WASHINGTON - Glass-Steagall legislation cleared the House Banking Committee without difficulty Tuesday, but the measure now moves to the Commerce Committee, where it faces a tougher challenge.
The commerce panel, which has traditionally been more friendly to the securities and insurance industry than to banking, has 30 days to consider the Glass-Steagall bill following Tuesday's 29-to-8 vote.
"The rest of the process is going to be difficult," said Edward L. Yingling, chief lobbyist at the American Bankers Association.
Mr. Yingling applauded the Banking Committee's work on Chairman Jim Leach's Glass-Steagall bill as a "major first step" but expressed concern about the next step in the process.
"The danger is that negative insurance provisions and new securities regulations will get recommended by the Commerce Committee, and if that ends up in the final version, we would have to try to kill the bill," Mr. Yingling added.
Rep. Richard Baker, R-La., literally worked until the last minute of Tuesday's seven-hour vote to hammer out an amendment that would allow banks to affiliate with insurance companies.
However, no agreement could be reached between the insurance and banking industries, and Rep. Baker withdrew his amendment, warning that the bill may face provisions in Commerce that aim to roll back bank insurance powers.
A spokesman for the Commerce Committee said that the panel will begin consideration of the Leach bill "as soon as it gets reported to us."
"We had hoped that the issues that were raised in the Baker amendment would have been dealt with in the Banking Committee, because it was their primary responsibility," he added. "Unfortunately, they weren't."
After the Banking Committee approved the measure, lobbyists for the Independent Insurance Agents of America said that they will push for Commerce to attach a bill introduced earlier by committee Chairman Thomas J. Blilely, R-Va. The measure would allow state insurance regulators to limit bank insurance powers.
"The (Leach) bill is not insurance neutral," said Robert A. Rusbuldt, vice president of federal affairs for the agents' group. "It's tilted heavily towards banks. We hope this gets rectified in the Commerce Committee, perhaps by adding the Blilely bill."
During Tuesday's deliberations, the committee approved an amendment that would eliminate provisions in the Leach bill restricting the ability of banks to underwrite municipal bonds. The measure was applauded by the Independent Bankers Association of America.
"This is one of the few areas of new business for community banks that came out of this bill," said Kenneth A. Guenther, the IBAA's executive vice president. The measure was offered by Rep. Baker.
The committee also:
*Approved a measure introduced by Rep. J.C. Watts, R-Okla., that would require banks selling nondeposit investment products to obtain a signed customer acknowledgment that the products are uninsured and are nondeposit.
*Agreed to an amendment offered by Rep. Bruce F. Vento, D-Minn., that would create a "financial services council" composed of federal banking and securities regulators. Among other things, the council would aim to provide an interagency forum to define permissible activities for financial service holding companies under the Leach bill.
*Accepted a proposal sponsored by Rep. Dick Chrysler, R-Mich., thatwould allow credit card banks to issue corporate credit cards.
*Approved an amendment introduced by Rep. Bernard Sanders, I-Vt., that would ensure that the bill does not preempt state safety-and-soundness and consumer-protection laws.
*Approved a provision to lift the 7% growth cap on nonbank banks, which was introduced by Rep. Mike Castle, R-Del., among other lawmakers.
*Agreed to a proposal by Rep. Marge Roukema, R-N.J., to restrict the authority of the Securities and Exchange Commission over fees charged by banks to manage bank common trust funds.
An amendment offered by Rep. Toby Roth, R-Wis., to attach the regulatory relief bill introduced by Rep. Doug Bereuter, R-Neb., to the Glass-Steagall bill was ruled nongermane.