When 1995 began, a new Republican majority on Capitol Hill seemed poised to release banks from the shackles that had kept them a step or two behind the rest of the financial services industry.
No such luck.
Instead, the good news for bankers came from the courts and the regulators. The Supreme Court affirmed banks' right to sell annuities. The Federal Deposit Insurance Corp. cut premium rates to all-time lows. All the banking regulatory agencies trumpeted regulation-cutting reforms.
The only major banking legislation Congress approved was a Savings Association Insurance Fund rescue that will - if President Clinton signs it - cost banks and thrifts more than $20 billion.
Should the industry look to Congress for answers in 1996? Probably not.
Bank lobbyists say there is no predicting what lawmakers might do, particularly if plans to follow the thrift fund fix with a merger of the bank and thrift charters gain momentum.
But the stalemate persists in the House of Representatives between supporters of broader bank powers and insurance agents who want to protect their turf. What's more, with elections looming, Congress is likely to effectively shut down by summer.
The courts and banking agencies, meanwhile, will keep on judging and regulating. And they could take actions this year that have a big impact on the business of banking.
First up is the Supreme Court, which on Jan. 16 will hear oral arguments in Barnett v. Gallagher, the attempt by Barnett Banks Inc. to overturn Florida laws that keep it from selling insurance.
Last January, the court ruled in banks' favor in a case challenging North Carolina-based NationsBank's right to sell annuities, and many in the industry expect a similarly favorable Barnett decision before midyear.
Bank lawyers think the court also will decide to hear another important banking case - dealing with credit card issuers' right to charge late fees to out-of-state customers.
A win in the Barnett case would let banks use current federal law to launch insurance marketing efforts from branches in towns with fewer than 5,000 people.
It also would likely embolden Comptroller of the Currency Eugene A. Ludwig. The comptroller laid off proposals to expand bank powers last year after receiving a series of stinging letters on insurance and other issues from House Banking Committee Chairman Jim Leach.
If the Supreme Court acts and Congress does not, the door will be opened for Mr. Ludwig to revive his plans to let bank subsidiaries move into lines of business now generally off-limits to banks.
But if the Supreme Court hands banks a victory, insurance agents are not likely to sit idly by. "It could whip them into a frenzy," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America.
All this points to rough sailing for Rep. Leach's bid to break down some of the Glass-Steagall Act barriers that keep commercial banks out of the securities business. In September, insurance agents' pressure led House leaders to combine Rep. Leach's bill with a regulatory relief measure and a moratorium on the Comptroller's ability to grant banks new insurance powers, making for a legislative stew unpalatable to most banking groups.
Rep. Leach will keep fighting for passage of his bill, Mr. Guenther said, but others believe it is more likely that regulatory relief - along the lines of the bill approved in September by the Senate Banking Committee, which doesn't touch the controversial Community Reinvestment Act - will be decoupled from Glass-Steagall and enacted on its own.
Then there's the charter merger. In return for being forced to chip in almost $600 million a year for 22 years to help pay the interest on bonds from the savings and loan bailout, commercial banks have clamored for an end to the federal thrift charter.
Thrifts now possess insurance, affiliation, and branching powers that banks don't, and some in the industry see the charter merger as a back-door way to improve the bank charter. But any major changes would run up against the same forces that have halted Glass-Steagall reform, while an attempt to force savings institutions into the existing bank charter would be fiercely opposed by many thrifts.
Thrifts also want to make sure the industry isn't forced to pay billions in back taxes on their so-called bad-debt deductions as part of a charter merger - although agreements by House and Senate tax writers late last year put such fears largely to rest.
"We do not want to see our people hurt because of this," said Randall McFarlane, director of governmental relations for America's Community Bankers, the leading thrift trade group.
Thus, while Sen. Alfonse M. D'Amato of New York, chairman of the Banking Committee, has promised action on the charter merger by Easter, chances are good that the issue won't be resolved this year.
More likely to be dealt with in 1996 is a Federal Home Loan Bank System modernization bill, which foundered in 1995 because of disputes over dividing the 12 Home Loan Banks' payments on thrift bailout bonds.
If Glass-Steagall reform indeed goes nowhere in 1996, bank groups plan to start pushing regulatory buttons - urging the Federal Reserve Board to let bank holding companies' section 20 subsidiaries get more of their income from securities activities that banks themselves cannot engage in.
Currently, such business - which includes underwriting municipal bonds, dealing in consumer receivables, and underwriting corporate debt and equity - can't provide more than 10% of the income of a bank holding company subsidiary. Bank lawyers say the Fed has the legal leeway to raise that limit as high as 49%.
The Fed already has a proposal in the works to make the limit more flexible. In a December speech, Fed governor Susan M. Phillips said the board definitely will consider raising the limit if Congress fails to act.
The Fed and the other banking agencies are also in the midst of campaigns to rewrite their rules to reduce confusion and regulatory burden, and make the examination process more "banker-friendly."
The Comptroller's office has been most aggressive, mixing regulatory relief with new powers for national banks. James D. McLaughlin, director of agency relations for the American Bankers Association, said he doesn't expect other regulators to go that far, but does see real reductions in paperwork and other hassles on the horizon for bankers.
The agencies also promised that the new community reinvestment rules they approved in April will make life easier for banks and thrifts. Exams under the new rules start this month, giving banks a chance to judge whether their regulators were right.
Also sure to show up in 1996 exams - particularly those by the Federal Reserve and the Comptroller's office - is an increased emphasis on risk management, something regulators talked about often in 1995.
Then there are the deposit insurance premiums. Throughout 1995, banks pushed the FDIC to cut them further and faster as the once-depleted Bank Insurance Fund returned to health. But the industry had nothing more to complain about after Nov. 14, when the FDIC cut most banks' premiums to the legal minimum of $2,000 a year.
In 1996, bank premiums can't go down any more. In fact, they will almost certainly go up about 2 basis points as part of the thrift fund rescue.
As of last week, however, the budget reconciliation bill that includes the thrift fund plan was still caught in the tug-of-war between President Clinton and Congress.
The savings fund proposal, which would let the FDIC drop thrifts' premiums to bank levels, is not the subject of any tension between the President and Congress. But if the budget legislation were to collapse completely and the thrift fund legislation were considered separately, 1996 would witness a Capitol Hill battle royal between thrift executives who want their fund fixed and bankers who don't want to help pay for it, Mr. Guenther said.
No one is predicting that this is will happen. But then again, as 1995 showed, predictions can be wrong.