Trade Groups Lobby for Broader Glass-Steagall Reform

Financial industry trade groups are promoting a Glass- Steagall reform plan that would usher in more comprehensive change than current Capitol Hill proposals.

Like a Glass-Steagall repeal bill introduced last year by Senate Banking Committee Chairman Alfonse D'Amato, the plan would allow financial services companies to affiliate with banks by establishing a financial services holding company.

But it also would allow affiliation between nonfinancial and financial firms and between insured institutions and uninsured wholesale banks.

The Alliance for Financial Modernization based its plan on Sen. D'Amato's measure and two other pending bills.

"We wanted to show the framework is already there for the kind of financial modernization we need," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

The plan also calls for strict firewalls between nonbanking and banking affiliates, similar to a plan by House Banking Committee Chairman Jim Leach. The new firewalls would not apply, however, to securities and investment activities of banks if their parents did not convert to financial holding companies.

The alliance plan also would eliminate the thrift charter, based on a bill drafted by Rep. Marge Roukema, chairwoman of the banking panel's financial institutions subcommittee.

Alliance members began initial discussions about their plan with congressional staffers last week but have received little response from Capitol Hill.

Besides ABA, members of the trade group alliance are the Financial Services Council, America's Community Bankers, the Securities Industry Association, the Investment Company Institute, the Bankers Roundtable, the American Financial Services Association and the Consumer Bankers Association.

Other provisions in the alliance plan would:

*Allow affiliation between financial and nonfinancial firms if at least 75% of the holding company's business is in financial activities.

*Subject financial holding companies to examination and reporting requirements, but only to the extent necessary to ensure bank safety and soundness.

*Allow bank holding companies that convert to financial companies to buy an established insurance agencies, but prevent them from launching new agencies.

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