WASHINGTON - House Banking Committee Chairman Jim Leach is gearing up for an all-out fight over the two big issues facing his panel: the fate of the thrift industry insurance fund and the separation of banking and commerce.
In an interview, the Iowa Republican sounded particularly firm in his opposition to lawmakers who want to take Glass-Steagall repeal one step further by permitting companies to own both commercial banks and nonfinancial companies.
"I don't hold this view on banking and commerce lightly," he said. "This is the country of Jefferson and Andrew Jackson, a country where we emphasize individualism and entrepreneurship over collectivism."
Should the House vote to permit such affiliations, "It would sound the death knell for my support of the bill," he added.
While Rep. Leach declined to elaborate, committee chairmen have considerable power over bills within their jurisdiction. A determined committee chairman can delay and even kill legislation, and that gives him enormous leverage in negotiations with other lawmakers.
The banking committee chairman parried questions about whether he would pull the plug on Glass-Steagall if the banking and commerce barrier was breached. But he expressed considerable confidence that the banking committee would follow his lead, rather than that of his chief rival, Rep. Richard Baker, R-La. Rep. Baker would permit banks to affiliate with nonfinancial companies.
Rep. Leach also suggested that taxpayers have already done enough for the Savings Association Insurance Fund and shouldn't be asked to help rebuild the insurance agency's capital.
The issue is being paid more attention because the banks are about to receive a reduction in insurance rates. Thrifts are already looking for ways to fund themselves without paying the industry's higher rates and that has the effect of further eroding the fund's assessment base.
"The U.S. taxpayer has funded $115 billion in current dollar terms to defend the deposit insurance system," he said. With interest, the total shoots up to about $350 billion, he added.
The Republican lawmaker said Congress in effect gave the Savings Association Insurance Fund a $2 billion grant when it extended the life of the Resolution Trust Corp., the thrift bailout agency. While the RTC is in business, thrift premiums build up in SAIF, he said.
"In other words, to date there has been an effective taxpayer- financed $2 billion addition to the SAIF fund," he said.
However, the banking committee chairman said he still has an open mind on the issue.
Despite his "great skepticism" about the use of tax dollars, he said he has "a great deal of sympathy for the plight of the solid S&Ls that did nothing to cause the crisis," but which now must pay for it.
"Whether or not taxpayers should put more resources into a private- sector insurance fund is a matter of troubling judgment," he added.
Both issues are familiar ones for Rep. Leach, who took control of the House Banking Committee in January. In 1993, as the banking committee's senior Republican, he led a successful fight against the Clinton administration's proposal to use federal tax dollars to fund SAIF.
Two years earlier, as a senior member of the panel's minority party, he waged a quiet, lonely battle against the Bush administration's efforts to break down the banking and commerce barrier.
He was beaten soundly at the committee level, although the banking and commerce language never made it to the House floor.
Some observers recall his low-key effort in 1991, and question whether he has the heart for that kind of fight. Rep. Leach suggested that those critics not only miss the point, but underestimate his resolve.
"There is a massive distinction in expressing strongly held views as a member of the minority, and being responsible as chairman of a committee for decisions that are going to affect the future shape of the American economy," he said.
"I've never been involved in an issue where I think greater caution is merited," he added.
The 10-term legislator indicated more flexibility on the question of whether banks should be permitted to merge with insurance companies.
"This is an issue for the committee to work its will," he said. "If you are trying to draw distinctions, obviously I feel substantially stronger on the subject of commerce and banking than on the subject of insurance and banking."
Rep. Leach said both the banking and insurance industries appear competitive today, and added that he sees little reason for commingling the two, even though he acknowledged that there may be more "natural synergy" between banking and insurance than between banking and securities.
"Insurance is a spectacularly bigger industry than commercial banking," he said. "In my judgment, it will bring many banks, some of substantial size, immediately into play, and it will bring some insurance companies, some of substantial size, immediately into play.
"We will see the greatest consolidation in the history of the republic," he added.
On a separate issue, Rep. Leach said he backed off his original plan to strip unitary thrift holding companies of their special powers when it became clear that several committee members would oppose the Glass-Steagall bill as a result.
However, he said, his new proposal - to exempt, or "grandfather" existing unitary thrifts from his legislation - is about as far as he is willing to go in the Glass-Steagall bill.
"I would hate to expand the landscape of exceptions," he said.
