Nine lives

Northwestern Financial Review, Sep 19, 1998 by Bengtson, Tom

On Friday morning, Sept. 11, the Senate Banking Committee surprised almost everyone by passing a financial reform bill, 16-2. We got word of the action right after we sent out our Sept. 12 Fax Update, in which we included a report about the committee's troubles. The committee had been scheduled to mark up the bill on Sept. 3 but postponed the session when differences emerged over CRA. Few people, including this editor, expected committee members to work out their differences before Congress is scheduled to adjourn Oct. 9. After three hours of committee wrangling on Sept. 11, however, members compromised on the CRA issues and passed a bill.

Sen. Alfonse D'Amato is pleased because the action makes him appear active on an issue that is important to a key portion of his constituency. (Remember, it's only a few weeks before the general election.) But even D'Amato was realistic about the prospects for passage this session, telling the media: "By no means are we there yet."

The committee passed the bill after taking out many of the anti-banking provisions in the House bill. For example, a provision requiring banks to offer low-cost accounts was dropped. So was a provision that would have subjected bank insurance sales to new state laws.

ALTHOUGH COMMUNITY BANKERS might prefer the Senate Banking Committee's bill to the House bill, the insurance agents across the country don't. An influential lobbying force, the Independent Insurance Agents of America has pulled its support for the bill.

In addition, Sens. Phil Gramm and Richard Shelby, who opposed the committee's bill, have said they will push the CRA issue on the Senate floor. They want all references to CRA removed from the bill, while most Democrats want to see CRA applied to new financial services companies.

Keep in mind that there remains a turf battle between the Federal Reserve and the Office of the Comptroller of the Currency. Fed Chairman Greenspan met with eight senators Sept. 11 prior to the vote urging passage. The OCC opposes the bill because it would lose some of its regulatory hold on the financial system. Prior to Lewinski-gate, the administration said it would veto a financial reform bill that favors the Fed over the OCC. But in light of recent revelations, perhaps the president won't feel confident enough to veto such a major piece of legislation that Congress likes.

Whether Clinton will ever see a bill, however, is a big question. The Senate isn't going to want to take time to debate a controversial bill. Plus, even if the full Senate passes a bill, a conference committee would have to work out seemingly irreconcilable differences between House and Senate versions.

Financial reform seems to have more lives than a cat. Just when you think it is dead, it springs back to life. The pending legislation will certainly give bankers something to consider as they meet in Orlando this week for the annual American Bankers Association convention.