LaFalce, a Pro-Bank Democrat, Defies Typing

The month of May was no spring picnic for Rep. John J. LaFalce.

The senior Democrat on the Banking Committee led a losing charge on the House floor against the Republican-backed financial services reform bill, which most of the banking industry opposed as favoring securities and insurance companies.

As the standard-bearer for the Treasury Department's opposition to the legislation, he sponsored an amendment expanding national bank powers that was soundly defeated, 306-to-115.

Republicans back home in western New York rallied against him, too.

A week before the reform vote, wealthy GOP businessman Christopher C. Collins launched a high-stakes campaign to oust Rep. LaFalce. Observers predict this could be the 24-year incumbent's toughest challenger ever.

Mr. Collins immediately branded his opponent as an ineffective Washington insider and liberal. "He is an anti-job, anti-business, tax-and- spend, professional politician who represents the failed policies of the past," Mr. Collins said, according to the Buffalo News.

If the 58-year-old Rep. LaFalce were defeated, banks would lose a key ally who, during the reform debate, stood up for them against the Republican leadership, some powerful Democrats, and Federal Reserve Board Chairman Alan Greenspan.

Indeed, his historical sensitivity to the concerns of banks and thrifts will undercut criticism of him as a traditional, anti-business Democrat, supporters contend.

"It is going to be pretty hard to make that stick in John's case because that is not his record," says banking lawyer James J. Butera, who describes Rep. LaFalce as a close friend. "John is a pro-business Democrat. The industry groups which have always supported John will continue to do so."

Rep. LaFalce, who succeeded ailing Texan Henry B. Gonzalez as House Banking's ranking Democrat in late February, is not an ideologue like some of his predecessors, banking lobbyists say.

"We have a better relationship with John LaFalce than we have historically had with ranking Democrats," says Edward L. Yingling, chief lobbyist for the American Bankers Association.

"He's a leading light on the Banking Committee, and sometimes we exchange ideas," says Robert G. Wilmers, president of First Empire State Corp. in Buffalo. "I think most highly of him."

But he hasn't sided with the banking industry on every fight. For instance, Rep. LaFalce and House Banking Chairman Jim Leach in March pushed a bipartisan bill through committee that would ease credit union membership limits despite bankers' adamant objections.

He also has been an outspoken advocate for consumer protection provisions that are anathema to many bankers, including affordable checking accounts for low-income people and "anti-tying" prohibitions against coercive sales practices.

Whether Rep. LaFalce relishes a good fight - legislative or campaign - is a subject of debate, reinforcing the difficulty of typecasting him.

"He's not one of those who will really go for the jugular," says Cory N. Strupp, head of government relations for J.P. Morgan & Co. "He's not really a guy who likes a verbal fistfight. He cares more about getting the right result than beating someone up."

Another bank lobbyist is more critical. "He always talks a good game," he says. "But the joke was don't look for him to carry your amendment .... He's not somebody who will go to the mat and fight for you."

Even Rep. LaFalce, who styles himself as a consensus-builder, says that he prefers "good intellectual point and counterpoint" over a partisan brawl and dreads a high-spending reelection battle.

Yet Clinton administration officials paint a tougher picture of the New York lawmaker, who in the days leading up to the reform vote lobbied hard at the side of Treasury Secretary Robert E. Rubin in favor of broad financial powers for bank operating subsidiaries.

"He showed great leadership in putting forth a view a lot of people had" despite powerful opposition, says Treasury Under Secretary John D. Hawke Jr. "There were a lot of things going against him."

Rep. LaFalce and Democratic colleague Bruce F. Vento of Minnesota proposed an amendment that would have let operating units underwrite securities and conduct merchant banking activities. Their amendment also would have restored the legal deference that federal courts give the comptroller of the currency's expansions of national bank powers when challenged by state insurance regulators.

Rep. LaFalce, who observers credit as a longtime advocate of financial reform, said he opposed any legislation that diminished the powers of any financial institutions.

"The bill in its current form is a frontal assault on the national bank system," he said during the House debate. He argued that it would shift assets out of institutions covered by the Community Reinvestment Act, undercut the authority of the executive branch to influence economic policy and define bank powers, and hurt the competitiveness of small banks.

In the end, fellow Democrat Rep. John D. Dingell of Michigan bested him by marshaling party colleagues against the amendment. Rep. Dingell agreed to support the Republican-led bill in exchange for inclusion of a series of consumer protections. He blasted underwriting powers for operating subsidiaries as too risky.

Republicans were nearly unanimous in opposition to the amendment, and Democrats split 99-99. Rep. LaFalce threatened to seek to strip the bill down to a bare-bones Glass-Steagall repeal if he lost but never followed through.

"I never did think it would pass," the New York lawmaker lamented in the hallways of the Capitol soon after the May 13 vote. "I felt we had to make the case."

Born in Buffalo, Mr. LaFalce is a second-generation Italian-American who has spent nearly his entire life in western New York. He graduated from Canisius College in New York and Villanova University law school in Pennsylvania.

He and his wife Patricia still live in the Buffalo suburb of Tonawanda, which he has called home since 1956. Their teenage son, Martin, is a star baseball player and was recently elected student body president - a race that his father lost when he attended the same high school.

Lobbyists describe the New York lawmaker, who formerly served as chairman of the Small Business Committee, as a friendly politician who enjoys a chat over a cup of amaretto coffee or a fine Italian dinner and as extremely knowledgeable on banking issues.

Rep. LaFalce already has his gaze set on next year.

Friendly with fellow New Yorker and Senate Banking Chairman Alfonse M. D'Amato, Rep. LaFalce does not expect the Senate to act on the bill by yearend. That would mean the House would have to reconsider the legislation in 1998.

The battle is primed for next year, he says, with the administration's strong position and threatened veto well established. If sweeping restructuring fails, he says, he would support incremental reforms.

But first he will have to beat his reelection foe.

The congressman, who says he has about $500,000 in his campaign war chest, admits that he will have to increase his fund-raising efforts to compete with Mr. Collins' vow to spend at least $1 million.

"I hate the thought of it, but I will probably be forced into that," he says.

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