The Senate is scheduled to begin debate on financial reform today with the aim of casting a vote Thursday, but disputes over the legislation as well as spending and other unrelated matters could delay voting until next week.
Sen. Phil Gramm, the Banking Committee chairman, is refusing to budge on powers for bank subsidiaries and changes to the Community Reinvestment Act. Democrats are threatening to stall the bill with extraneous amendments or a filibuster unless they are allowed to offer pro-CRA and other amendments.
To rally support from fellow party members, Sen. Gramm has invited Federal Reserve Board Chairman Alan Greenspan to speak Tuesday at the Senate Republican Policy Committee's weekly luncheon. Mr. Greenspan supports the Senate bill's tighter limits on new powers for bank operating subsidiaries.
But Sen. Richard C. Shelby on Monday attacked Mr. Greenspan's stance against bank subsidiaries as hypocritical and discriminatory toward domestic financial institutions.
The Alabama Republican circulated a draft letter that says the Fed since 1990 has approved applications by 18 foreign banks to underwrite securities through direct subsidiaries. "The Federal Reserve does not seem concerned about the unfair competitive advantage of foreign banks," the letter says. "Fundamental fairness suggests domestic banks should also have the choice of an operating subsidiary."
Sen. Shelby's letter described Sen. Gramm's proposed ban on broad powers for subsidiaries of banks with more than $1 billion of assets as "arbitrary" and unjustifiable. It seeks bipartisan support for an amendment that would let any national bank conduct securities underwriting and merchant banking through a direct subsidiary.
Meanwhile, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt Jr. are slated to testify Wednesday on the legislation before House Commerce's finance subcommittee. Industry witnesses and George Nichols 3d, Kentucky's insurance commissioner and vice president of the National Association of Insurance Commissioners, are also scheduled to testify.
The subcommittee might hold a third hearing but has delayed scheduling it pending the Senate's vote. House leaders have given the Commerce Committee until May 14 to finish its work, but the panel is expected to seek an extension if Senate consideration stalls.