Brady Bullish on Bank Bill: |Time and Tide Are With Us'
WASHINGTON -- Relaxing on an easy chair in his corner office, his left leg across a worn coffee table, Treasury Secretary Nicholas Brady looks like he's on the way to winning the biggest legislative battle of his career.
That's because deep down he is convinced that he can't lose the fight to overhaul the nation's banking system.
"Time and tide are with us," he says, referring to the bill's progress through the tricky currents of Congress. Of course, it doesn't hurt that George Bush, riding an unprecedented wave of popularity, remains "four-square behind the program," the Secretary points out.
"As the legislation gets to the top committee level of Congress, you'll see the President in action, and forceably so," Mr. Brady told the American Banker in an exclusive interview last Friday.
Mr. Brady also said:
* The economy appears to have bottomed, but the Federal Reserve should cut interest rates again anyway to speed the recovery. "I can tell you, if I were a Fed governor, I would move in that direction."
"We would want to see the mortgage rates come down; and it seems to me now that inflation obviously has been checked we should remove all impediments to returning this country to growth," Mr. Brady said.
* Other industrial nations should aggressively follow the same course to spur the world economy. His remarks appeared to be directed at central bankers in Germany and Japan, who have been reluctant to cut their interest rates.
"I fail to see how some bloodless strategy of simply talking about fighting inflation is going to get the job done. We have to have a dynamic, forward-looking strategy for the 1990s. And that seems to be one based on growth; not inflationary growth, but growth nevertheless," said Mr. Brady.
* The Bush Administration's bank reform bill, if passed without major revisions, will restore the flow of equity to the banking industry. Mr. Brady emphasized that provisions permitting commercial and industrial companies to own banks should be left intact.
Fresh Capital Seen
"It's a new source of capital and that's important," the Secretary said, dismissing talk that the provision is merely a legislative bargaining chip that the Treasury would be willing to drop in the inevitable horse trading involved in getting a bill through Congress.
* Small banks will be able to compete effectively with big banks, even if interstate branch banking is allowed. He criticized Kenneth Guenther of the Independent Bankers Association of America for opposing elements of the plan, stating "I think he demeans his members, carrying on the way he does."
"I think I have much more confidence in small banks than Ken Guenther does. I was a director of a small bank for a number of years in my home county [in New Jersey] and it more than successfully dealt with the competition from larger organizations."
Rougher Sailing Ahead
In a major victory for Mr. Brady, the reform bank plan survived its recent journey through the House Banking subcommittee on financial institutions supervision, regulation, and insurance. That was its first major legislative test. But Mr. Brady knows that rougher sailing lies ahead in both legislative chambers.
So far, Mr. Brady, 61, has managed to keep his emotions in check.
"I never got into either the valleys of despair or the peaks of euphoria that seem to surround this particular piece of legislation," said the Secretary.
"I've adopted the view that this is a matter of national interest that has to be carried forward. And so, it doesn't matter where you are in the process, you've got to complete the job."
Mr. Brady hasn't been sitting on the sidelines, watching events unfold. History sometimes needs a push or a shove here, a foot in the door there. He expends varying amounts of time and energy each day trying to get lawmakers to adopt the administration's vision for a brave new world of banking. Some days it's 10% of his time, other days, 50% to 70%, he says.
Last Friday, he spent part of his morning with House Banking Committee Chairman Henry B. Gonzalez, who seems to oppose many parts of the Administration's bank plan.
It was a week in which an article in Rolling Stone magazine by William Grieder said that Mr. Brady and the administration had been asleep at the wheel as the current banking crisis unfolded. The article was excerpted in The New York Times. Mr. Brady had skimmed over the Times version before the meeting.
What Rolling Stones?
"Chairman Gonzalez was talking about Rolling Stones yesterday and I didn't know what he was talking about," laughed Mr. Brady, who thought the Texas Democrat was discussing the rock group Brady's children used to listen to as teenagers.
"The chairman's point was, we have much too important work to do here to be pulled off course by articles of that sort," he said.
A Good Mixer
Mr. Brady mixes well with Congress, in part because he used to be a Senator, having served out in 1982 the term of New Jersey's Harrison Williams, who was caught taking bribe money by Abscam's candid camera in 1981. Also, he is considered a straight shooter.
He is very knowledgeable, too. Mr. Brady was once a bank director and he has 30 years of experience on Wall Street.
He is also unpretentious. Lean and tall, with silver hair and a decisive jawline, Mr. Brady is considered among the most photogenic men in politics. Yet he hates to have his picture taken. His staff has been known to penalize reporters who ask to have their photographers get fresh pictures of him; on occasion they have subtracted time spent in a photography session from the reporter's allotted interview time.
Debate Only on Specifics
While there may be room for debate on the specifics of the banking bill, Mr. Brady believes there is no debate about whether change in the industry is needed.
The Administration's bill, he argues, is designed to make the banking industry profitable and competitive, to make banks a safer haven for deposits and a stronger source of credit. This is is what any objective observer wants, he says. In his view, the issue is not political in any traditional sense.
"Fundamentally, the alliances that make the banking bill an important piece of legislation are not party-line alliances. Each of the issues inside the bill is regional and parochial. So, that crosscuts party lines."
Record bank failures, losses to the bank insurance fund, and the rise in importance of foreign banks - all these things evidence the need for reform now, he says.
"We wouldn't stand still if we didn't have a computer company in the top ten. We wouldn't stand still if we didn't have a leading aerospace or an automobile company. It's clear, something has to be done. I have no doubt something will be done," he says.
Mr. Brady predicts a rapid turnaround for banks if the bill is passed. The argument is essentially that by being able to get into new businesses - and operate with a recapitalized insurance fund - the banks will be able to reap higher profits. Indeed, Mr. Brady feels the bill is partly responsible for this year's rise in bank stock prices, up nearly 40% since Jan. 1.
Other Key Influences
While the bill has probably had some positive effect on bank stock prices, the drop in interest rates and a generally rising market have been at least as important, analysts believe.
With the President at his side, Mr. Brady remains bullish. "To me, this is the same kind of situation that existed in Mexico," he said of the banking industry's woes.
"We undertook that problem by facing the fact that we should have a debt reduction pact with Mexico. All I can tell you is in the two years since we've done that, the reserves of Mexico went from $4 billion to $13 billion or $14 billion. Mexico is a success story. It doesn't take that long."
Mr. Brady lauds members of the House subcommittee who pushed the bill ahead ten days ago, praising them for intellectual honesty and an apolitical approach. The big question, he says, is whether Congress as a whole has "the guts to really solve the problem or whether they'll solve half of it or 25%."
PHOTO : SECRETARY BRADY expects the President to weigh in -- forcefully.