House Leaders Agree to Move Glass Steagall For Floor Vote
WASHINGTON (AP) _ The centerpiece of Congress’ banking legislation this year, a proposal to let banks and Wall Street firms affiliate, is now moving forward to a House floor vote under an agreement reached by GOP leadership.
A House Banking committee aide, speaking on background, said Wednesday that House Speaker Newt Gingrich, R-Ga., met with chairmen from the House Rules, Banking and Commerce committees and worked out a deal to bring the so-called Glass Steagall reform bill to a floor vote.
The bill would remove Depression-era restrictions that prevent a securities firm, say Merrill Lynch & Co., from buying a commercial bank, such as NationsBank. Many economists believe the separation of securities and commercial banking doesn’t make sense in an increasingly integrated financial services industry, where mutual funds can be purchased through ATM machines.
The House Banking Committee passed the bill in May, but it’s been in a legislative limbo since then due to a bitter fight between insurance and banking interests, among other obstacles.
Insurance agents, for example, don’t want banks to expand into their industry for fear they will quickly dominate a business populated by small insurance agents.
The compromise worked out by GOP leaders would drop any language on affiliations between banks and insurance companies, the aide said. It would contain language preventing a major federal bank regulator, the Comptroller of the Currency, from granting banks additional insurance powers, the aide said.
The aide said House rules committee is to combine the Glass Steagall reform bill with a controversial bill that cuts bank regulations, including programs dear to consumer advocates. But the newly combined banking bill won’t revise the Community Reinvestment Act or CRA, an important fair lending law, the aide said. President Clinton had threatened to veto legislation that unduly restricts CRA.
The CRA reforms last week were placed in a separate bill passed by the banking committee last week.
Removal of the contentious insurance and fair lending issues is expected to ease passage of the complex legislation. Regulators have expressed general support for letting banks and securities firms affiliate, so long as there were proper controls against risky use of deposits.
Officials from the American Bankers Association and Independent Insurance Agents of America weren’t immediately available.
Elsewhere, banking committees in both the House and Senate acted on other financial reform measures.
A House Banking subcommittee voted 15-1 for a bill that will effectively eliminate the savings and loan industry by 1998. The proposal’s main goal is to rescue the Savings Association Insurance Fund, or SAIF. The thrift fund rescue plan calls for the industry to make a one-time $6 billion payment to revive the fund then merge it with the bank insurance fund. Then, the bill would eliminate the federal thrift charter, forcing S&Ls to become commercial banks or state institutions.
The committee reached a compromise on the problem of how to distribute that $6 billion payment. A group of banks that purchased deposits from thrifts in the past six years, known in the industry as ``Oakar banks,″ remain obligated to pay into the thrift fund. These banks argue they’re forced to pay too much under the thrift fund rescue plan.
The Oakar banks won a significant victory, with the committee agreeing to bill them less than thrifts under the fund bailout plan. Robert R. Davis, research director for the S&L trade group America’s Community Bankers, said thrifts will wind up paying an extra $150 million because the committee lowered the fees on Oakar banks.
In the Senate, the banking committee passed a deregulation bill that eliminates certain credit disclosures for home mortgages, streamlines rules on hiring bank officers and directors and gives the Federal Reserve greater flexibility in allowing foreign banks into the United States.
Consumer groups opposed one provision that revokes consumers right to sue banks if they used misleading advertising about their savings deposit rates.