The House made history - and stunned more than a few industry observers - this May with the passage of HR 10, a comprehensive, bipartisan bill to reform America's outdated financial laws.
The landmark legislation passed because a broad coalition of congressional and industry leaders made a commitment to get it done. And thanks to Banking Committee Chairman Alfonse D'Amato's leadership, the Senate appears set to pick up where the House left off.
The question now is whether banking-related trade associations will serve the banking community by joining in that commitment and helping Congress finish the job.
The House vote on HR 10 proved that the process works. When you put aside the turf battles, the association politics, and the cynicism that has traditionally accompanied this issue, you're left with a picture of the House cautiously working its will in as fair a manner as possible.
The result was a sound product that lets banks engage in new activities without jeopardizing the federal safety net, that expands investor protections while streamlining regulation, and that maintains prohibitions against the mixing of banking and commerce until we have a chance to see how the other parts of the puzzle work. It is truly a historic achievement and an unprecedented opportunity for American banks.
The process worked in the House, and it will continue to work in the Senate, where the interest in finishing the process this year grows with each passing day. The stumbling block for passage of financial services reform has always been the House, and that hurdle has been cleared for the first time in 20 years.
With this watershed development, it is clear the bank lobby can best serve the interests of the American banking community by rethinking its opposition to the process and joining in the commitment to enacting HR 10 this year.
In the long term, the reforms in HR 10 are almost certainly in the banking industry's interest. Without legislative action, any changes that benefit the industry will come slowly - through protracted and expensive litigation - as the OCC struggles to establish its authority to allow banks entry into such promising markets as securities and insurance underwriting and sales.
Legislation, on the other hand, makes that authority certain. And in a market that evolves as fast as the financial services market, speed and certainty are crucial. That certainty is critical for our large banks which compete overseas and for small community banks competing against non bank entities.
Does HR 10 give banks everything they want? No.
Does it give them what they need to compete fairly in today's markets, within a secure and fair regulatory structure? Yes.
And with every day that goes by, the banking community loses another opportunity to help shape the bill in ways that make it even more attractive to American banks.
There's a reason the House defied 20 years of failure and worked so hard to pass HR 10. America is the global leader in many of the industries of tomorrow, including financial services. But just as a number of our trading partners are opening their financial markets for competition, American financial service providers are being held back by laws that were written for realities of the Great Depression.
We have an opportunity to update our laws at a time when things are good in the financial services industry. With our recent success in balancing the budget, cutting taxes, and getting control of entitlement spending, banks are booming.
Since 1994, bank stocks have soared, substantially outpacing broader indexes like the Standard & Poor's 500. Businesses are able to service their loans and are seeking more financing in hopes of further growth.
Homebuying is up, with more families refinancing their mortgages. And with vehicles like Roth IRAs, individuals have even greater incentive to save and invest in their futures.
These are good times for banks and good times for the free-market financial reform our economy needs for the long haul. The alternative is to wait for a crisis, and experience has shown that crisis-driven legislation is not good for the private sector. It means more regulation, more mandates, and less flexibility to respond to market conditions. Just like Glass-Steagall.
So let's get it done. Let's scrape away the scar tissue of battles past and renew our commitment to taking this historic step this year for our economy's future. From banks to consumers to our economy itself, it's in our best interests.