Capitol Account: A Revolting Development for ABA and IBAA

A little rebellion every now and then is a good thing, Thomas Jefferson once argued. Of course, Jefferson wasn't the head of a bank trade group.

For the leaders of the banking industry's major trade associations, the rebellion brewing among their state affiliates is a major headache. In time, it should pass. But before it does, it could be the source of a good bit of pain.

What has the state associations riled is a proposed moratorium on new national bank insurance powers, which the House leaders attached to a legislative package that includes regulatory relief and Glass-Steagall repeal.

One of the trade groups, the Independent Bankers Association of America, has endorsed the package, albeit reluctantly. The other, the American Bankers Association, has not taken a position, contending that the final version of the package has not yet been revealed.

A good number of the state associations don't share the ABA's finely honed sense of caution. They've seen enough of the package to know that they don't like it, and they want their trade groups to get out front and oppose it.

That makes life uncomfortable for the associations' leadership. "Every trade group executive has to be leery of getting in front of his members," said Kenneth A. Guenther, head of the Independent Bankers.

"We clearly got out in front of Texas and Florida in deciding to support the bill," he added, citing two of the state groups that have been most vocal in their opposition to the national organization's position.

Mr. Guenther's state executives are meeting today and Saturday in Austin, Tex., and House Banking Committee Chairman Jim Leach is scheduled to speak to the group. Rep. Leach will likely argue that the insurance moratorium isn't so bad as it seems. He will also likely argue that he will do what he can on other fronts to compensate for the moratorium.

Rep. Leach spoke on Wednesday to executives of all 50 of the ABA's state affiliates on a telephone conference call. An aide to Rep. Leach said the Iowa Republican "seemed to bring some of them around."

But the most common complaint raised during the meeting was not about the insurance moratorium. Instead, the No. 1 concern was a separate measure that would require banks to pay most of the tab for bonds sold in a failed 1987 effort to rescue the thrift insurance fund.

Still, the unhappiness of the state groups isn't entirely bad news for the national organizations. Neither the ABA nor the IBAA is crazy about the bill that Rep. Leach patched together. But neither group wants to take on the banking committee chairman.

The state revolt offers both groups some cover. It allows Mr. Guenther and ABA chief lobbyist Edward L. Yingling to go to the banking committee chairman and ask for a break to help deal with the thunder from back home.

That's something that legislators understand. Congressional leaders cannot govern without the ability to enforce discipline on key votes. But a lawmaker is often given a "pass" when voting with his or her party would cause a serious problem back home.

It is also possible the ABA is hoping Glass-Steagall will remain in flux until after the thrift insurance fund issue is dealt with. By withholding its support on Glass-Steagall for as long as possible, the trade group could have some leverage to negotiate a better deal.

But there is also some risk involved for all parties. The national organizations run the risk of doing long-term damage to their relationships with the state groups. And the industry as a whole risks alienating a powerful committee chairman who has shown time and again that he knows how to play hardball.

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