For more years than most people can remember, the banking industry's battle cry has been new products and services. That being the case, you'd think that if Congress were trying to take a product away from banks, the industry would protest. Mightily.
Of course, you'd be wrong. A week ago, Congress voted under suspension of the rules to effectively kill the so-called Retirement CD. The measure passed on a voice vote.
A "suspension vote" is a procedure reserved for noncontroversial items, such as measures that aren't opposed by major industry groups. Until now, at least, banking has been counted as a major industry group, which is to say, it has always been strong enough to at least avoid being beaten on unanimous votes.
"It's a tremendous plus for the insurance industry, and they just gave it away on the House side," said consultant Bert Ely.
In point of fact, few banks are offering the Retirement CD. Some analysts, like Karen Shaw, think the product is of only meager importance to the industry, since only $100,000 can be insured. Real annuities offer much higher payouts.
But the Retirement CD was not just a product for banks to sell. It was also a bargaining chip in the debate over new powers and regulatory relief.
Right now, the only thing standing between banks and a Glass- Steagall/regulatory relief bill is the insurance industry, which desperately wants to limit bank involvement in its business.
And while the insurance industry may be the only thing standing between banks and a bill, it's a very big hurdle. It is absolutely clear that there will be no banking bill unless the insurance industry is satisfied. Insurers can't dictate the contents of the bill and probably can't force through a bill that banks oppose. But the insurance industry can almost certainly exercise a veto.
Banks obviously want to give as little as possible. But one thing they could have given without much pain was the Retirement CD.
"We were all just asleep," said one bank lobbyist.
Other industry lobbyists portrayed the vote as a gift the industry gave away freely in an effort to appear more reasonable in the Glass-Steagall debate. Right now, the Independent Insurance Agents of America are in the unaccustomed position of being the most accommodating party in the negotiations.
"We don't have anything left to give," said Robert Rusbuldt, a lobbyist for the agents. Mr. Rusbuldt exaggerates a bit, of course, but it is true that many on Capitol Hill believe it is the banks that have been unwilling to compromise on this issue.
It's important to understand that compromise is the currency of choice on Capitol Hill. Sometimes the mere willingness to compromise is more important than the substance of the proposed accommodation. That's especially true late in the congressional session, when tempers are becoming frayed and legislators are looking for a way - any way - to close the deal.
But banking didn't have to compromise as early as it did. If banks had wanted to give up the Retirement CD, they could have waited and caved in during negotiations over the Glass-Steagall package, where they are fighting efforts to impose a moratorium on new insurance powers for national banks.
"It's always a mistake to allow something to go through that is antibanking," concluded one influential industry lobbyist.
