House Banking Committee Chairman Jim Leach plans to introduce financial reform legislation Wednesday, the first day of the new Congress.
Though the bill was still being drafted Tuesday, a committee spokesman said it would closely mirror the compromise version backed by the banking, insurance, and securities industries in October. Rep. Leach has requested the same bill number, HR 10, that was used in the last congressional session.
The legislation would overhaul the nation's financial laws by letting banks, insurance companies, and securities firms affiliate with each other. It would bar banking organizations-except unitary thrift holding companies that are grandfathered under the bill-from owning nonfinancial businesses. Commercial companies could not purchase unitary thrift holding companies.
This bill stalled in the Senate late last session and, in response to senators' concerns, Rep. Leach is expected to scale back a key community reinvestment provision. Committee sources said banks seeking to affiliate with a securities or insurance company would have to have "satisfactory" or better ratings in their most recent Community Reinvestment Act exams. But merged entities would no longer face divestiture or other penalties if the CRA ratings of their banks subsequently dipped.
Bank operating subsidiaries would be barred from underwriting activities, merchant banking, or real estate development.