WASHINGTON -- A turf fight is brewing in between the House Banking Committee and the House Energy and Commerce Committee over which panel should have the final say on bank securities activities, a battle that could scuttle efforts to reform the financial industry.
Though a similar dispute derailed reform attempts in 1988, banking panel staff members believe the pressing need to provide more funds to the beleaguered Federal Deposit Insurance Corp. could give the banking committee the upper hand.
The House Banking Committee, scheduled to begin deliberations on the bill next week, will consider provisions to recapitalize the FDIC along with sweeping reforms in the way banks and securities firms do business.
The FDIC recapitalization could prove to be the engine that pulls the reforms -- such as repeal or modification of the 1933 Glass-Steagall Act, which separates investment and commercial banking -- through Congress, banking panel aides say.
Moreover, committee aides are using the urgency of the FDIC's need in an attempt to persuade House leaders to limit the amount of time the energy and commerce panel is given to work on the bill.
But House Energy and Commerce Committee Chairman John D. Dingell, D-Mich., is already raising a ruckus about that approach. In a June 6 memorandum to his committee members, Rep. Dingell says that for reasons of "substance, process, and jurisdiction, this would be an unacceptable outcome."
Also, in a letter to House Speaker Thomas S. Foley, D-Wash., Rep. Dingell accuses the banking panel of holding the FDIC recapitalization bill "hostage to completion of the comprehensive restructuring package."
In the letter, also dated June 6, Rep. Dingell says his committee "stands ready to process banking reform legislation with all deliberate speed," but urges the House leadership to give the energy panel "sufficient public policy and a quality work product."
Rep. Dingell's letter also tells the speaker that the 1988 legislation, which would have repealed Glass-Steagall, died because the House Banking Committee was intransigent, not because the energy panel blocked the bill.
He says the banking panel "refused to discuss" the matter, despite prodding by the House leadership.
"It was the view of the banking committee that the bill was its jurisdiction alone and that recognizing our jurisdiction would diminish it into 'a subcommittee of energy and commerce,'" Rep. Dingell says. "The bill died because the banking committee was unwilling to work cooperatively with us, not because this committee was opposed to banking reform."
Despite his expressed willingness to entertain bank reform proposals, Rep. Dingell takes aim in his letter at several of the current bill's chief provisions.
For example, the legislation would allow commercial firms to own banks, a means of bringing new capital into the banking industry and ensuring that banks and securities firm operate on a level playing field. Current law prohibits banks from such affiliations. As a consequence, if Glass-Steagall is repealed, some securities firms would not be allowed to affiliate with banks because they are owned by commercial concerns.
But Rep. Dingell says, "The down side of this proposal is too high a price to pay to achieve these meager and speculative goals." He says the need for new capital in banking is a matter of dispute and adds that "any need for a two-way street can be addressed through less radical means, with less potential for danger attached."
Rep. Dingell also expresses his traditional reservations about a repeal or relaxation of Glass-Steagall, a reform proposed as a means of making banks more profitable and competitive internationally.
Rep. Dingell tells the speaker there are no excess profits in the securities industry and that if banks were involved in securities underwriting during 1990, "banks would have racked up large losses in the securities industry, adding -- along with weak credits on their balance sheets -- to bank failures."
In the end, the legislation's fate is likely to be decided by Rep. Foley and other House dealers. And if recent history is any guide, the leadership may side with the banking committee.
During the arduous wrangling this spring over legislation to provide more funds to the Resolution Trust Corp., Rep. Foley directed Democrats to work with the Republican administration. The banking reform bill is an administration initiative, described by President Bush as one of his top domestic issues.