SPECIAL REPORT Glass-Steagall Repeal In the Stars at Last?

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 the House and Senate banking committees are all advocating legislation to repeal the 1933 law separating commercial and investment banking.

March 20

18484

Despite the battering investment banking has taken in the past year, bankers eagerly anticipate the dismantling of the law that has kept them out of the business. Repealing Glass-Steagall would mean the end of a cap requiring that investment banking units generate no more than 10% of overall revenue.

March 21

18727

Banks' mutual fund businesses could end up losing more than they gain from repeal of Glass-Steagall. Banks, which right now enjoy considerable freedom in retail brokerage and mutual funds, might be required to establish separate fund units and isolate them with a series of firewalls.

March 22

18753

Banks' future in the insurance business hangs in delicate balance as the Glass-Steagall debate heats up. Bankers have high hopes for life insurance, in particular. A bank's annual profits from that business could range from hundreds of thousands of dollars to millions.

March 23

18801

With many of the nation's biggest banks well on their way to developing businesses historically prohibited by the Glass-Steagall Act, repeal of the law might seem just a formality. But the chief executives of the leading banks are as insistent as ever about the need for a change. The law "has been in place far too long," said Richard Thomas, chairman and CEO of First Chicago Corp.

March 24

18845 WASHINGTON Bank Insurance Fund Hit Record Level in '94 The Bank Insurance Fund hit a record high $21.85 billion in 1994 by adding $8.7 billion during the year, the government announced. The growth boosted the fund's reserve ratio to 1.15% on Dec. 31. The bank fund, by law, must hold $1.25 for every $100 of insured deposits before the Federal Deposit Insurance Corp. can lower its premiums; at yearend the fund was just $1.85 billion shy of that point.

March 22

18765

Lawmakers and government regulators agreed at the first congressional hearing on the topic that the thrift insurance fund needs another bailout. The only question is where to get the money. "I can assure you that we will give this matter the most intense scrutiny in order to come to a solution," pledged Rep. Marge Roukema.

March 24

18848

In a move that could complicate prospects for Glass-Steagall legislation, House Commerce Committee Chairman Thomas J. Bliley is expected to introduce legislation to limit banks' insurance powers. The bill would give state insurance commissioners the power to regulate bank insurance sales.

March 21

18725

The Justice Department's fair-lending probe of the auto industry signals a new step in the government's drive to eliminate loan bias. "It seems to mark a broadening of the lending enforcement action at Justice," said Richard Ritter, a former prosecutor who now consults on fair-lending issues.

March 23

18809

Charles Stuzin, president of Miami's Citizens Federal Bank, says antidiscrimination laws give community groups and Justice Department lawyers too much power. His blunt views startled a conference audience that included Justice Department and Fed officials.

March 21

18693 REGIONAL BANKING Big Banks' Earnings Rose 8.8% Last Year Earnings for 1994 were up 8.8% at the nation's largest bank holding companies, according to an American Banker survey. Some banks, like Norwest Corp. and Bank of Boston Corp., capitalized on cost cutting, wide net interest margins, and healthy loan growth. But bad plays on interest rates hurt others, including Banc One Corp. and PNC Bank Corp.

March 24

18836

Keycorp agreed to acquire AutoFinance Group Inc. for $325 million, marking the bank company's first entry into the profitable but somewhat risky business of "sub-prime" auto lending. Keycorp, which paid 3.8 times book value, said the deal would allow it to "offer a complete spectrum of financing options to dealers across the country."

March 21

18723

Fleet Financial Group may have to divest more than it said it will to win Justice Department approval for its acquisition of Shawmut National Corp., observers said. Fleet may have to dump loans as well as $3 billion of deposits it had earmarked for disposal when the transaction was announced in February.

March 20

18454

American Express Bank Ltd., the international banking arm of American Express Co., announced it will divide operations into correspondent banking, commercial banking, and private banking, and promoted Robert V. Sicina from chief financial officer to president of American Express Bank.

March 23

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Sumitomo Bank of California a $5 billion-asset bank, said it has been promised up to $180 million in fresh capital by its Japanese parent, Sumitomo Bank Ltd., to reduce remaining problem assets and diversify operations. Tadaichi Ikagawa, Sumitomo California's president, said the bank hoped to trim its remaining bad loans and other nonperforming assets as well as the expense of carrying them.

March 24

18837 COMMUNITY BANKING Small California Banks Finally See Sunshine The community banks of California - battered in recent years by real estate woes, defense industry layoffs, and natural disasters - are finally seeing some sunshine. Their return on assets has risen steadily since late 1993, hitting 0.41% in the fourth quarter of last year, according to preliminary data.

March 23

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A year and a half after Centura Banks Inc. of Rocky Mount, N.C., acquired a mutual savings bank in a merger-conversion, seven former depositors of the thrift are trying to have the deal overturned.

March 22

18741

Opponents of the intestate branching in Oklahoma were fighting an opt-in bill instead of pushing for an opt-out law, as they had hoped to do. Legislation that would have let Oklahoma opt out of the interstate branching provisions of the Riegle-Neal Interstate Banking and Branching Act was not considered in the state Senate last week when it became clear it would not make it to the floor for a vote.

March 22

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Full year earnings at the nation's smallest community banks slipped 8% in 1994 as more institutions took securities losses, according to the Federal Deposit Insurance Corp. Industry observers, though not alarmed by the drop, said small banks could face tough times ahead in competing with larger institutions.

March 21

18706

Gov. Tommy Thompson is working to merge Wisconsin's financial service regulators. His proposal, which has been projected to save $900,000 a year, would create a Department of Financial Institutions to be headed by a cabinet-level secretary.

March 21

18707 SMALL BUSINESS ITT Unit's Busy Lenders Active in SBA Servicing In addition to being one of the most active Small Business Administration lenders, ITT Small Business Finance Corp. has also been one of the most active buyers of SBA servicing portfolios. In the past two years alone, the company has bought portfolios covering an estimated $150 million worth of SBA-backed loans.

March 21

18705 COMPLIANCE CEOs Fret Over CRA, Fair-Lending, Disclosure Bank chief executives continue to rank community reinvestment and fair- lending rules as well as borrower disclosures among their top compliance headaches, according to KPMG Peat Marwick's survey of CEOs on compliance issues. Bank execs also predicted the regulatory attention to mutual funds, annuities, and derivatives will grow over the next three years.

March 23

18791

Citibank discontinued "payable-through" accounts after the product cost it $2 million. The Federal Reserve warned bankers that these accounts are a money laundering tool, adding that they should keep their eyes open for customers with check-writing privileges through foreign institutions.

March 23

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After a year of experience with guidelines governing mutual fund sales, the Comptroller's office plans to streamline - and even drop - some of its disclosure requirements. Changes are being made because banks were doing unnecessary work that did not help customers, according to David Apgar, a senior policy adviser at the agency.

March 23

18797 CREDIT UNIONS Boeing Group Eyes Growth Despite Layoffs Boeing Employees Credit Union is bracing for turbulence as its giant sponsor makes yet another round of cutbacks. Though the new cuts affect 6,000 to 10,000 Boeing Co. employees, the credit union plans to keep growing, says its president, Gary J. Oakland.

March 20

18479

James R. Bell, the president of the U.S. Central Credit Union, has resigned, citing interference from the industry's largest trade group. In a particularly strongly worded letter, Mr. Bell said that serving two "masters" - the Credit Union National Association and U.S. Central - was damaging the Overland Park, Kan., institution.

March 20

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The directors of Navy Federal Credit Union voted March 15 to drop out of the Virginia Credit Union League, and by extension, the Credit Union National Association, unless the two groups agreed within 10 business days to withdraw their lawsuit against the federal goverrnment. With this move, Navy joined a growing number of credit unions that have threatened or taken action to protest the policies of CUNA or the state leagues.

March 20

18497 CREDIT/DEBIT/ATMs NationsBank to Issue Blockbuster Visa Card NationsBank Corp. and Blockbuster Entertainment Group have launched one of the biggest cobranded credit card programs. The Blockbuster Visa will earn consumers 5% rebates on all purchases at Blockbuster Video, Blockbuster Music, Discovery Zone FunCenters, and Paramount Parks locations. Purchases elsewhere are credited with 1%.

March 22

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National City has begun a cobranding program with two subsidiaries of Ashland Inc., a Kentucky-based petroleum company. SuperAmerica convenience stores and Valvoline Instant Oil Change centers are offering customers rebates with the Performance Visa.

March 20

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First Union Corp., NationsBank Corp., and Wachovia Corp., are working with Visa International on a huge stored-value card project in Atlanta in time for the 1996 Olympic Games. More than one million stored-value cards will be issued to consumers for low-dollar purchases.

March 22

18767

First Data Corp. has joined with Celltel Data Inc. to create a wireless credit authorization service that can be used by the likes of restaurants, parking garages, toll booths, and limousine services. The new service will combine Celltel's cellular digital packet data point-of-purchase terminal with First Data.

March 21

18697

As the banking industry begins to look to smart cards as a replacement for cash, the airline industry views the technology as a way to eliminate tickets and streamline other aspects of its payment system. A number of major airlines are experimenting with ticketless procedures.

March 23

18781 INVESTMENT PRODUCTS For Many Small Banks, The Gold Rush Is Over

Signs are cropping up that the investment products gold rush is coming to an end at community banks. Many small banks are dismantling mutual fund and annuity sales programs they scurried to build just a year or two ago.

March 20

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Banking regulators have gone overboard in their efforts to police mutual fund sales and advertising practices at banks, a panel of securities industry executives said. While raising costs for mutual fund companies that want to do business with banks, policies and guidelines imposed over the past two years have failed to provide clear benefits to consumers, fund executives maintained during a panel discussion at an industry conference in California.

March 24

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Massachusetts Financial Services, one of the nation's oldest mutual fund companies, is making a push to market 401(k) retirement plans through its alliance with the Independent Bankers Association of America.

March 23

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The wealthiest Americans - those with at least $200,000 in annual income or a net worth of more than $3 million - are more worried about the economy than they were just after President Clinton was elected, according to a survey from the United States Trust Company of New York. Among the 153 wealthy people interviewed, 52% said they believed they will have to support their grown children, up from 44% in November 1992.

March 22

18757

The American Association of Retired Persons, the Consumer Federation of America, and the North American Securities Administrators Association issued a warning about investment sales practices that can harm elderly investors. The warning comes as banks are becoming more aware of newspaper articles and lawsuits alleging misleading sales tactics.

March 23

18790 MORTGAGES Advanta Reinventing Itself in Low-Key Way Milton Riseman is trying to propel Advanta Mortgage into the top ranks of a growing market - home equity loans for people with blemished credit histories. Advanta is amassing the loans through brokers, other lenders, telemarketing campaigns, and - starting this month - retail loan offices.

March 20

18453

GE Capital Mortgage Corp., a Raleigh, N.C., unit of General Electric Capital Corp., is cutting 15% of its work force. The layoffs should total 400 to 425 jobs of a total staff of 3,000, according to a company spokesman. The moves come during tough times in the home-lending industry and some top-level shifts at the GE mortgage unit.

March 23

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Rep. Rick A. Lazio, chairman of the House Banking subcommittee on housing, criticized the administration's blueprint for overhauling the Federal Housing Administration. The New York Republican seemed to suggest that the FHA should target its programs more narrowly, perhaps on low- income and first-time homebuyers.

March 23

18793

GMAC Mortgage Corp. has hired a relatively unknown executive to head the retail side of its home equity lending. Willem J. Nieuwkerk, who joined the Elkins Park, Pa.-lender last month as manager, helped form the second- mortgage lending unit at Residential Services Corporation of America.

March 22

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A study by the National Second Mortgage Association reported a 16% decline from 1993 to 1994 in the number of loans at least 30 days delinquent at nine home equity lenders of varying size and geographic location.

March 21

18715

National Pacific Mortgage Corp., Anaheim, Calif., has purchased 10 West Coast offices of Bank of New York's Arcs Mortgage unit. After a prolonged search for a buyer, in January, the Bank of New York decided to shut down Arcs and sell its servicing.

March 24

18823 TECHNOLOGY The Scramble Is On To Speed Settlements Back offices of investment firms, brokerages, and custodian banks are gearing up for a big change in how they transact business with each other. Under a rule that takes effect June 5, a securities transaction must be settled within three days, not five. The shift, known by the industry rubric as T+3, is an attempt by the U.S. securities business to squeeze out the operational risk in the settlement of hundreds of thousands of stock trades every business day.

March 20

18486

Telechips Corp. has created ThinPhone, an advanced Windows-based screen phone, touted as a true hybrid of a telephone and personal computer. Telechips has been testing ThinPhone for more than a year through at least one unnamed bank partner, according to Randall Pinato, vice president of sales and marketing.

March 23

18782

The New York Clearing House Association has mandated that the member banks be able to present checks electronically by July 30. And by next Feb. 1, it wants them to be sending return notifications before noon of the day following transmission.

March 23

18787

Having at least a single account relationship with more than 40% of households in its home state of Florida, Barnett Banks Inc. holds a market position that any institution would envy. But until recently, few executives would have wanted to change places with Barnett's top technologist, Jonathan J. Palmer.

March 24

19929 FINANCE Feb. Bank Stock Rally Spurred Short-Selling

Last month's rally in bank stocks caused a spurt in short-selling, according to a new monthly survey by the American Banker. Aggregate short interest in banking, thrift, and related stocks traded on the New York and American stock exchanges was approximately 124.9 million shares as of March 15, up 2.1% from the previous month's data.

March 23

18805

Insider buying in the banking industry slowed in late January and February, while insider selling increased, as stock prices rebounded from 1994 lows. "Bank stocks got very cheap at the end of last year and there was a lot of value buying among insiders," said Robert Gabele, president of CDA/Investnet, who provided the data.

March 20

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BankAmerica Corp. bought back five million shares in the first month of its repurchase program, according to Lewis W. Coleman, the bank's chief financial officer. "We have been fairly aggressive in the market on nearly every trading day," Mr. Coleman said during the San Francisco company's presentation at the 25th annual symposium of the Bank and Financial Analysts Association.

March 22

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