House Banking Committee officials are floating a financial reform compromise that would preserve the thrift charter but limit its powers.
The latest proposal, which surfaced Thursday, could break the logjam that has prevented Congress from revising the laws governing the banking, securities, and insurance industries. It came out just a day after the House Commerce Committee released its own proposed compromise.
Legislation passed last year by the House Banking and Commerce committees would eliminate the thrift charter, but the Banking Committee compromise would keep the charter and would transfer thrift oversight to bank regulators, sources said.
The Office of Thrift Supervision still would regulate thrifts, but it would become a department of the Office of the Comptroller of the Currency. The Federal Reserve Board would regulate unitary thrift holding companies, sources said.
Commercial firms would be barred from buying or starting unitary thrift holding companies, sources said.
Thrifts still would be subject to rules limiting business lending, and they would be required to follow interstate branching restrictions for new facilities and to boost home mortgage lending.
The draft also would merge the deposit insurance funds and ease conversions between bank and thrift charters, sources said.
The changes, if adopted, would occur on Jan. 1, 2000.
A House Banking spokesman declined to discuss the details but said staff met Wednesday for bipartisan discussions on the charter issue at the request of Chairman Jim Leach, R-Iowa.
"There are discussions going on to come up with some minor compromises," the spokesman said. "Nothing has been decided."
The spokesman emphasized that proposal would not require commercial firms to divest thrifts they already have established.
Paul A. Schosberg, president of America's Community Bankers, said he would withhold final judgment, but he warned that the proposal raises many concerns.
"Obviously, it is a diminution of the charter," he said. "It smacks of legislating to the lowest common denominator."
Edward L. Yingling, chief lobbyist for the American Bankers Association, called the proposal "a dramatic change" and said it addresses some of his group's primary complaints.
The ABA has fought to kill the thrift charter. It would favor putting banks and thrifts under the same regulatory structure and strictly limiting the mixing of banking and commerce, Mr. Yingling said.
Mr. Yingling said he is concerned that the proposal would merge the insurance funds without combining the bank and thrift charters.
