Clinton Plan to Repeal Glass-Steagall Act Splits the lndustry

NEW YORK - The banking industry divided Monday over the Clinton administration's plan to repeal the Glass-Steagall Act, with one major trade group blasting the proposal as a road map for further industry consolidation.

"I would hope the American consumer will think through the process and see that they will be hurt by financial concentration," said Kenneth A. Guenther, head of the Independent Bankers Association of America.

"I would hope small business would take a close look, too," added Mr. Guenther. "Small business will be hurt by this bill."

However, Edward L. Yingling, chief lobbyist for the American Bankers Association, praised the administration announcement, saying it tracked his own organization's approach closely.

"We want to see the details of the 'firewalls,'" he added, however, referring to the safeguards the administration wants to build into the legislation to protect insured deposits.

"It could have firewalls that would make it very difficult to compete," he added.

The administration proposal, unveiled in New York Monday by Treasury Secretary Robert Rubin, appears to take a middle ground between bills introduced by the chairmen of the House and Senate banking committees.

It tracks legislation advanced by House Banking Committee Chairman Jim Leach in that it calls for an end to the separation of commercial and investment banking. However, it goes beyond the Leach bill by permitting insurance companies to affiliate with banks.

Still, the administration plan stops well short of the approach taken by Senate Banking Committee Chairman Alfonse M. D'Amato, who wants to let banks affiliate with commercial and industrial concerns.

Sam Baptista, president of the Financial Services Council, a trade group that represents large, diversified financial institutions, praised the administration, even though the Treasury bill doesn't go as far as his group would like.

"This is a step-by-step process that is moving forward in the right direction," said Mr. Baptista, whose group includes large commercial enterprises, as well as several big banks and major securities houses.

Mr. Rubin provided few details about his proposal in a session with reporters Monday. He suggested that banks would be barred from providing loans or financial guarantees in support of underwritings managed by affiliates, and said securities units could be subsidiaries of either the bank or the holding company.

In addition, he said, regulation would be by function; the securities unit would be regulated by the Securities and Exchange Commission and the bank would be overseen by the appropriate bank regulator.

No single agency would have responsibility for the organization as a whole, though bank regulators could examine nonbank affiliates if they thought it necessary.

Mr. Rubin said the administration decided against permitting affiliations between banking and commerce because its goal was to find "synergies and commonalities that strengthen financial services."

Letting nonfinancial companies own banks didn't help that process, he said, and poses the risk that commercial or industrial firms would "take advantage of their relationship with the bank."

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