Time Is Short for Congress To Act on Reform Legislation

With Congress still scheduled to adjourn Friday, prospects for financial services reform legislation continued to defy prediction.

"Efforts are under way to try and bridge the gap" on remaining disputes, said Edward L. Yingling, chief lobbyist for the American Bankers Association. "Whether that can be done remains to be seen. ... We expect this to go right up to the very end."

As the Senate prepared to vote late Monday on a motion limiting debate, industry sources said that House leaders have been involved in compromise negotiations and would quickly adopt the final Senate bill as envisioned currently.

Supporters also stirred rumors that the Treasury Department will back off its demand that full financial powers be granted to bank operating subsidiaries.

In a private meeting after an Institute of International Bankers breakfast Monday, House Banking Committee Chairman Jim Leach reportedly told bankers that a possible deal would let operating subsidiaries underwrite securities and conduct merchant banking activities.

But in his speech to the same group, Treasury Under Secretary John D. Hawke Jr. treated the bill's demise as a forgone conclusion. The Clinton administration has a strong case for a veto, he said, particularly if Senate Republicans scale back the Community Reinvestment Act.

"Status quo, while not ideal, is not altogether bad," Mr. Hawke said. "We are prepared to work with the incoming Congress to address and resolve these issues."

In a separate speech Monday, acting Comptroller of the Currency Julie L. Williams complained the legislation places "new roadblocks in the way of bank regulators." The legislation, she said, would bar bank regulators from examining nonbank affiliates without hard evidence that a problem threatening the bank's safety exists.

"By that time, damage to the bank or its reputation could have already occurred," she said in a speech to the Wallenberg Bankers Forum at Georgetown University.

Still, the bill's prospects got a boost when a persistent opponent unexpectedly dropped its demands. America's Community Bankers late Friday said it supports the legislation, despite provisions that would bar the transfer of ownership of a unitary thrift holding company to a commercial firm. The group said it will stop fighting for amendments because Senate Banking Committee Chairman Alfonse M. D'Amato is expected to add a provision that would repeal creation of a special reserve to the thrift insurance fund. Thrifts opposed the reserve because it could drive up premiums.

(A 1996 law requires the Federal Deposit Insurance Corp. to put all money above $1.25 for every $100 of insured deposits into a separate reserve next year. That special reserve could be tapped only if the fund fell below 62.5 cents for every $100 of insured deposits.)

Other controversies continue to threaten the bill.

Republican Sens. Phil Gramm and Richard C. Shelby are expected to vigorously fight the bill's CRA-related provisions. Meanwhile, bankers are preparing to fend off an expected amendment from liberal Democrats that would require them to offer affordable checking accounts.

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