Banks won more than the right to sell insurance nationwide from the Supreme Court Tuesday - they also apparently gained political muscle that will help in their fight for Glass-Steagall reform and regulatory relief.
"The Supreme Court decision is of tremendous importance because ultimately it may remove the key brick in the wall preventing broad financial modernization," said Edward L. Yingling, chief lobbyist for the American Bankers Association.
By striking down a Florida law that blocked Barnett Banks from selling insurance from towns with fewer than 5,000 residents, the Supreme Court also invalidated similar laws in 20 other states.
With the court on their side, bankers will be even less willing to make a deal on the insurance restrictions that have stalled the House Banking Committee's Glass-Steagall reform bill.
But insurance agents, who have ground major banking bills to a halt by pushing for new restrictions on banks' insurance sales, will step up their efforts in a big way. Agents are expected to try harder than ever to parlay their close ties to House Speaker Newt Gingrich and other Republican leaders and get a vote on the bill.
"The agents' lobbying is going to be much fiercer than it has been," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. " The wolf is no longer at the door; the wolf is in their house."
The Supreme Court decision has already had an impact on lawmakers. After meeting with House Banking's subcommittee chairmen, Committee Chairman Jim Leach was scheduled Wednesday afternoon to present Republican leaders several options for dealing with banking legislation, including Glass- Steagall reform and the thrift insurance-fund bailout.
Rep. Richard Baker pressed Rep. Leach to allow holding companies to own both banks and insurance operations. It was unclear late Wednesday whether Rep. Leach was persuaded to tack this onto his larger legislation combining Glass-Steagall reform, regulatory relief and the thrift fund fix.
If House leaders squelched the combined approach, Rep. Leach reportedly planned to ask that the thrift-fund fix be attached to bills increasing the federal debt ceiling or authorizing more government spending.
Despite the seemingly intransigent positions staked out by bank and insurance agents, some believe a deal is possible.
If the insurance agents drop efforts to block banks from expanding into their business, then the two industries might strike a deal on the narrower issue of state regulation of bank insurance sales. "There may be a compromise that banks would agree to," said Karen Shaw Petrou, president of ISD/Shaw.
Mr. Yingling said the ABA is willing to accept "reasonable" regulation of bank insurance sales by state insurance commissioners.
Officials at insurance industry trade groups said they would continue lobbying Congress for restrictions on bank insurance powers.
"We respect the opinion of the Supreme Court, but it's Congress' job to write the law," said Paul Equale, senior vice president of government affairs for the Independent Insurance Agents of America.
"We're disappointed the Supreme Court didn't do more to clarify the role of states - this underscores the need for Congress to act," said Gary Hughes, chief counsel at the American Council of Life Insurers.
The Barnett decision also may weaken the alliance between agents and insurance companies, said Paul A. Schosberg president of America's Community Bankers, the thrift trade group.
"Major insurance carriers have stuck with the agents to avoid the appearance of a major breach in the insurance business, but they have coveted the retail presence of bank branch networks," he said.
