Banking bill compromise uncertain Defeated proposal pleased nobody

November 06, 1991|By Susan Benkelman | Susan Benkelman,Newsday

In the end, the broad bank reform bill defeated by the House this week was a compromise that pleased neither side.

The bill, which only 89 lawmakers supported, would have allowed banks to enter new lines of business -- a goal the Bush administration and banks had pushed for months -- but was amended with restrictions that banks said were too onerous.

And the vote, with 324 representatives opposed, showed how the compromise ultimately became distasteful to two divergent interests: those who wanted to loosen bank regulations without any strings attached, and those who feared that to do so now would be distasteful in light of the ongoing savings and loan debacle.

Today, the prognosis on Capitol Hill is that broad reform of the nation's banking laws won't come this year. The Senate last night put off scheduled action on its version of the measure.

But Department of the Treasury officials held out hope that a sweeping bill still can be worked out this year.

Desiree Tucker Sorini, a department spokeswoman, said that Secretary of the Treasury Nicholas F. Brady met with lawmakers yesterday. The Senate delay "gives us time to work out something," she said.

The House Banking Committee, meanwhile, was scheduled to work on a narrower bill to replenish the deposit insurance fund.

The broader legislation, to let banks sell securities and insurance and open branches in other states, was designed to help the troubled institutions at a time when they have fewer opportunities to make good loans and are facing growing competition from foreign banks.

But Democratic committee chairmen added restrictions that the administration said would hurt the industry more than help it.

These restrictions came in negotiations between Banking Committee Chairman Henry B. Gonzalez, D-Texas, and Energy and Commerce Committee Chairman John D. Dingell, D-Mich. They included, for example, "fire walls" between a bank's lending business and its securities business.

Democratic supporters of the Dingell-Gonzalez measure said that the bill was defeated because lawmakers weren't in the mood to loosen regulations -- even with the fire walls -- after hitting taxpayers with the savings and loan bailout.

"Both the administration and the banks misjudged the temper of the country and of the Congress," said Representative Charles E. Schumer, D-N.Y., a member of the House Banking Committee.

"After the savings and loan crisis, nobody wanted to give banks new power until they get their old house in order."

The dilemma was made worse by the fact that lawmakers are being asked to allow the insurance fund to borrow billions more to protect depositors.

But supporters of broad reform said the bill failed simply because the Gonzalez-Dingell amendments were added. "It just kept getting uglier and uglier" as the House debate continued, said Virginia Dean, a spokeswoman for the American Bankers Association.

"There were a number of members who felt that the direction in which the legislation evolved was the wrong direction," Ms. Dean said. "At a time when a lot of people are looking to banks to help spur the economy, Congress was pulling back and tightening the rules."

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