When your party wins control of Congress for the first time in 40 years, it's supposed to feel good. But for Rep. Richard H. Baker, it's been frustrating.

The five-term Louisiana Republican had high hopes of advancing what he calls his "grand plan" to update the laws governing banking. But reality hasn't met expectations.

"This has been the most difficult legislative year I've ever had, in both my congressional or my state legislative life," Rep. Baker says.

The 47-year-old lawmaker is frustrated because the future he sees for financial services has conflicted with the views of House Banking Committee Chairman Jim Leach.

Rep. Baker, however, won a big concession Thursday when the Iowa Republican backed legislation that would let banks buy insurance companies. (See article on page 1.)

Rep. Baker, chairman of the banking panel's capital markets subcommittee, is the most vocal and arguably the most knowledgeable Capitol Hill proponent of letting banks move into new lines of business.

"If anything, I've at least opened the debate and built a platform for action next year," he insists.

According to Rep. Baker, the market - not regulators or lawmakers - should dictate what services financial institutions offer.

"He's more of a visionary than even most of those within the industry," says Sam Baptista, president of the Financial Services Council. "And he's going to continue to push the outer envelope and make his mark."

"Baker is substantive to the core and very quick-witted with the political realities of the committee," adds Mary Clare Fitzgerald, director of government relations for Hughes, Hubbard & Reed. Another lobbyist describes Rep. Baker as a combination of southern gentleman and "high- intellect Louisiana wheeler-dealer," well-suited to building bridges between Republicans and Democrats.

"While in the minority, he knew how to work with the Democrats, and won his amendments almost every time," Ms. Fitzgerald says.

Indeed, that's part of the problem; Rep. Baker is used to getting things done. With the GOP in charge, Rep. Baker, who ranks sixth in seniority on the House Banking Committee, logically could have expected to get a lot done.

But often Rep. Leach has blocked his way.

The committee chairman contends that mingling commerce and banking would lead to massive concentrations of economic wealth; Rep. Baker says banks and nonfinancial companies should be free to own one another.

Looking back over the last 15 months, Rep. Baker says Rep. Leach has prevented his subcommittee from addressing financial modernization. For example, Glass-Steagall repeal, a top priority for Rep. Leach, falls within the jurisdiction of Rep. Baker's subcommittee. But Rep. Leach insisted that hearings on the repeal bill take place in the parent committee, Rep. Baker says.

"The subcommittee agenda hasn't been active because of the efforts of the chairman to move his principal agenda first," Rep. Baker contends. "We had nine hearings at the full committee, but I never felt that I had the opportunity to discuss the positives and negatives of the 'grand plan.'"

The biggest clash between the two lawmakers came last June when the banking panel was deliberating on a regulatory relief bill. Rep. Baker pushed through a controversial amendment that would have let banks affiliate with insurance companies.

Even the 36-12 vote for the amendment, however, could not secure it in the face of the chairman's opposition. Much to the chagrin of the bank lobbyists who had cheered the "Baker amendment," Rep. Leach, using a parliamentary loophole, reintroduced the regulatory relief bill after the committee's vote - but without Rep. Baker's provision.

Yet it seems Rep. Baker may prevail.

Prompted by this week's Supreme Court ruling that national banks can sell insurance from small towns, Rep. Leach changed his mind. Late Wednesday, he agreed to include a provision in his Glass-Steagall repeal bill that would let insurance companies and banks affiliate. Whether the House will approve the bill is uncertain, but Rep. Baker was thrilled at the sudden turn of events.

"We've really come full circle on the affiliations amendment," Rep. Baker says. "I'm beginning to feel like this committee's work product could turn out to be the most significant we've ever had."

Rep. Baker's interest in financial services dates from 1970 when he began work as a commercial real estate broker after graduating from Louisiana State University. His 16 years in real estate paralleled his tenure in the Louisiana House, to which he was elected in 1971.

"It wasn't like a light switch went off, but I began to realize that we needed to modernize the frame of reference that financial services must function within," Rep. Baker says.

Much of his reform drive is fueled by his interest in the huge impact technology is having on financial services.

An avid Internet surfer, Rep. Baker likes to tell the story of how he called up the home page of an Iowa insurance company from his home in Baton Rouge. Within minutes, he got a quote from the company on refinancing his mortgage.

Two days later, he received a Federal Express package with a loan application form and a prepaid return package.

"That fella in Iowa is already competing amazingly efficiently with my small-town banker in Baton Rouge," Rep. Baker says. Telling this story to a group of thrift executives, he adds: "If this doesn't scare you, you're not breathing."

Rep. Baker says the government is "totally unprepared" to deal with Internet delivery of financial services.

"You may have a situation where there's a provider in Chicago selling a product over the Internet that's being financed by a guy in New York," Mr. Baker says, "and it's insured by a company in California. If that product is damaged in delivery, who the devil do you call to complain to?"

Nevertheless, Rep. Baker says, it would be a mistake to restrict the development of on-line banking services by overregulation.

"It is totally irresponsible for Congress to say, 'You can't do this,' simply because we don't understand it," Rep. Baker says.

Reforming the Federal Home Loan Bank System is another pet project. Rep. Baker introduced legislation this month that would let Federal Home Loan banks fund development loans in rural areas and underserved communities.

"The small banks can't access the capital markets as easily as the large banks," Rep. Baker says, "so they really need more of the access the Home Loan banks can provide."

While the presidents of the 12 Home Loan banks want some changes in it, they generally support the measure, which was expected to be approved Thursday in Rep. Baker's subcommittee.

With the Clinton administration opposing it, however, the legislation's fate is uncertain. But Rep. Baker says he'll keep at it until changes are enacted.

"I have more plays in my desk drawer on Federal Home Loan Bank modernization than most NFL coaches have in their playbook," he says.

While he admits his relentlessness can come off as "too intense," Rep. Baker says it's the only way to overcome Rep. Leach's opposition.

"Chairman Leach knows that I am going to continue at every opportunity to express my point of view," Rep. Baker says. "He knows I'm not going away."

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