WASHINGTON -- Rep. Henry B. Gonzalez, chairman of the House Banking Committee, said his panel will work "expeditiously" to craft a bill to recapitalize the ailing Bank Insurance Fund following the House's resounding defeat Monday night of comprehensive bank reform legislation.
The outlook for major legislation this year that would repeal the law separating investment and commercial banking now appears dim, though key lawmakers did not rule out a possible bill if the Bush administration is willing to compromise. But immediate efforts will center on bolstering the flagging fortunes of the Bank Insurance Fund.
"The thing to do is what we've got to do," Rep. Gonzales, D-Tex., said after the vote. He said his committee may vote as early as this week on a bill that would provide a $30 billion loan to the Bank Insurance Fund, implement accounting reforms and force regulators to promptly close ailing banks.
The bill, labeled House Resolution 2094, was introduced earlier in the year by Rep. Gonzalez as a fall-back in case trouble hit the more comprehensive bill, H.R. 6.
"As far as I'm concerned, back in April and May I had foreseen that something like this might happen," Rep. Gonzales said of the banking bill's Waterloo Monday night. And despite the uncertainty surrounding any bill that smacks of a bailout of banks, Rep. Gonzales said, "We'll do the responsible thing.'
The comprehensive bill was defeated by the House on a 324-to-89 vote, with two members voting present. The House action signaled the virtual death of efforts this year to repeal the Glass-Steagall Act, which separates investment and commercial banking.
Treasury Secretary Nicholas Brady, however, urged the House to go back to the drawing board and craft a comprehensive bill.
"This action indicates that the House will not replenish the Bank Insurance Fund without true, comprehensive reform," Mr. Brady said. "The House must now craft new comprehensive legislation to address the real problems of the banking system."
"He still doesn't understand," Rep. Gonzals said after seeing Mr. Brady's statement. "If he's talking about comprehensive legislation, he's saying let's get a hammer and knock our heads all over again. Secretary Brady, he's learned nothing, or he doesn't want to learn anything."
Comprehensive legislation that would repeal Glass-Steagall, Rep. Gonzalez noted, would also have to be considered by the House Energy and Commerce Committee.
It was that panel's work on H.R. 6, and a subsequent compromise worked out by Rep. Gonzales and House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., that made the bill unpalatable to the Bush administration and House Republicans. The legislation contained tough firewalls designed to insulate banks from the risks of securities underwriting. But detractors said the firewalls made the bill unworkable.
Rep. Gonzales said the banking committee will focus on recapitalizing the Bank Insurance Fund. "We're not going to duck," he said.
Rep. Edward J. Markey, D-Mass., who is chairman of the energy panel's telecommunications and finance subcommittee, and Rep. Dingell both said they were willing to work with the administration on comprehensive legislation. But they stressed the administration will have to be willing to compromise.
"On all the substantive challenges to the Gonzalez-Dingell compromise, it was the will of the House that any comprehensive bill be drafted along the lines of the comprimise," Rep. Markey said.
Rep. Dingell concurred, adding that House Democrats "didn't trust the administration, the bank regulators the banks, and didn't want to bail out the banks without adequate safeguards."
"We have to pass BIF this year," Rep. Markey said of the need to recapitalize the Bank Insurance Fund. "IF the administration wants any other goodies, it will have to work with us. "We're willing to distribute the sheet music to 'Jingle Bell's to demonstrate how long we're willing to stay here."
Against the backdrop of uncertainty over the fate of major bank overhaul efforts in the House, the Senate is set to begin deliberations on its version of bank reform legislation this week.
Secretary Brady pledged to 'continue to work for genuine reform in the Senate." But even there troubles could loom. In late summer, the Senate Banking Committee passed the reform bill on a relatively close 12-to-9 vote.
In the end, lawmakers find themselves in a politically unpopular situation. In addition to the need to recapitalize the Bank Insurance Fund with a $30 billion loan, Congress also is being asked to provide another $80 billion to the Resolution Trust Corp., the agency in charge of closing insolvent thrifts and disposing of their assets.
Both insurance funds are said to need to money before Congress adjourns, possibly by Thanksgiving.
"I feel real disappointed to reach this point with the BIF recap problem and now we have the RTC problem," Rep. Gonzalez said. But he stressed his committe's priority will be to fund the Bank Insurance Fund.
"The RTC can play around a little bit," he said. "They ought to have some dough, so it's not as pressing as the BIF problem." Reflecting on the daunting task now before Congress, Rep. Gonzales added, "You know, things always happen for the best."