Rep. Bill McCollum, a key member of the House Banking Committee, is working on an amendment to the Glass-Steagall repeal bill that would give banking companies full insurance powers, including policy underwriting.
In return for these full-blown powers, banks would be required to move all insurance activities to a holding company subsidiary.
As for state regulation - the contention that has stalled the Glass- Steagall bill for months - the McCollum amendment would require equal treatment of insurance companies owned by banks and nonbanks.
The measure would revoke the industry's long-standing practice of selling insurance from branches in small towns. Rep. McCollum's amendment would eliminate for banks over a certain asset size, possibly $100 million, the so-called "town of 5,000" authority, which allows banks to sell insurance from towns with fewer than 5,000 people.
But a senior McCollum aide said Friday that banks would no longer need this authority.
"This gives banks full-blown insurance powers without having to go through the town of 5,000 loophole," the staffer explained. "They would have all the insurance powers they could ever want."
It was unclear Friday how much support the amendment will get when the House Banking Committee continues voting on the Glass-Steagall bill Tuesday; its mark-up began June 6. But without this change, Rep. McCollum said he will vote against the bill. With many Democrats already lined up against the bill, Rep. Leach may need the Florida Republican's vote to get the measure out of committee.
The Office of the Comptroller of the Currency and the Independent Bankers Association of America came out against the McCollum amendment Friday.
"We don't see any policy reason for pushing something that is safe and sound like insurance agency activities out of the bank," said OCC spokeswoman Lee Cross. "It robs banks of a useful source of earnings and it makes it harder for bank customers to get a service that they want."
"It cuts small banks out of insurance unless they totally restructure," IBAA executive vice president Ken Guenther said.
But the McCollum staffer said the amendment gives both banking and insurance what they've been seeking. Banks get broader insurance powers and fair treatment from state regulators while insurance agents will not have to compete directly with banks.
"We thought maybe if we wrote down on paper everything people were asking for we could reach a consensus," the staffer said. "If nothing else, we would call everybody's bluff."
