Congress' failure to pass financial services reform legislation can be traced to the sour relationship between two committees of the House of Representatives.
In a year when reelection pressures and other hot issues will preoccupy lawmakers, the tension between the Banking and Commerce committees is likely to remain a serious obstacle.
It certainly does not help matters that banking, insurance, and securities interests are constantly bickering, while regulators get tripped up in territorial disputes.
But in the end, all eyes turn to the legislative snags. The two committees approved conflicting versions of reform legislation last year and must resolve their differences soon if a bill is to be enacted before the session ends in October.
"Nothing happened this week," banking committee member Marge Roukema, R- N.J., said in an interview Friday. "That is a disappointment. Hopefully the (House) leadership is going to take over."
Insiders said they have gotten accustomed to the gulf between the committees.
"What relationship?" asked Karen Shaw Petrou, president of the ISD/Shaw Inc. financial services consulting firm. "I thought they hated each other."
Events in recent months have intensified the committees' mutual pique:
Commerce Committee members did not show up for a scheduled meeting in November with Banking Committee members to draft a consensus bill.
House Republican Conference Chairman John A. Boehner and Commerce Committee member Michael G. Oxley excluded Rep. Roukema, chairwoman of the Banking Committee's financial institutions subcommittee, when they traveled to New York last month to meet with executives of the largest financial services companies.
The Commerce Committee's Feb. 4 letter to the Banking Committee, which was said to be a peace offering, was taken by the Banking Committee staff as an insult.
For example, challenging the effectiveness of House Banking's limits on unitary thrift holding companies acquiring banks, the letter from Commerce asked: "Does the Banking Committee know that approximately 75% of the nation's commercial banks would currently satisfy the Qualified Thrift Lender test and, thus, could be acquired and merged into a converted thrift without significant difficulty?"
Commerce also criticized Banking's broad definition of sophisticated investors who do not need the protection of federal securities laws:
"Does the Banking Committee believe that a person who has won the lottery has the requisite sophistication necessary to evaluate these complex securities?"
Meanwhile, people outside the Beltway might be moved to ask why two committees of the same house of Congress, firmly controlled by the same, Republican Party, would tussle so.
The answer can be found in their jurisdictional divide.
The Banking Committee is responsible for banks, thrifts, and credit unions, while the Commerce Committee is charged with overseeing insurance and securities firms. Their differing versions of financial reforms reflect the biases of the industries they oversee.
"Neither committee is to blame," Rep. Roukema said. "This is rather typical when you have these joint jurisdictions. Leadership has to take control and mediate the differences."
Participants are waiting for Rep. Boehner to schedule a meeting of House leaders on financial services reform legislation. A Boehner spokesman did not return calls about the task force's plans. (Congress is in recess until Feb. 24.)
Meanwhile, the two committees' staffs met last week but came with different expectations. Banking Committee staffers thought the session would be a formal presentation of the legislative counterproposals in Commerce's Feb. 4 letter. It proposed letting banks engage in additional securities activities, lifting some restrictions on fee income, and restoring the thrift charter. But Commerce staffers arrived expecting to hear feedback from Banking.
The meeting broke up after 20 minutes with little accomplished, according to a Banking source. The Banking Committee plans to reply to Commerce's letter within two weeks.
A Commerce spokesman downplayed the apparent friction, saying, "I don't think negotiations have been terribly strained."
In the letter, Commerce offered to allow banks to underwrite municipal revenue bonds and permit uninsured state-chartered trust companies to engage in securities activities, provided they are regulated by state banking agencies.
Rep. Oxley, chairman of Commerce's finance subcommittee, touted the counteroffer as "significant movement in the area of securities," but a Banking official said the panels remain far apart on numerous securities matters.
The Commerce Committee insists on more strictly defining the sophisticated investors who would be excluded from federal securities law protections. The committees also disagree on whether banks may charge commissions on stock purchase and dividend reinvestment services for employee benefit plans.
Even larger issues remain, such as whether the thrift charter should be preserved, if direct bank operating subsidiaries should be allowed, and how state and federal regulation of insurance and securities products should be reconciled.
Banking Committee officials continue to float language that would preserve the thrift charter while scaling back its powers, but Commerce favors dodging that issue.
Rep. Jim Leach of Iowa, chairman of Banking, and Rep. Oxley have both said they want to get a bill to the floor in March.
"Given the diceyness of the issues involved, however, there are no guarantees the House will take up the bill," Rep. Leach said through a spokesman Friday.
Lobbyists are paying scant attention to the Commerce counteroffer and said they are holding private talks to hammer out compromises on securities, insurance, and other matters.
"Part of you just wants to say, 'Here they go again,'" said Gary E. Hughes, chief counsel for securities and banking of the American Council of Life Insurance.
"I don't think any staff document at this point means a whole lot," said Edward L. Yingling, chief lobbyist for the American Bankers Association. He said House leaders "first have to make some key decisions."