to answer any questions they may have concerning our proposals.

Sincerely,

Gregory C. Golembe
Executive Director

Enclosure