WASHINGTON -- The House of Representatives, as it neared a final vote on historic bank reform legislation, yesterday adopted provisions that would allow interstate banking in three years.
Under an amendment overwhelmingly approved by the House yesterday, states would be allowed to prohibit out-of-state banks from opening branches within their borders.
The amendment -- sponsored by Rep. Bruce Vento, D-Minn., and Rep. Doug Bereuter, R-Neb. -- was offered as a means of protecting state sovereignty while promoting the growth of nationwide banks.
A more restrictive amendment, offered by Rep. Bill Richardson, D-N.M., would have required states to pass legislation authorizing interstate banking before out-of-state banks could enter their borders. That amendment was rejected on a 250-to-142 vote.
Approval of the Vento amendment provided a rare victory for the Bush administration, which has suffered a series of defeats as the banking bill has taken shape.
The Bush administration, which has threatened a veto of the bill if it reaches the President in its current form, is vehemently opposed to provisions designed to insulate federally insured banks from the risks of securities underwriting.
Treasury Department officials have complained that the provisions -- known as "firewalls" -- are overly restrictive and diminish the value of repealing a ban contained in the 1933 Glass-Steagall Act on bank involvement in securities underwriting.
The firewalls were contained in an agreement reached by House Banking Committee Chairman Henry B. Gonzalez, D-Tex., and House Energy and Commerce Committee Chairman John D. Dingell, D-Mich. The accord, which protected the jurisdiction of the banking committee to determine what securities powers should be given to banks, also ensured Rep. Dingell's panel had a strongly say in how those powers could be used.
Oppositions to the accord by banking interests and the Bush administration made the outcome of the legislation uncertain.
House Rules Committee Chairman Joe Moakley, D-Mass., said just hours before the final vote that the outcome was uncertain.
The Bush administration earlier this year offered a plan that would allow banks into the securities business and would enable retailers and manufacturers to purchase banks. The plan also would recapitalize the Bank Insurance Fund and allow nationwide banking.
The Bush plan survived relatively unscathed when the House Banking Committee debated the bill. But the administration suffered a serious setback when the House Energy and Commerce Committee deleted provisions allowing retailers and manufacturers to purchase banks and erected firewalls between banks and their securities affiliates.