When it comes to banking legislation, lawmakers and lobbyists alike are approaching the new year with only modest ambitions.

"It's a political year, and nothing is going to happen that will be constructive," said Bank of America lobbyist Fred Martin, noting that the presidential election season will be in full swing by the time Congress returns in January.

Indeed, hopes for repealing Glass-Steagall are all but dead for 1992, and interstate branching powers have only a ghost of a chance of passage. Instead, bank lobbyists plan to focus their attention on narrower items, including enhanced individual retirement accounts and more favorable tax treatment for certain real estate investments.

For many bank lobbyists, 1991 was a year in which grand expectations quickly turned into bitter setbacks, so they are approaching 1992 as a time to lie low and expect very little.

Branching Effort Abandoned

Throughout 1991, for example, BankAmerica's Mr. Martin proved a tireless advocate for interstate branching. But he has no intention of asking Congress to try again in 1992.

Part of the problem this year: Things got off to the worst possible start, with a bitter debate over new funding for the savings and loan bailout that poisoned the atmosphere for banking legislation of any kind.

Next year will start the same way. The funding measure Congress approved in November for the Resolution Trust Corp. expires April 1. As a result, one of the first items on next year's legislative agenda will be consideration of a money package to keep the savings and loan bailout going - a bill that will serve as a reminder to anyone on Capitol Hill who had forgotten why he or she was mad at insured depository institutions.

Threat of More Regulation

But the RTC package may be more than just a reminder of hard feelings about the rescue efforts for the bank and thrift insurance funds.

"Every time they do a money bill, legislators feel a need to show they are being tough on banks," said Edward L. Yingling, chief lobbyist for the Americn Bankers Association.

"If we have an RTC bill, the question is whether it could become a vehicle for additional regulatory burden," Mr. Yingling added. "So we feel a need a vehicle for additional regulatory burden," Mr. Yingling added. "So we feel a need to go up and talk to legislators about that."

A number of items left over from this year's legislation could be added to the RTC package, including proposals that banks be required to cash government checks and provide low-cost accounts for the poor.

Redress from Harsh Provisions

As bad as the atmosphere may be in Washington, some industry representatives believe banks and thrifts have no choice but to seek redress from some of the more onerous provisions in this year's banking law.

"Early intervention has to be revisited," said lobbyist James Butera, referring to a section of the new law that requires regulators to close institutions when their capital dips below 2% of assets.

That provision, which takes effect at the end of next year, is likely to come into play just as the economy comes out of recession, a time in which banks and thrifts are likely to be at their weakest. As a result, many more institutions are likely to be forced into receivership than is healthy.

But many worry that Congress won't take up a "technical corrections" bill in which such issues might be addressed.

"There are technical problems in the bill, but I'm still a skeptic," said Stephen J. Verdier, a lobbyist for the Independent Bankers Association of America and a former senior aide to the House Banking Committee.

Revisions Are Rare

In previous years, the banking committees have only rarely revisited their legislative initiatives, he pointed out, adding that they are unlikely to do so this year.

While bankers would welcome clarification of some sections of the law - a provision requiring 90 days' notice before a branch can be closed has no effective date, for example - many fear that a technical bill could become yet another vehicle for tougher oversight of the industry.

Looming over this year's legislative process is the presidential campaign. Banking legislation is hard enough in the best of times, but it is widely regarded as nearly impossible in a presidential year.

A Few Exceptions

There have been exceptions to that rule, to be sure: the Bank Holding Company Act was enacted in 1956 and the Monetary Control Act, which raised deposit insurance coverage to $100,000 per account, passed in 1980.

But bank legislation was regarded as essentially nonpartisan in those years. That changed with consideration of the 1989 savings and loan bailout, as Democrats tried to force President Bush to renege on his "no tax" pledge to fund the rescue operation.

And this year's bill, despite moments of genuine cooperation between House Speaker Thomas S. Foley, D-Wash., and Treasury Secretary Nicholas Brady, degenerated into partisan warfare by the end of the year.

Already, there are signs that the banking committees could be caught up in the swirl of election politics.

Gonzalez to Shift Focus

House Banking Committee Chairman Henry B. Gonzalez, D-Tex., has proclaimed that his panel will emphasize economic issues next year, the area in which Democrats believe President Bush is most vulnerable.

"With 8.5 million people out of work, with bankruptcies increasing daily and the recession deepening, it is imperative that this committee redouble its efforts on the economic issues," Mr. Gonzalez said in a policy statement.

In a listing that may suggest how Mr. Gonzalez ranks his priorities for next year, the chairman noted that the panel's jurisdiction includes "economic stabilization, redevelopment of economically distressed areas, encouragement of maximum employment, monetary policy, housing, community development, community investment, and all areas of credit and credit guarantees."

Job Creation, Housing

Mr. Gonzalez said he plans to introduce early next year an emergency housing and community development bill that will place emphasis on job creation and housing.

Similarly, Senate Banking Committee Chairman Donald W. Riegle is expected to use confirmation hearings for Federal Reserve Chairman Alan Greenspan as a forum to explore the stagnant economy.

"The banking industry could be a major political football," said the ABA's Mr. Yingling.

Consequently, banks are likely to be most effective when they can make common cause with other industries, such as the politically powerful real estate and development sectors.

Helping Real Estate

One major common interest of financial institutions and developers is legislation aimed at turning around the beleaguered real estate markets. The most frequently mentioned item in this category is restoration of favorable tax treatment for passive losses in real estate investments, though a reduction in capital gains taxes has become a close second.

As with other issues of interest to bankers, passive loss rules stand a fair chance of passage if a tax bill moves, as expected. (See article on page 6).

Also high on the agenda are tax-advantaged accounts - a liberalized individual retirement account or President Bush's proposed family savings account.

But banks are likely to have little influence over whether IRAs are included in the tax bill, said Mr. Butera, the lobbyist. "It's going to happen or not happen, regardless of what financial institutions do," he said.

Enhanced IRA Likely to Pass

With backing from Sen. Lloyd Bentsen, D-Tex., the powerful chairman of the Senate Finance Committee, an enhanced IRA is considered likely to pass.

A number of little issues - important to financial institutions, but minor items to most lawmakers - could be included in a tax bill as well.

"The biggest thing they could do for the thrift industry now involves the bad-debt recapture," said Lee Peckarsky, an independent financial insitutions lobbyist. The provision, which requires thrifts to pay taxes on their bad-debt reserve before converting charters, is likely to receive serious consideration in the context of tax legislation, Mr. Peckarsky said.

Mr. Yingling believes Congress will give serious consideration to protecting lenders from environmental liability and to overhauling the bankruptcy laws to make it more difficult for individuals and businesses to evade responsibility for debt repayment, a priority item for many banks.

Tough Time Expected

But Mr. Verdier, who covers the House of Representatives for the IBAA, thinks the industry will have a tough time getting its way on that issue.

"When I look at the House Judiciary Committee, I see a pretty liberal group," he said. "It's hard for me to believe that bankruptcy reform, as defined by the banking industry, is something they will endorse."

Sam Baptista, president of the Financial Services Council and perhaps the strongest proponent of the administration's unsuccessful banking initiative, said 1992 is shaping up as a "re-grouping year" to prepare for another legislative battle over restructuring in 1993.

"No matter who is in the White House," he said, "he will have to recognize that some fundamental reform in the financial services industry is needed."

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