Industry leaders continue to oppose sweeping banking legislation, even though the latest version would write into law much of a Supreme Court ruling allowing national banks to sell insurance from small towns.
House Banking Committee Chairman Jim Leach, R-Iowa, last week proposed slapping a permanent ban on the comptroller of the currency's ability to expand the insurance powers of national banks.
Rep. Leach figured that making the ban permanent, rather than allowing it to lapse after five years, would ease the insurance industry's opposition to his legislation.
But the banking industry didn't like Rep. Leach's bill in the first place and the permanent moratorium on the comptroller simply compounded the opposition. Besides, bankers figure they don't need Rep. Leach's bill now, in view of the Supreme Court decision.
The March 26 ruling in favor of Barnett Banks Inc. gave banks so much leeway on insurance sales, industry observers said, that any legislation would be a step backward.
"Banks can only lose by accepting legislation that clarifies the Barnett decision," said Karen Shaw Petrou, president of ISD/Shaw Inc.
"There is no reason, other than protection for insurance agents, to permanently stop the comptroller from allowing banks to use new financial products that he determines are incidental to banking," said Peter Kravitz, lobbyist for the Independent Bankers Association of America.
Rep. Leach's new plan would forbid state insurance regulators from interfering with national banks' ability to sell insurance. But state regulators could control the "manner" in which banks sell insurance, for example, through licensing or consumer disclosure requirements.
The Leach legislation also would allow common ownership of banks and insurance companies - in states that allow this.
American Bankers Association chief lobbyist Edward L. Yingling said permanent restrictions on the Comptroller's Office would be "definitely troublesome."
In addition to these insurance provisions, Rep. Leach's bill would repeal the Glass-Steagall Act and provide banks with some regulatory relief.
