Federal Reserve Board

The central bank becomes top dog among regulators by overseeing the diversified financial services holding companies created under the legislation.

Lawmakers heeded Fed Chairman Alan Greenspan's call to prohibit the formation of new unitary thrift holding companies and prevent commercial companies from acquiring existing unitaries.

The Fed avoided being labeled a spoiler by reaching a compromise in its turf war with the Office of the Comptroller of the Currency that lets banks underwrite securities through direct subsidiaries. But in five years, the Fed gets a say in deciding whether banks can use direct subsidiaries for merchant banking.

The deal lets the Fed and Treasury veto each other's decisions to grant new powers to the banking entities under their respective jurisdictions, and size and other limitations were placed on direct bank subsidiaries.

Citigroup Inc.

Without the bill, Citigroup could have faced a fire sale of its insurance underwriting operations.

When Citicorp and Travelers Group merged last year, the Fed gave the resulting company two to five years to divest that business. Even before their deal was completed, lobbyists for the two companies began a furious push for the bill. Co-chairman and chief executive officer Sanford I. Weill stepped in at a crucial point in the negotiations last week, urging the White House to compromise.

Now, Citigroup is the model for the new financial services conglomerates and has at least a year's head start over its rivals.

Sen. Phil Gramm

The Texas Republican, who single-handedly stopped the legislation last year, defied predictions that he would do it again. Instead, Sen. Gramm pushed the bill through the Senate in May -- two months before the House -- and won significant concessions on the Community Reinvestment Act, powers for bank subsidiaries, and other areas.

The Senate Banking Committee chairman may not have gotten everything he wanted, but in Washington making excessive demands is a strategy for getting what you really want. For instance, Sen. Gramm backed off many of his anti-CRA proposals but forced Democrats to accept a requirement that bank loans or payments to community groups be publicly disclosed. And he failed to get small banks exempted from the reinvestment law but lengthened the time between CRA exams for many of them.

He held the House-Senate conference committee in the palm of his hand last week as he hashed out the final CRA deals with Treasury Secretary Lawrence H. Summers.

Rep. Jim Leach

Many observers bet against the House Banking Committee chairman, saying he was no match for his wiley counterpart in the Senate, Phil Gramm. But instead, Rep. Leach's stamina and dogged persistence kept the bill alive during its darkest hours this year, and his cooperation with Democrats helped produce a bill that the White House could support. "He's a huge winner," a veteran banking lobbyist said. "Nobody has worked harder on this bill than he did."

The Iowa Republican also triumphed on one of his top priorities: keeping banking and commerce separate by clamping down on unitary thrifts. In fact, the final bill looks a lot like the version passed by the House.

Small Banks

Long the most vocal opponents of the legislation, small banks won some key victories.

Thrifts and banks under $250 million of assets will face fewer CRA exams. With some exceptions, those with an "outstanding" rating would be examined for compliance once every five years, and those with "satisfactory" scores would be reviewed only once every four years.

Small banks also gain broader access to the Home Loan Bank System by being able to pledge small-business and agricultural loans -- not just mortgage loans -- as collateral for long-term advances.

The small-bank lobby is also celebrating the limits on unitary thrifts, relieved they won't be facing Wal-Mart as a competitor.

Rep. Edward J. Markey

The Massachusetts Democrat may be critical of the final bill, but he was almost single-handedly responsible for toughening its consumer privacy protections.

After House Banking passed a bill that would have made financial institutions create and disclose privacy policies, the industry vowed not to give in further. But Rep. Markey sought more and won during House Commerce deliberations. He successfully pushed through an amendment that would have given customers the option to block their financial institutions from sharing information with affiliates or third parties. That right was scaled back in the final bill, but Rep. Markey and allies have laid the foundation for future battles over the privacy of financial records.

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