While stumping for his financial reform plan Tuesday, Senate Banking Committee Chairman Phil Gramm acknowledged his bill will stall in the Senate unless he compromises with Democrats.
The Texas Republican said efforts to strike a deal with Sen. Paul S. Sarbanes and other Democrats on the committee have failed. Critics claim Sen. Gramm's bill would weaken the Community Reinvestment Act and breach the wall between commerce and banking and that it lacks adequate consumer protections.
But Sen. Gramm vowed to forge ahead with Thursday's vote on the legislation to force Democrats "to sit down and take this thing seriously."
"It may very well be that our first vote in committee will be partisan," he told reporters after speaking at a conference of America's Community Bankers. "You can't pass a partisan bill in the Senate, so I am eager to work with Democrats" to pound out a deal before the bill goes to the Senate floor.
But Sen. Gramm made clear he will not compromise at any cost. "The world's not going to come to an end if this bill ends up sitting there for awhile waiting for consensus to form," he said. "I am in no hurry."
The Senate and House Banking committees are each scheduled to vote on reform legislation Thursday. The bills overlap in several respects but vary widely on the most controversial issues.
Both bills would overhaul the nation's financial laws by permitting banks, insurance companies, and securities firms to own each other. They also would prohibit bank holding companies from engaging in commercial activities and expand the Federal Home Loan Bank System.
But the Gramm bill has softer CRA requirements, fewer limits on unitary thrift holding companies and bank sales of insurance, and tougher curbs on bank operating subsidiaries.
In a boost for the House bill, a Federal Reserve Board spokeswoman said Tuesday that the central bank would support a key compromise provision to make the Fed and Treasury Department cooperate on granting new bank powers and let each agency veto the other's decisions.
Some critics have called the plan unworkable, but House Banking Committee Chairman Jim Leach said it was the only approach both agencies would agree to. "Only time will tell whether that process is a tenable one," he said at a National Association for Business Economics seminar Tuesday.
Partisan clashes are expected during both committee votes, but the House committee's final bill is expected to earn more support from both parties.
Industry lobbyists cautioned that it is too early to consider the legislation doomed because of Senate partisanship or other controversies because the political maneuvering has hardly started.
"The process is just beginning," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America. "It has a long way to go in the Senate and a long way to go in the House."
Banking lobbyists are fairly upbeat about both bills, but the reaction is mixed from the thrift industry and negative from insurance agents and consumer groups.
Edward L. Yingling, chief lobbyist for the American Bankers Association, said the industry is "in the best position we have ever been in" compared with past starting points for congressional debate.
The ABA generally supports both bills except for the fact that Sen. Gramm's plan would continue to let commercial firms buy unitary thrifts, Mr. Yingling said.
Mr. Guenther said that the IBAA is still studying the Gramm bill but so far prefers the House bill because it is tougher on unitary thrifts and has stricter limits on merchant banking powers.
At the ACB conference Tuesday, executives applauded Sen. Gramm's description of the thrift charter as "far more in tune ... with the needs of the modern marketplace than any other financial charter" but questioned proposals such as a three-year extension of the requirement that thrifts pay a larger share than banks of the interest due on Financing Corp. bonds.
Sen. Gramm said preserving the current payment structure would keep the pressure on Congress to merge the bank and thrift charters and combine the deposit insurance funds.
Echoing Sen. Gramm, House Rules Committee Chairman David Dreier told ACB members that he opposed scaling back the thrift charter or expanding CRA requirements.
