Regulatory consolidation is the Vietnam of bank legislative issues. In 1991, at the height of its power, the Bush administration tried to merge the bank supervisory agencies, and was brought down low.
The Clinton Treasury Department entered the quagmire three years later, and came out tattered and bruised. With so much history arguing against another run at consolidation, it's a bit surprising to see that nearly everyone with a shred of political power is suddenly jumping on the consolidation bandwagon.
And yet, there is reason to believe that 1995 will be the year that Congress reaches the light at the end of the consolidation tunnel.
Outgoing Treasury Secretary Lloyd Bentsen said the administration is ready to try again, building on an agreement reached with the Federal Reserve late in the last congressional session. That deal apparently would reduce the four agencies to two: the Fed and a new Federal Banking Agency.
More important, Rep. Jim Leach, the incoming chairman of the House Banking Committee, said regulatory consolidation will be a top legislative priority. Unlike the Clinton administration, the Iowa Republican has real political power -- and that's the main reason regulatory consolidation may have a future.
Rep. Leach was one of the principal opponents of the administration's plan last year, the others being the Federal Reserve and the entire banking industry.
What bothered Rep. Leach was the idea of consolidating all bank supervision in a single agency.
A victim of Watergate -- Rep. Leach gave up a career as a foreign service officer in outrage when President Nixon fired the special prosecutor -- the GOP lawmaker decried the. administration plan as "the presidentialization" of bank regulatory power.
A Nixon White House, he argued, would have used that kind of power to lean on the industry for campaign contributions.
As a result, the Leach bill will take a more modest approach, merging only the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The Fed and the Federal Deposit Insurance Corp. retain its existing regulatory powers, although the central bank also gets all 25 of the largest banks.
By itself, a merger of the OTS and the OCC isn't much of an accomplishment. The two regulators are already separate Treasury agencies and a merger would likely mean a little more than shuffling a few boxes on an organizational chart.
But the Leach bill promises two other steps. First, the merged agency would be moved outside the Treasury, giving it a bit more shelter from political pressure than it now has.
Second, Rep. Leach would eliminate one layer of regulation by placing responsibility for the holding company with the federal regulator who oversees the organization's principal bank subsidiary.
The Leach bill also preserves the options that bankers desperately want to maintain. With the FDIC and the Federal Reserve still in the business of supervising state-chartered banks, a national bank unhappy with the Comptroller of the Currency could change regulators with a charter switch.
As a result, the Leach bill would be supported overwhelmingly by the banking industry, eliminating one of the forces that helped bring down the administration bill earlier this year. The Fed too is likely to be supportive.
An open question is whether Senate Republicans will go along. Sen. Alfonse M. D'Amato joined outgoing Banking Committee Chairman Donald W. Riegle in supporting the single-regulator approach this year, and it is widely assumed he still favors that view.
Also up in the air is whether the administration will go along with some version of the Leach bill. Though Treasury's hand was weakened considerably by the Republican landslide, no administration is ever truly powerless. The administration has considerable resources it can use to block legislation it dislikes, including a presidential veto.
But in a year in which legislative successes are likely to be few and far between, the administration may decide simply to follow Rep. Leach's lead and declare victory.
