WASHINGTON -- Senate Banking Committee Chairman Donald W. Riegle said yesterday he would attempt to remove provisions from pending bank reform legislation that would allow banks into the securities business.
Sen. Riegle's efforts, if successful, would virtually kill any attempt to broaden bank securities powers this year. The House of Representatives last week killed a major bank bill and was expected to take up narrower legislation last night.
Sen. Riegle, D-Mich., said he would "reluctantly" offer an amendment to the bill to strip it of provisions that would repeal the Glass-Steagall Act, which separates investment and commercial banking activities. Sen. Riegle made his remarks as the Senate geared up to consider its version of bank overhaul legislation.
The impending move to eliminate the Glass-Steagall repeal provisions of the Senate bill comes amid increasing concern about the health of the banking industry. Many lawmakers have expressed wariness at granting banks new powers at the same time they are being asked to provide money to recapitalize the ailing Bank Insurance Fund.
Legislation pending before both the Senate and House would provide the insurance fund with a $30 billion loan to cover losses at failed banks, and a $45 billion loan for working capital purposes.
Working capital is money needed by bank regulators to handle assets held by failed banks until they can be sold to the private sector. Working capital borrowings theoretically would be repaid from the sale of those assets.
The $30 billion loan would be repaid through premium assessments banks are charged for deposit insurance.
Major bank reform legislation was offered earlier this year by the Bush administration, which pushed the plan as the centerpiece of its domestic agenda.
The Bush plan, which would have shattered Glass-Steagall, allowed manufacturers and retailers to own banks, and permitted interstate banking, is now hardly recognizable following months of congressional debate and amendment.