WASHINGTON - The fate of legislation to stiffen federal regulation of the government securities market was uncertain yesterday after the House decisively rejected the bill backed by the Energy and Commerce Committee.
The House voted 279 to 124 on Wednesday night against the bill backed by Commerce Committee Chairman John Dingell, D-Mich., and by Rep. Edward Markey, D-Mass., chairman of the telecommunications and finance subcommittee.
With Congress scheduled to adjourn Oct. 3, supporters of the Markey bill said they did not know if there is enough time to win congressional approval. The House leadership would have to agree to another floor vote, and, if the measure is approved, go to conference to iron out differences with the Senate.
The Senate version of the legislation, approved last year, would set a more modest regulatory role for the Securities and Exchange Commission.
The Markey bill was staunchly opposed by Rep. Henry Gonzalez, D-Texas, chairman of the House Banking Committee, who was pushing his own bill. The Treasury Department and the Federal Reserve also opposed the Markey bill.
Congressional aides said Mr. Gonzalez fought hard to persuade his own committee members and key House leaders to vote against the bill on both procedural and substantive grounds. In the end, procedural objections apparently doomed the legislation, but the defeat of Mr. Dingell's bill left a bitter aftermath that made it unclear what will happen.
"Frankly, I don't know w.here we go from here," said Betsy Dotson, assistant director of federal liaison for the Government Finance Officers Association. "We have to have this legislation. It's important to our members, and I think it's important to the market as a whole."
The bill was brought up in the House for a vote on the suspension calendar, meaning that supporters wanted to treat it as a noncontroversial item. However, any objection means the bill must win a two thirds vote instead of a simple majority, and members typically do not like to vote for a bill on suspension if it is subject to much dispute.
Mr. Gonzalez argued that putting the bill on the suspension calendar was an unfair procedural maneuver to sidestep his own bill. He also insisted that his bill was needed to limit SEC regulation to securities firms in the government market and retain bank regulators to oversee bank dealers. A majority of Democrats and Republicans ended up siding with Mr. Gonzalez.
"Process prevailed over substance, and then it became a snowball," said Micah Green, executive vice president of the Public Securities Association. "If it had come up on order, it would have passed. " Still, he added, "the problem is there isn't much time."
Ms. Dotson agreed, noting that approval will be difficult unless Mr. Dingell and Mr. Gonzalez resolve their turf war. "It's really a shame that the policy and substance issues have gotten lost in this."
In a statement, Mr. Gonzalez hailed the defeat of the Energy and Commerce Committee bill as a victory for his own committee and the taxpayer. "As anyone knows, banking is a complicated business, and it takes regulators with expertise in the field to catch incidents of malfeasance and fraud"' he said. "Our bill contained only jurisdictional modifications designed to keep the SEC out of the bank regulatory business."
Staffers from the Energy and Commerce Committee could not be reached for comment, but supporters of the Gonzalez legislation were elated with the outcome and said they had won based on the issues as well as procedure.
"Hurricane Henry blew through the House and knocked down John Dingell," said one Banking Committee aide. "A lot of the vote could be attributed to the differences among members over the process, but the whole vote of the House was for one bank regulator and the process issue made it such a lopsided vote. "