Repeal of the Glass-Steagall Act is shaping up as a front-burner issue in both the House and Senate banking committees. The principal obstacle to repeal in years past had been Rep. John Dingell, former chairman of the House Energy and Commerce Committee, who almost single-handedly blocked serious discussion of the issue.

With Mr. Dingell relegated to minority status, the major remaining hurdle is a looming debate over the Bank Holding Company Act. The securities firms view Glass-Steagall repeal, standing alone, as a one-sided deal.

Elimination of Glass-Steagall would allow banks full-fledged participation in the securities business. But the securities firms say the Bank Holding Company Act would block many securities firms from full participation in the banking business.

The problem, according to the securities firms, is that many of them have affiliates engaged in activities not permitted to bank holding companies.

If, for example, a securities firm has an affiliate engaged in underwriting life insurance, the securities firm may not become a bank holding company without shedding the life insurance business.

I understand why securities firms would not wish to divest their nonpermissible activities as a quid pro quo for being permitted to acquire banks.

But it's not obvious to me how a requirement that they do so would place the securities firms at a competitive disadvantage vis-a-vis banking companies.

It's simply a fact of life, under current law, that if a company wishes to own a bank, it must forgo engaging in a wide range of other activities. The rules are the same for everyone.

While I don't agree there is an inequity in repealing Glass-Steagall without repealing the Bank Holding Company Act, I believe the Bank Holding Company Act has outlived whatever purpose it was intended to serve.

The Bank Holding Company Act should be near the top of any list the administration and Congress might develop of government laws and regulations that should be eliminated.

The law was adopted in 1956 primarily as a means to prevent the spread of interstate banking.

There were virtually no problem banks or bank failures during the 1940s and 1950s, so the measure was clearly not intended to address any concerns about safety and soundness, modern-day rhetoric to the contrary notwithstanding.

The law was aimed specifically at the banking and insurance empire assembled by the founder of Bank of America, A.P. Gianinni.

No doubt because Mr. Gianinni was one of the best and most innovative bankers in U.S. history, he and his organization engendered more than a little fear and jealousy among competitors.

The 1956 law did not create a total separation between banking and commerce, since it allowed nonfinancial firms to own a single bank.

That exception was closed by the 1970 amendments to the Bank Holding Company Act, despite the absence of problems stemming from the ownership of banks by nonfinancial firms.

It's always been puzzling how it became more or less "conventional wisdom" that the separation of banking and commerce is essential to the preservation of a sound banking system. This conventional wisdom ignores the fact that a number of our nation's best banks - Chase and Wells Fargo to name two - evolved from nonbanking companies.

The conventional wisdom also ignores that for more than a decade before the Bank Holding Company Act was enacted no banking problems existed.

Moreover, it seems indisputable that, by preventing our nation's banks from evolving and diversifying, the Bank Holding Company Act contributed mightily to some very serious problems in both the banking and thrift industries.

Surely, the widespread banking problems of the 1980s would have been far less severe had banks been permitted to diversify geographically.

The massive problems in the thrift industry, which cost taxpayers some $200 billion, would have been diminished considerably had we allowed thrifts to affiliate with banks in the early 1970s when it became apparent thrifts were losing their niche in the marketplace.

Interstate banking is now the law of the land, which eliminates the original rationale for the Bank Holding Company Act. A number of other laws have been put on the books, which are more than adequate to guard against other perceived potential problems.

There are laws requiring approval from the bank regulators before anyone may acquire control of a bank. Thus, the regulators have the ability to screen potential acquirers to make sure they possess the requisite integrity, management skill, and financial resources.

There are laws governing insider and affiliate transactions to prevent the owners of banks from abusing them. There are antitrust laws to prevent anticompetitive combinations and improper tying practices.

There are laws requiring banks to ascertain and meet the needs of their communities. And the regulators have been given a vast array of enforcement powers to deal with any threats to the financial stability of a bank.

The Bank Holding Company Act was from its inception a law designed to limit competition in the financial marketplace. It has accomplished its purpose at enormous cost to the American public. Its repeal is long overdue.

Mr. Isaac, a former chairman of the Federal Deposit Insurance Corp., is chairman and chief executive officer of Secura Group, a financial services consulting firm based in Washington.

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