House and Senate negotiators have removed provisions from the financial reform legislation that would have authorized wholesale banks.
Lawmakers had agreed to create wholesale financial institutions, or "woofies," which securities or insurance firms could have chartered to accept uninsured deposits. The institutions would not have been subject to Community Reinvestment Act requirements, but banks could not have chartered them.
Although strongly pushed by Goldman, Sachs & Co., woofies attracted a growing number of opponents in recent weeks. "The banking industry objected to the unfairness of Goldman Sachs to ... have a franchise that anyone affiliated with a bank wouldn't have," said Edward L. Yingling, chief lobbyist of the American Bankers Association.
J.P. Morgan & Co. had lobbied for the right to fold a commercial bank into a wholesale institution, but the Treasury Department opposed that because it might let banks escape CRA.
Congressional staffers were putting the final touches on the bill Wednesday so it could be circulated among members of the House-Senate conference committee. The full House and Senate are expected to vote on the bill this week or next.
-- Dean Anason