Last week's aborted coup against House Speaker Newt Gingrich complicates the outlook for financial modernization legislation.
One victim of the fallout may be Rep. John Boehner, chairman of the Republican Conference and one of the party's top five lawmakers. More important for bankers, the Ohio Republican heads the House's task force on financial modernization-a group created by Rep. Gingrich in January to broker a reform deal between the House Banking and Commerce committees.
If Rep. Boehner was involved in the move to unseat the Speaker, his effectiveness could be weakened. He could even lose his position in the leadership.
While Rep. Boehner has denied he was involved, coup planners are insisting he was in on the plot. If the accusation proves true, the financial modernization task force could fail.
"The Boehner task force was going to be the leadership's vehicle for getting this through the House, but it looks like that idea is dead in the water," said one industry lobbyist who asked not to be identified.
A consortium of eight large banks including Citicorp, Chase Manhattan Corp., and BankAmerica Corp. has hired John E. Chapoton, managing partner of Vinson & Elkins Washington office to lobby for capital gains cuts on venture capital investments.
The eight are among 66 that make venture capital investments through small business investment companies, which allow banks to circumvent restrictions on direct equity stakes. The tax cuts also would be a big benefit if Congress passes pending financial reform legislation allowing banks to invest in commercial companies.
Chase Manhattan lobbyist L. Thomas Block said the consortium supports a Senate plan that would cut the corporate tax rate on gains from investments in small companies to 17.5% from 35%.
Mr. Block, however, described the plan's chances as "very dicey" because neither the House nor the Clinton administration tax proposals include cuts for venture capital returns.
Other banks hiring the law firm are BankBoston Corp., Fleet Financial Corp., First Chicago NBD Corp., Norwest Corp., and Wells Fargo & Co.
The American Bankers Association wants the House Commerce Committee to get the message: Banks are losing ground to other financial firms and must be allowed to enter new businesses.
To make the point, the ABA's economic and policy research department prepared a 16-page booklet giving lawmakers a look at the financial operations of Ford Motor Co., Merrill Lynch & Co., General Electric Co., Travelers Group, and American Express Co., which have entered what was once banking's unchallenged domain-investing household deposits and making consumer loans.
"With the Commerce Committee now considering financial reform legislation, we believe there are folks over there who have an interest in understanding the relationship between banks and other financial firms," said ABA senior economist Michael ter Maat.
Mr. ter Maat said many Commerce Committee members-who generally focus on securities and insurance issues-may be under the impression that banks still dominate financial services.
"The book makes the point that a lot of nonbanking firms provide banking services and have been for quite some time," he said.
The study also points out that banks' share of financial assets has fallen to 28% today from 60% in 1977.
