WASHINGTON - In a move that could complicate prospects for Glass- Steagall legislation, House Commerce Committee Chairman Thomas J. Bliley is expected to introduce legislation to limit banks' insurance powers.
The bill, which could be introduced as early as this week, would give state insurance commissioners the power to regulate bank insurance sales.
The measure could block the Comptroller of the Currency's authority to grant banks the ability to sell annuities. And bank lobbyists said they fear that the Virginia Republican's bill may be tacked on to industry modernization legislation emerging from the House Banking Committee.
"This can wreck the whole Glass-Steagall process," said Phillip Corwin, lobbyist for the American Bankers Association. "If anything like this gets attached to any of the modernization bills, we will lobby to kill the bill."
The Commerce Committee has "sequential referral" on any Glass-Steagall bill. That is, after the House Banking Committee passes an industry modernization bill, Commerce will have a period of time - perhaps as short as one month - to review the measure and propose its own amendments.
If the two panels propose differing bills, the House Rules Committee would have to decide which will be considered on the floor. The panel has broad discretion and could let lawmakers vote on both, or only one of the two if it chooses.
Most often, Rules will take one of the two in order as original text and let the other panel offer its measure - or one or two items from it - as an amendment.
If enacted, the Bliley bill would effectively overturn a Supreme Court decision in a case that pitted NationsBank Corp. against Variable Annuity Life Insurance Co., or Valic.
The court's ruling upheld a decision by the Comptroller of the Currency that selling annuities was "incidental to banking," thereby allow banks to sell the long-term investments.
"This totally wipes out the Supreme Court decision, which I think it is intended to do," said Bob Griffin, director of litigation for the Comptroller's office. "Moreover, it wipes out any kind of federal preeminence in the field of insurance. Comparing the McCarran-Ferguson Act to the Bliley bill is like comparing a stiletto to a meat ax."
The bill would also affect two important federal appeals court cases, Mr. Griffin said. The recent decision involving Barnett Banks Inc., in which a court ruled that states can regulate bank insurance sales, would be codified by the bill's passage.
Conversely, the Owensboro National Bank decision, in which a court held that states cannot bar national banks from selling insurance in towns of under 5,000, would be rendered moot.
"There has been a split between the court districts, but this would be an action that postdates all the court decisions with a statement by Congress," said Richard Whiting, general counsel for the Bankers Roundtable.
However, Phil Anderson, senior Washington representative for the Independent Insurance Agents of America, said that the bill would simply create a level playing field for offering insurance products.
"This bill simply aims to make it clear that everyone who sells these products is treated the same," said Mr. Anderson. "This legislation is not novel or radical in its goal - it simply clarifies the McCarran-Ferguson Act."
Mr. Anderson criticized banks' belief that state insurance regulators have no authority over bank sales of insurance products like annuities.
"Banks say they want to keep functional regulation, but to not leave the state insurance regulator with the power to just say no to an institution is nothing more than lip service to functional regulation," Mr. Anderson said.
Turf battles between House Banking and Commerce committees were expected to be muted during this Congress because Rep. John Dingell, long a barrier to financial industry modernization bills, lost his Commerce Committee chairmanship. However, the introduction of this bill, which the Michigan Democrat co-sponsored, may prove that the days of jurisdictional wrangling between the committees are not over.