WASHINGTON - At long last, the planets appear to be aligned in favor of those who want to repeal the Glass-Steagall Act.

Gone are the congressional committee chairmen who for years stood in the way of financial modernization. Instead, the Clinton administration and the chairmen of both the House and Senate banking committees are all advocating legislation to repeal Glass-Steagall.

Moreover, support for repeal is more broadly based than ever within the financial services industry. Some traditional enemies of change, such as the securities industry, now favor an overhaul of the law, and other staunch opponents - including the Independent Bankers Association of America - appear resigned to change.

Yet with all that Glass-Steagall repeal has going for it, nobody's ready just yet to write a death certificate for the 1933 law that separates commercial and investment banking.

"Look at interstate branching," said a longtime observer, referring to last year's major banking bill. "It had a broad coalition behind it and almost no opposition. But in the end, it just barely made it."

In this article and others to follow this week, the American Banker sizes up both the prospects for repeal and its likely impact.

The proposals afloat in Washington clearly have the potential to transform the financial services landscape. For example, banks could win a clearer path to sell insurance, something they have wanted for years.

It remains unclear, however, just how quickly banks would embrace all the new powers being discussed. Many banks say they have become wary of jumping into investment banking as a result of the Barings and Orange Country debacles. Others worry that, as old barriers fall, new and more onerous ones will be erected.

For now, all eyes are on Capitol Hill.

"If I was a betting man, I'd say it's 50-50," said Edward L. Yingling, the top lobbyist for the American Bankers Association. "Some days it seems slightly ahead, and some days it seems slightly behind."

The first big effort to repeal Glass-Steagall came in 1988, with legislation sponsored by Senate Banking Committee Chairman William Proxmire, D-Wis. The securities industry was violently opposed, and that bill died on the final day of the legislative session.

A more serious challenge to the Depression-era law arose in 1991, when the Bush administration proposed a radical overhaul of the financial services industry. That effort, too, died amid the pressure of the congressional clock, hostile committee chairmen, and the demands of interest groups.

But the landscape has changed considerably since 1991, and some observers believe the new environment shifts the odds slightly in favor of repeal.

The biggest change has been in Congress itself. The Republican takeover this year removed three committee chairmen who were at best dubious about and at worst openly hostile to Glass-Steagall repeal.

House Banking Committee Chairman Henry B. Gonzalez, D-Tex., was never a fan of Glass-Steagall repeal, and Senate Banking Committee Chairman Donald W. Riegle, D-Mich., was viewed by most lobbyists as lukewarm at best on the subject of financial modernization.

The third relevant congressional sachem, House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., made no secret of his disdain for banks and his belief that Glass-Steagall was essential to the safety of the financial system.

Rep. Dingell's panel long blocked efforts to expand bank securities powers. This year, though, the House Republican leadership expanded the banking committee's jurisdiction over Glass-Steagall.

The Energy and Commerce Committee got only limited rights to review legislation produced by the banking panel, and Rep. Dingell's successor as chairman, Rep. Thomas Bliley, R-Va., said he would not hold up Glass- Steagall repeal.

Meanwhile, the new House Banking Committee chairman, Rep. Jim Leach, R- Iowa, made Glass-Steagall repeal his top priority. His bill would permit a single company to own both a bank and a separately capitalized insurance company. The Federal Reserve would supervise the parent company.

His Senate counterpart, Alfonse M. D'Amato, R-N.Y., would repeal the Glass-Steagall Act and go one step further, permitting common ownership of banks and nonfinancial companies. Rep. Richard Baker, R-La., has introduced a companion bill in the House.

Should the D'Amato-Baker approach prevail, a single holding company could own a bank, a securities firm, an insurance company, and even an industrial concern such as Ford Motor Co.

But that's part of the problem.

Rep. Leach is adamantly opposed to the intermingling of banking and commerce, and he can be expected to wage a fierce battle against any effort to drop the Bank Holding Company Act's ownership restrictions.

Likewise, the Independent Bankers Association of America, will fight down to its last lobbyist against the Baker bill. The IBAA would likely be joined by a broad coalition of interests, including independent insurance agents, agricultural and consumer groups, and the real estate lobby.

But the Securities Industry Association warns that it won't support legislation that lacks flexibility on the banking and commerce barrier.

A number of securities firms have merchant banking groups that routinely take large positions in nonfinancial companies. Those investments would disqualify them from owning a full-fledged commercial bank under the Leach approach. (The banking committee chairman would, however, let securities firms own a "wholesale bank," a non-deposit-taking institution that would have access to the payments system.)

Glass-Steagall also faces problems from groups that don't much care about the separation of commercial and investment banking, including the Independent Insurance Agents of America.

"The insurance agents are already maneuvering for a floor amendment," said Mr. Yingling, the ABA lobbyist.

"And if they succeed, we will do everything we can to kill the bill," he added. Mr. Yingling said he is confident the banking lobby can block a bill it opposes.

The insurance agents are expected to press for language that would give states the right to decide who can sell insurance. A number of states are trying to bar national banks from selling insurance, and the courts are split on how much authority the states have in this area.

Robert Rusbuldt, a lobbyist for the agents group, declined to comment on its agenda but acknowledged that his organization is unhappy with the national bank regulator.

"It doesn't seem to matter who the Comptroller of the Currency is," he said. "Once they get in there, they become a cheerleader for the industry."

But if the interest group politics of Glass-Steagall repeal appears as intractable as ever, the legislative initiative may have a few things going for it that past efforts didn't.

For one, time is on the side of those who would tear down the Glass- Steagall wall. In 1991, when the Bush administration launched an ambitious effort to overhaul the financial services industry, the calendar worked against reform.

Because of the dire condition of the Bank Insurance Fund, the administration felt it had to have a bill by yearend. As the deadline drew closer, the administration steadily lost leverage, and opponents gained it.

But Mr. Rusbuldt warns that time isn't unlimited. "Next year is the presidential election," he said, noting that legislating tends to slow down as the campaign season approaches.

Also helping advance the issue are the divisions that appear to be cropping up in the securities industry.

Despite the SIA's doubts about the Leach bill, one longtime opponent of Glass-Steagall repeal, Goldman, Sachs & Co., recently joined with commercial banker J.P. Morgan & Co. in endorsing "the principles" of that measure.

That kind of announcement might have drawn gasps of surprise a year ago.

Also, some industry sources believe the House leadership has lined up behind Glass-Steagall repeal, from Speaker Newt Gingrich to Rep. Bliley and Rep. Leach.

"I think Leach, Bliley, and Gingrich decided a long time ago that Glass- Steagall is going to pass the House this year," said Kenneth A. Guenther, executive vice president of the IBAA.

"Everyone assumes D'Amato will move quickly after Leach, and I don't see anything on the horizon to stop this very aggressive agenda," he said, adding:

"There will be a bill this Congress."

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