Comment: Charter-Merger Panal Could Break Logjam in Congress

The costly civil war within the nation's financial sector over needed legislative reforms must end as soon as possible. This could be achieved quickly and decisively by applying remedies used successfully on such other difficult issues as closing military bases and approving trade treaties.

I have introduced legislation to do exactly that, and I will initiate congressional banking committee action on it at the earliest possible moment.

That may come soon because favorable conditions currently exist in Congress for positive action on financial reforms. This special opportunity arises from the commitment of House and Senate banking committees to revisit the controversial pending legislation to merge the charters of national banks and thrifts.

Such a merger proposes, among other things, to abolish federally chartered thrifts and to close the door at last on the savings and loan debacle. It could change the nation's financial landscape, too.

The next window of opportunity for positive action will be in July, when the House Banking Committee is tentatively scheduled to consider banking provisions in the fiscal 1997 federal budget.

At that time, it is likely the committee will consider adding the pending charter-merger proposal to the budget legislation. This was attempted in 1995, but eventually was rejected by the Senate. The administration opposed it too.

My legislation is designed to break this gridlock. One part of the solution was suggested in a March 21 news release issued by the New York State Bankers Association:

"A commission similar to the (Military) Base Closure Commission could implement the charter mandate. Its recommendations, to be presented by a date certain, would take effect unless the Congress rejected them."

What I propose in my bill, however, is to combine this idea with fast- track legislative procedures used for considering trade treaties, like the North American Free Trade Agreement and the General Agreement on Tarrifs and Trade. Key portions of the fast-track procedures provide legislators more drafting flexibility than does the base-closure law.

Thus, a framework would be created that could address the most arcane financial issues as well as overarching public policy questions. It could even resuscitate efforts to repeal the Glass-Steagall Act. The bill could be a vehicle for regulatory reform and for resolving the continuing disagreement over terms and conditions under which national banks can sell insurance.

Following the base closure commission pattern, my legislation would create an eight-member Thrift Charter Merger Commission of qualified persons representing a balance of interests.

It would be appointed by the President by Feb. 15, 1997, with the advice and consent of the Senate after consultation with the majority and minority leaders of the both the House and Senate. A director and staff would support the commission's work.

A final report and proposed implementing legislation would have to be submitted by the commission to the President and the Congress by Oct. 1, 1997. After receiving comments from the President and the Congress, the commission would have to submit a revised final implementing bill to Congress by Dec. 1, 1997, or 30 legislative days after submission of the final report, which ever is later.

The commission's legislation would be submitted without amendment via a highly privileged motion under familiar fast-track legislative procedures for an up or down vote in early 1998.

Noncontroversial reforms, transitional matters, and emergencies, such as recapitalizing the thrift deposit fund, could be addressed by amendment to my bill. Such provisions could take effect immediately upon enactment in 1996 - independent of the commission's operations.

Does financial modernization deserve the rigorous, no-nonsense commission-and-fast-track approach?

I believe so. The health of our financial system is crucial to job creation and economic growth. The nation's banks and thrifts are weighed down by horse-and-buggy laws and layers of unneeded regulation.

Unfettered by banking laws, insurance companies make loans. Securities companies provide checking accounts and most other bank products. Finance companies, mortgage companies, and other enterprises also provide bank-like services.

Archaic, legal "firewalls" between these players are being crushed by technological advances, regulatory burden, bureaucratic rulings, court decisions, and global competition.

As a result, banks and thrifts are rapidly losing market share. They currently hold less than 35% of the nation's financial assets, down from 75% in 1950.

It is clear that all of us as consumers have an enormous stake in this modernizing effort because it could, indeed, make credit more available and more affordable. With more financial choices, consumer demand could play a larger role in the allocation of credit.

First, however, there must be basic modernization of financial laws. Only then can consumers hope to realize the benefits of a more highly competitive, healthier financial services industry in the 21st century.

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