Rep. Richard Baker is one of the bright young conservatives with positions of power on the House Banking Committee. As chairman of the subcommittee on capital markets and securities, the Louisiana Republican holds sway over a broad range of issues vital to bankers on Wall Street and Main Street alike.

He is also one of the new breed of GOP lawmakers who pose a challenge to Rep. Jim Leach, the moderate Republican who chairs the House Banking Committee.

Rep. Baker is preparing legislation that would serve as a counterweight to Rep. Leach's Glass-Steagall repeal bill. Both bills drop the barriers between commercial and investment banking. But where Rep. Leach draws a line in the sand between banking and commerce, Rep. Baker would build a highway to connect the two.

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The distinction is crucial. Securities firms and diversified financial services companies argue that Glass-Steagall repeal by itself creates a one-way street that lets banks into their businesses but effectively locks them out of banking.

That's because the ownership restrictions of the Bank Holding Company Act bar companies with nonfinancial interests from affiliating with a bank.

Rep. Baker and others want to open up what they say would be a two-way street. Drop the ownership restrictions and allow anyone to buy a bank, they say - and let banks buy into practically any business they choose as well.

"I think that a business, corporation, or individual ought to be able to use capital in a way that they think makes sense," so long as they comply with regulations aimed at protecting insured deposits, Rep. Baker said.

"If a bank chooses to risk capital through its holding company, that should not put taxpayers at risk," he added in an interview this week.

These are matters of high principle, to be sure. But they are also matters of high politics. And for Rep. Leach, the debate with Rep. Baker carries considerable political risk.

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As a legislator, Rep. Leach has never hesitated to carry lonely positions. In 1991, he stood almost alone on the banking committee in opposing the Republican administration's effort to drop the barriers between banking and commerce. That bill died on the House floor.

But he is chairman now, and chairmen must lead, or at least be seen to lead. The question, then, is what will Rep. Leach do if the votes appear to be running against him? Lose gracefully? Try to compromise with Rep. Baker in advance of a vote? Or use his power as chairman to pull the plug on the process?

Rep. Baker doubts that Rep. Leach would pull the bill from consideration if he loses on the banking and commerce issue.

"Jim has always been very fair, and I think he will abide by the will of the committee," Rep. Baker said.

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But Rep. Baker left little doubt that he expects to prevail on this issue. The huge class of freshmen Republicans, a wild card in any debate, is almost certain to work to his advantage, he said.

"From personal visits with new members, I am very pleased with their outlook on issues," he said.

However, the five-term lawmaker minimized the differences between his position and that of Rep. Leach.

"I agree with Jim Leach a lot more than Henry Gonzalez," he said, referring to the Texas Democrat who chaired the panel last year.

Rep. Baker said he plans to discuss the issue at some length with Rep. Leach, and predicted that the two would reach a compromise.

"His bottom line is that we should not expose the taxpayer to unreasonable risk," he said of his colleague. "If we can propose something that permits financial services participants to acquire other players with no risk to the insurance program, we ought to be able to agree."

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