WASHINGTON - In a surprising display of harmony, two key committee chairmen have pledged to cooperate in passing Glass-Steagall legislation on the House floor by June 30.
"We are committed to working together to resolve the insurance questions surrounding Glass-Steagall reform," said House Banking Committee Chairman Jim Leach, R-Iowa, and House Commerce Committee Chairman Thomas J. Bliley, R-Va., in a written statement.
"Through the joint efforts of our committees, we fully expect to bring to the House floor and pass a comprehensive financial services modernization bill by the end of June," they added.
The statement appears to suggest that Rep. Bliley and his Commerce Committee won't be as much of an obstacle to the securities underwriting bill as had been feared. Many observers thought his panel would add an amendment restricting bank insurance activities.
However, one House Banking Committee staff member who has worked on insurance issues in the Glass-Steagall debate greeted the joint statement with caution.
"It is more good than it is bad, and it's definitely a positive step, but you can read so many things into it," he said. "A statement like that has to be backed up with action."
And a Commerce Committee staff member said that Rep. Bliley was holding open the option to attach his amendment, which would permit states to bar banks from selling insurance, to the Glass-Steagall bill. If the Bliley amendment is attached to financial industry reform legislation, the banking industry has vowed to block it.
Insurance and banking industry representatives testified on the Bliley amendment during a hearing Monday before a subcommittee of the commerce panel.
Edward L. Yingling, executive director of government relations at the American Bankers Association, said that banks are already overly restricted in selling insurance when compared to other financial institutions.
"Banks account for less than one-third of all credit extended, yet all other creditors, including those with federal deposit insurance, can sell insurance without any of the restrictions imposed on banks," Mr. Yingling said. "Bankers simply cannot understand why they are singled out for discriminatory treatment."
The Bliley amendment is not needed to make banks comply with state insurance regulations, Mr. Yingling said, since all banks selling insurance are currently licensed. He warned that the measure would let state insurance regulators define insurance products.
"What constitutes the business of insurance should continue to be a question of federal law, not state law," Mr. Yingling said.
Rep. Billy Tauzin of Louisiana, the subcommittee's senior Democrat, seemed to agree with Mr. Yingling.
"Whether or not (banks can sell insurance) is separate from who regulates insurance," the Louisiana lawmaker said.
However, Ann Kappler, counsel for the Independent Insurance Agents of America, said the issues of insurance regulation and defining an insurance product are inseparable.
Ranking Commerce Committee Democrat John D. Dingell said the Bliley amendment, which he co-sponsored, is needed to shut off the Comptroller's ability to "override state insurance laws with respect to national banks' engaging in the business of insurance."
While Rep. Dingell, the prior Commerce Committee chairman, is no longer in the driver's seat, he showed that his disdain for the banking industry and some of its regulators has not faded.
"There's a curious thing about bankers: They know the cost of everything and the value of virtually nothing," Rep. Dingell said, describing his belief that the banking industry had not learned from the economic collapse of 1929.
The tentative date for the Commerce Committee to begin voting on the Glass-Steagall bill is June 16, a committee employee said.