Delaware's Champion of Banks Stating Case Nationally

WASHINGTON - Long before his 1992 election to Delaware's lone House seat, Michael N. Castle was a champion of the banking industry.

During eight years as governor, Rep. Castle helped make the banking industry the state's second-largest employer - an accomplishment that attracted national attention.

Now that he ranks among the leaders of the House Banking Committee, he wants to extend his vision of a modern financial services industry to the national arena.

"As a result of my experiences at the state level, I feel that banking - actually, the management of finances in general - needs to be opened up in this country," said the second-term Republican, who heads the House Banking subcommittee on domestic and international monetary policy.

For banks, Rep. Castle's vision of "opening up" financial services could hardly be more opportune.

Back in 1990, he earned the everlasting gratitude of bankers upon enactment of the law that allows banks with operations in Delaware to underwrite and sell insurance there.

"He has been the leader in the past decade in the area of authorizing underwriting of insurance products for banks," said Philip S. Corwin, lobbyist for the American Bankers Association. "It is extremely useful for the industry to have him on the committee."

Rep. Castle says his own state's experience with banking legislation provides a valuable lesson for Congress as it tries to break the deadlock between banking and insurance that has held back efforts to modernize the financial services industry.

Insurance agents fought the Delaware measure tooth and nail - just as they are currently fighting the Comptroller's power to expand the insurance powers of national banks. Yet Rep. Castle said recent conversations with agents in his home state suggest fears that increasing banks' powers will render the insurance industry extinct are unfounded.

"They are going to attack anything that would on the face of it appear to limit their sphere of business influence," said the second-term lawmaker. "But I have had a number of Delaware agents tell me that the 1990 law has not really affected their business.

"I don't think that competitive circumstances are necessarily a negative," he added.

Indeed, Delaware insurance agents even say they may have overreacted a little.

"We thought it was going to be a lot worse than it is," said Lawrence A. Wilson, president of the Independent Insurance Agents of Delaware. Mr. Wilson added, however, that his constituency may not have felt the full effect of the law yet.

Here in Washington, Rep. Castle reacted quickly in June when House Banking Committee Chairman Jim Leach amended a regulatory relief bill by attaching a measure that would restrict the Comptroller from expanding national bank insurance powers.

"That got me concerned," Rep. Castle said.

After last minute, behind-the-scenes negotiations with the Iowa Republican, Rep. Castle produced an amendment that would bar state insurance regulators from defining traditional banking products as insurance.

"I wanted to make sure that somebody did not come around later and declare that banking products were insurance products," Rep. Castle said. "I wanted to protect what's already been decided by the Comptroller of the Currency and in the courts."

While Rep. Castle refers to his amendment as "more of a clarification than anything else," some industry sources viewed its passage as a significant victory.

"That amendment is critically important," said Peter Kravitz, lobbyist for the Independent Bankers Association of America.

"It preserves the ability of banks to continue to offer what are really banking products, even though they may have some attributes of insurance, like letters of credit," he added.

When Rep. Castle found out he could get a House Banking subcommittee chairmanship this year, his first choice was the housing panel.

"But I was the last one to choose a subcommittee - in other words, I didn't choose," he said with a laugh. Nevertheless, he said, his "choice" ended up being more appropriate than he had originally thought.

"The subcommittee has turned out to be more extensive and more attuned to the banking world than housing would have been," Rep. Castle said. "I'm happy it worked out the way it did."

The domain of Rep. Castle's panel includes monetary policy and the future of money, topics that John M. Burris, president of the Delaware Chamber of Commerce, sees as critical for his constituency.

"Castle's role on the committee is going to become more and more crucial, because we want to become the nation's high-tech center for financial services," Mr. Burris said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER