Trying to resuscitate legislation reforming the nation's financial laws, three executives-one each from banking, securities, and insurance-have come up with a compromise.
The plan by Norwest Corp. chairman Richard M. Kovacevich; John G. Turner, chairman of ReliaStar Financial Corp.; and Irving Weiser, chairman of Dain Rauscher Inc., would protect banks selling insurance and securities from interference by state regulators. In return, competitors in these other industries would gain power to challenge bank powers in court.
The three men-dubbed the "Minnesota Triplets" by a Capitol Hill staff member because they run companies based in Minneapolis-have been working on a deal since last fall when the reform bill stalled in the House.
According to a draft copy obtained Friday by American Banker, the proposal would:
Make it easier for federal regulators to override state insurance laws.
Allow banks to conduct other securities activities directly, such as buying stock for employee benefit plans, instead of through holding company or operating subsidiaries.
Require the Federal Reserve to pay interest on reserves and permit banks to pay interest on demand deposits.
In exchange, banks would surrender a key legal tool the industry has used to defend challenges to their insurance selling powers.
Under current law, federal courts defer to the Office of the Comptroller of the Currency in disputes with state regulators over bank insurance sales. The draft compromise by the three executives would eliminate that advantage.
Other provisions would prevent federal regulators from preempting state oversight of insurance companies that affiliate with banks and strike from current legislation the requirement that banking and insurance activities be physically separated.
The three executives are not scheduled to approve a final proposal until early March, according to Gary E. Hughes, chief counsel of securities and banking for the American Council of Life Insurance.
"The deal is not finished," he said, emphasizing that the ACLI gave technical assistance to the three men but has not endorsed their plan. "It has changed and probably will change some more."
(Mr. Turner at ReliaStar is a former ACLI chairman.)
Although the proposal has not been released officially, lobbyists for the Independent Insurance Agents of America and the National Association of Life Underwriters have already begun assailing it for rolling back state insurance laws too far.
"This 'deal' does not represent the interests of the nearly half-million insurance agents and their employees whom our two associations represent," Robert A. Rusbuldt, the IIAA's senior vice president of government affairs, and David Winston, NALU's associate general counsel, wrote Rep. John Boehner, R-Ohio, last week.
"The agent provisions are worse than current law and would, in fact, be a major step backward," they wrote.
Mr. Kovacevich is to present the plan in early March to Rep. Michael G. Oxley, chairman of the House Commerce Committee's finance subcommittee. He is also reportedly seeking a meeting with Rep. Boehner, the House Republican Conference chairman.
"It is problematic that the talks did not include the agents," a spokeswoman for Rep. Oxley said. "We will certainly take a look at it to see if there are any good ideas in there."
Spokesmen for the House Banking and Commerce committees-who ultimately must resolve conflicting versions of legislation each approved last year- said they would review the proposal but would not comment on its substance.