The House Banking Committee narrowly rejected an amendment Thursday that would have loosened the financial reform bill's limits on unitary thrift holding companies.
The 30-to-29 vote after a fierce, 90-minute debate preserves the legislation's prohibition on commercial companies chartering new thrifts or buying existing ones. The bill would grandfather nonfinancial companies that owned or had applied for thrift charters as of March 4.
The Senate Banking Committee adopted reform legislation March 4 that would prevent commercial companies from applying for new thrifts after Feb. 28, but they could still enter the banking business by buying existing unitary thrifts.
In their third day of debate on the bill, House Banking members avoided other controversies such as community reinvestment requirements and powers for bank operating subsidiaries. However, new disputes emerged over consumer privacy protections and federal review of megamergers.
The committee had not cast a final vote on the legislation by late afternoon.
The normally reserved House Banking chairman, Jim Leach blasted the thrift industry while adamantly defending the bill's limits on unitary thrifts.
He accused thrift industry lobbyists of backing off a commitment last year to support these provisions and of being ungrateful for the federal government's bailout of the savings and loan industry in the late 1980s.
"I have never in my life dealt with any industrial grouping of any nature that has been treated more generously than the United States thrift industry," Rep. Leach said. "I have never dealt with an industry that has made agreements with implicit understandings, and then taken what was good, and asked for more. The committee ought to draw the line."
Rep. Leach blamed Washington Mutual Inc., Seattle, for leading an attack on the proposed curbs on the thrift charter because it "wants the right to be sold to Microsoft."
Reps. John LaFalce, D-N.Y., Edward Royce, R-Calif., Bill McCollum, R- Fla., and others introduced the amendment that would have stripped the bill of these provisions and preserved current law on unitary thrifts.
Rep. LaFalce, the committee's ranking Democrat, staunchly defended the unitary thrift as a legal, viable charter that has a strong track record of safety and soundness.
"It is specifically provided for by law, and has been for about the past 30 or 40 years or so," he said. "It has operated to the benefit of consumers for all that period of time with nary a problem. ... Why do we come in now and repeal it?"
Rep. LaFalce disputed the concerns raised by Rep. Leach, Federal Reserve Chairman Alan Greenspan, and Treasury Secretary Robert E. Rubin that unbridled unitary thrifts would lead to large concentrations of economic power.
Arguments that mixing banking and commerce led to the recent Asian financial crisis are not applicable to the U.S. economy, he said.
After procedural tiffs late Wednesday threatened to unravel the bill, lawmakers did manage to avoid controversy in several areas.
For instance, Rep. McCollum withheld controversial amendments to exempt small banks from the Community Reinvestment Act or to curtail the bill's CRA requirements for merging banks. The Senate Banking Committee approved similar measures, and an aide explained that Rep. McCollum would seek to preserve those in the final bill.
Rep. LaFalce said he decided not to introduce a proposal that would have preserved more powers for the comptroller of the currency to override state insurance laws, because "it might well unravel the bill." However, he said that he might revive it on the House floor if the bill gets there.
Also, a fragile compromise to settle the turf war between the Fed and Treasury Department over powers for operating subsidiaries survived. Both agencies could veto the other's decisions to grant new bank powers. Also, banks with more than $10 billion of assets choosing to conduct new powers through a subsidiary would have to have a holding company so the Fed could scrutinize them.
But behind the scenes, lawmakers tussled over whether the Fed should be required to conduct hearingsin every major cityaffected by mergers between banks that have assets of $1 billion or more each.
Also under debate was an amendment by Rep. Jay Inslee, D-Wash., to require holding companies from sharing personal financial information unless they give customers an opportunity to stop it.
Rep. Leach and Rep. Bruce F. Vento, D-Minn., were expected to introduce a compromise that would require banks to disclose their privacy practices to customers and keep customer health information confidential. The Leach- Vento plan would make it a federal crime for someone to trick a bank into divulging private data on customers.
