ABA Poised To Withdraw Its Support For Bank Bill

WASHINGTON - With President Bush's plan to overhaul bank law facing major alterations by Congress, the American Bankers Association is ready to reverse course and withdraw its endorsement.

Talks currently under way between two key House committee chairmen appear likely to lead to a compromise that would be unpalatable to the banking industry, said Edward L. Yingling, head of government relations for the ABA.

The compromise could lead to a bill that would roll back existing bank insurance powers as well as impose strict restrictions on any new authority to underwrite securities.

Knockout Punch Prescribed

While Mr. Yingling said it is still possible that "a miracle" could save the so-called "powers and services" title of the bill, the ABA is now preparing to use its clout to lobby against the broad-based measure that emerges.

"Our position is that we don't want to go backward on powers and services," he said. "It seems highly unlikely" that the bill "would not go backward, and we have to position ourselves to knock it out."

Mr. Yingling said he believes the national organization's view is now shared by all 50 state banking associations.

Determined opposition by the banking industry could doom efforts to restructure the financial services industry this year. However, some industry observers said the bill may now have too much momentum to stop.

"Everyone in the financial trade groups would [now] prefer a narrow bill, but they may have waited too long," said Sam Baptista, president of the Financial Services Council. The council represents big banks and diversified financial services companies.

Gonzalez-Dingell Talks

Congressional aides and financial industry lobbyists who were following the banking legislation said progress was made Tuesday in the talks between House Banking Committee Chairman Henry B. Gonzalez and Energy and Commerce Chairman John D. Dingell, D-Mich.

The scenario most discussed involves changing key elements of the reform plan proposed by President Bush. Affiliations between commercial and banking firms would not be allowed. And, while banks would be permitted to underwrite securities, restrictions championed by Mr. Dingell would be imposed. Also, current insurance-activity restrictions would be kept.

At the same time, a compromise on interstate branching appeared to be shaping up in the House, under which states could require institutions to enter via acquisitions, rather than by opening new branches. The states see such restrictions as a way of preserving the franchise value of existing banks.

Taking Up the Bill

It appears likely now that the House Rules Committee could take up the bill as early as next Tuesday. The panel, which sets the terms for floor debate, could clear the measure for floor action before the end of the week.

In that event, provisions on which the two panels agreed could be incorporated as original text in the bill; other issues could be voted on as amendments on the House floor.

The chief obstacle to major legislation now is the ticking congressional clock. Republican staff directors in the Senate were told by their party's leadership to expect a Nov. 22 adjournment. In the House, lawmakers are pressing for an end to business by Thanksgiving.

Few Days Left for Passage

With so few legislative days left, any snag in the process could make it impossible to pass comprehensive legislation. In that case, a measure providing money for the Bank Insurance Fund would probably be tacked on to an unrelated bill - at the last minute.

Meanwhile, Rep. Joseph P. Kennedy, D-Mass., pledged Tuesday to push an amendment on the floor that would bar a bank from branching across state lines until regulators affirm that it is complying with the Community Reinvestment Act.

Mr. Kennedy said he is outraged by data released this week by the Federal Reserve, indicating that banks are discriminating against minorities applying for mortgages.

Furious that too many banks are getting good CRA ratings, Mr. Kennedy said Congress should force regulators to consider a bank's mortgage lending practices when judging CRA performance.

His amendment linking interstate branching privileges with CRA compliance was dropped in the House Banking Committee.

But, once before, Mr. Kennedy won an important amendment on the House floor: in 1989 he forced banks to begin reporting whether they approved or rejected mortgage applications, and the income and race of the applicants. That amendment was the seed of this week's report from the Fed.

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