Leach, Seeking Deal on Reg Relief, Offers a Last-Ditch Compromise

Pushing for a last-minute deal, House Banking Committee Chairman Jim Leach Monday unveiled a compromise he said would shore up the thrift deposit insurance fund and give banks regulatory relief.

The Iowa Republican reached out to bank and insurance trade groups, as well as House Democrats, in hopes of tearing down the obstacles that have blocked banking legislation all year.

If House leaders do not allow a separate vote on Rep. Leach's bill, the best alternative for enacting the Savings Association Insurance Fund rescue are attaching it to an omnibus budget bill or to a commemorative coin bill the House approved last Wednesday.

Rep. Leach offered several proposals to appease each side on the issue of bank insurance powers.

His new plan would:

*Expand bank holding company powers by allowing activities that are "financial in nature" rather than "closely related to banking." This new definition would explicitly bar holding companies from selling insurance or annuities. However, most bank annuity sales are made directly by the bank subsidiaries and would not be affected.

*Enact guidelines proposed by the Comptroller's Office for insurance sales, giving states the right to dictate licensing requirements for all agents, including bank employees.

*Prohibit the Federal Deposit Insurance Corp. from insuring the so- called Retirement CD.

*Call for a General Accounting Office study of state supervision of national bank insurance activities.

Rep. Leach did not give in to demands from the Independent Insurance Agents of America that he close a "loophole" allowing state banks to retain insurance activities when they convert to national charters.

Konrad S. Alt, the comptroller's chief of staff, said Monday that his agency was reviewing the package and had not taken a stand. "We're looking carefully at the latest draft," he said, "and the question we'll be asking is, 'Will it make the national banking system better off?'"

One major trade group endorsed Rep. Leach's package Monday, and representatives of others sounded supportive.

American Bankers Association chief lobbyist Edward L. Yingling said letting bank holding companies engage in a broader range of activities is an "acceptable tradeoff" for the industry's share of the thrift fund fix.

The ABA is likely to accept the bank insurance sales guidelines, but first Mr. Yingling said he wants the group's lawyers to study the bill.

Robert A. Rusbuldt, lobbyist for the insurance agents, said his group probably will drop efforts to block any legislation that doesn't bar the Comptroller's Office from granting new insurance powers to national banks.

"We are assessing Chairman Leach's proposal now," he said. "I am willing to say are we inclined to not oppose it."

The Independent Bankers Association of America heartily endorsed the new plan. "We think Chairman Leach has made a herculean effort to craft pro- banking legislation," said Kenneth Guenther, IBAA executive vice president.

Still in question is an industry demand that banks be freed from the cost of cleaning borrowers' toxic waste sites. That issue is outside Rep. Leach's purview, so his bill only includes a "sense of Congress" that the industry's environmental problems be resolved.

"We've made clear that we must have an environmental liability provision in order not to oppose the final package," Mr. Yingling said.

To placate Democrats, Rep. Leach has scaled back some regulatory relief proposals. New proposals include:

*Allowing a well-capitalized institution to make acquisitions or open branches without prior approval only if regulators have accepted its Community Reinvestment Act strategy. Institutions without an approved CRA plan would be open to challenge from community groups for 30 days after the filing of a public notice of intent to make an acquisition.

*Raising the exemption from Home Mortgage Disclosure Act requirements to cover institutions with less than $50 million of assets, instead of the current $10 million. However, Rep. Leach dropped a provision that would have let the Federal Reserve give additional exemptions at its discretion.

*Requiring banking agencies to design uniform model disclosures for consumer leasing.

*Ordering bank regulators to "consider" outside directors' lack of knowledge relative to insiders when deciding whether to sue after an institution fails.

Democrats on the House Banking Committee said they were still reviewing Rep. Leach's proposals and could not comment.

Rep. Leach is pushing Republican leaders to allow a vote on his plan, which would make thrifts pay a one-time special assessment to capitalize the Savings Association Insurance Fund. Starting in 1997, banks would begin paying $360 million a year toward the interest due on Financing Corp. bonds used to bail out the thrift industry in the late 1980s.

In 2000, the industry's share would rise to $580 million a year until the bonds mature in 2017. Banks have opposed paying anything toward the Fico bonds but have agreed to the latest formula in return for regulatory relief.

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