WASHINGTON -- The banking industry appears poised for another banner year on Capitol Hill, thanks in large part to the rise of the Republicans.
The industry was doing well enough with Democrats in charge. Before leaving town this year, Congress approved -- among other items -- interstate branching, a package of regulatory relief, and bankruptcy reform.
"We've enjoyed some real successes in 1994," said Richard Thomas, chairman of First Chicago Corp. "It's the first time we've accomplished anything positive in a long time."
But Republican lawmakers, traditionally wary of government regulation, have always been seen as the more friendly of the two political parties. And the signs so far have been more than encouraging, particularly in the House.
Iowa Rep. Jim Leach, the incoming chairman of the House Banking Committee, plans to sponsor bills that would repeal the Glass-Steagall Act, apply sanctions to countries that discriminate against U.S. financial institutions, and overhaul the Federal Home Loan Bank System.
The industry will also benefit from its own good financial health. Unlike the difficult days at the turn of the decade, when the Federal Deposit Insurance Corp.'s solvency was threatened by a tidal wave of bank failures, the industry is earning record profits.
Capital levels are high and failures are so rare that the insurance fund will be recapitalized by the middle of next year.
"The levels of capital in the industry today are going to be very helpful on Capitol Hill," said Richard J. Boyle, vice chairman of Chase Manhattan Bank, New York.
"The specter of every bank becoming a travel agent won't provoke the same kind of fears that it did earlier in the decade," he added.
And unlike past years, when the industry needed a particular piece of legislation so badly that it was forced to swallow hard and accept new regulations as part of the price, bank lobbyists say they need almost nothing from Congress in 1995.
As a result, the banking industry's bargaining power is higher than ever.
Glass-Steagall is a good example. Many large banks would like to see the Depression-era law overturned, but not at any cost.
Banks can underwrite securities to a limited extent already under the Fed's interpretation of the Glass-Steagall Act, and those "Section 20" powers are expected to be further expanded in the years ahead.
As a result, if the price for repeal of Glass-Steagall is substantial new regulatory requirements or a loss of insurance powers, the big wholesale banks would likely walk away from the bill.
Since it is always easier to block a bill than to pass one, bank lobbyists calculate that they can stop a bill that turns sour.
But there may not be that much to dislike in the bill.
The banking committee has always been sympathetic to supporters of repeal, and most of the past opposition has come from the Energy and Commerce Committee, particularly out-going Chairman John D. Dingell.
Republicans have agreed to overhaul the committee structure to give the banking panel first crack at Glass-Steagall. And Rep. Thomas Bliley, R-Va., the incoming chairman of Energy and Commerce -- to be known simply as the Commerce Committee in the new Congress -- has said he will not tamper with the banking panel's work.
Sen. Alfonse M. D'Amato, R-N.Y., the incoming chairman of the Senate Banking Committee, is a bit of a wild card.
In the past, he has been known as an ally of the securities industry.
He supported Glass-Steagall repeal in 1991, though as part of a much broader realignment of the financial services industry.
Administration and industry sources said they are unsure where the New York Republican will come down on the issue this year.
Still, most observers are betting that the Glass-Steagall Act is about to undergo significant change.
Ron Ence, director of legislative affairs for the Independent Bankers Association of America, cited the wide range of officials supporting some level of reform, from Federal Reserve Chairman Alan Greenspan to Deputy Treasury Secretary Frank Newman.
"You don't have to be able to read tea leaves to figure out that it will happen," Mr. Ence said.
"We just don't know exactly what the final shape will be," he added.
Two other issues are likely to be high on the congressional agenda next year: additional regulatory relief for banks and legislation to merge the supervisory agencies.
Regulatory relief got a push from the Republican "Contract with America," which calls for strict cost-benefit analysis of banking regulations.
Both major political parties have formed working groups to address lightening the regulatory burden for businesses.
"My impression is that there is a genuine desire on the part of the new majority and many in the new minority to affect some real reform here on regulatory burden," said Federal Reserve Governor John P. LaWare.
The fact that Christopher H. Bond of Missouri, a banking committee member, is co-chair-man of the GOP working group in the Senate is a good sign that the banking industry will be targeted for relief, congressional aides say.
Agency consolidation may prove a thornier issue than relief. An administration effort in the last Congress to merge all bank supervision into a new federal banking agency failed miserably, in large part because of opposition from the Federal Reserve and the banking industry.
However, Rep. Leach is expected to propose legislation that would maintain independent roles for the Federal Reserve and the FDIC -- a tack that is likely to win support from the banking industry and the central bank.
Bankers seem divided about prospects for next year, with some expressing cautious optimism and others warning that the industry has often had its hopes raised falsely in the past.
"I would hope that bankers don't assume that things will be better because of the change of the complexion of Congress," said Chase's Mr. Boyle.
"Sometimes it's easy to believe that if you pass a piece of legislation, you are going to create a cure-all," he added.
"But if you look back in history, we've had a lot of harmful legislation that started out with the best of intentions."
Top Issues Expected legislative efforts in '95
* Repeal of Glass-Steagall
* Merger of bank agencies
* Regulatory relief
* Overhaul of Federal Home Loan Bank System
* Fair trade in financial services