Comment: Banking Legislation Deserves Honest Debate

There are some very curious happenings these days in Washington. No, I'm not referring to the budget impasse or the partial shutdown of the federal government. These are things I think I understand.

Most Republicans are determined to balance the budget in seven years. They want a tax cut as part of the package, and they want the Congressional Budget Office to score the numbers.

Most Democrats aren't enthusiastic about balancing the budget at all, much less in seven years. They don't have much use for the tax cut, and they would like to use rosier economic scenarios than those painted by the CBO.

In short, the budget battle is an honest policy debate on what proportion of our national income should go through the federal government and how it should be spent. It's not pretty to watch, but it's the epitome of democracy in action.

The banking industry offered two pieces of priority legislation in 1995. Congress' handling of this legislation is disgraceful, particularly when compared with the open and sincere debate on the federal budget.

The first banking bill reformed the Glass-Steagall Act, and the second reduced the burden of regulation. Both bills were clearly in the public interest and neither was controversial, apart from some Community Reinvestment Act provisions.

After the bills cleared the House Banking Committee, the Republican leadership intervened. It was decided that the measures would not be allowed to come to a floor vote unless they were accompanied by a moratorium on new insurance activities by national banks.

This action by the House leadership epitomized government at its worst. Two bills clearly in the public interest were held hostage in order to force acceptance of unrelated special interest legislation that was both anticonsumer and antibank. The only justification offered was House Speaker Newt Gingrich's incorrect observation that there are more independent insurance agents than bankers.

To their great credit, all but a handful of banks said "no dice." They would forgo their two pieces of priority legislation rather than allow the House leadership to bludgeon them into accepting regressive restrictions on insurance activities.

The story gets even more curious. It seems the legislation proposed originally by the banks has developed a constituency and life of its own on Capitol Hill.

One could count on his fingers and toes the number of banks that support enactment of the banking bills at the cost of accepting a moratorium on insurance activities. The bankers have made clear that if this package is brought to a floor vote, they will do all in their power to defeat it.

Yet the chairman of the House Banking Committee, an otherwise very bright and able fellow, is insisting that the bankers accept legislation they proposed but now reject. Only in the wonderland of Disneyland East could such a bizarre episode unfold.

The bankers' bills are pro-competition and will reduce the burden of government regulation. In other words, they are everything that Republicans say they stand for.

The insurance agents' moratorium bill is anti-competitive and will increase the intrusiveness of government. In short, it's everything Republicans say they oppose.

There seems to be only one way out of the mess the Republicans have created for themselves. They should bring the bankers' bills to a floor vote without the insurance moratorium attached. They should bring the moratorium legislation to a floor vote separately if they feel they must do something to placate the insurance agents.

Each bill would stand or fall on its own merits. It's difficult to see how anyone who believes in a democratic society could object to this approach. Unless, of course, that person doesn't believe he can convince the public his cause is just.

Mr. Isaac, former chairman of the Federal Deposit Insurance Corp., is chairman and CEO of Secura Group, a financial institutions consulting firm based in Washington.

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