House Commerce Panel To Weigh In on Reform

The debate over financial reform shifts to the House Commerce Committee Tuesday as its finance subcommittee holds a hearing on regulation of bank insurance sales.

The Commerce Committee receives the legislation approved Friday by the House Banking Committee that would allow banks and insurance and securities firms to own each other. House leaders have not determined which provisions the Commerce Committee will have authority over or how much time it will be given to work on the bill.

Some observers are predicting major changes, with many insisting Commerce Committee members are likely to listen to insurance and securities lobbyists.

"Commerce will tear this thing apart," predicted Karen Shaw Petrou, who as president of the consulting firm ISD/Shaw Inc. closely tracks financial services legislation.

But, on the record at least, lobbyists for insurers, their agents, and securities firms claim they have no plans to seek big changes from the Commerce Committee.

"There is no way we're going to try to significantly change it," said Robert A. Rusbuldt, Independent Insurance Agents of America senior vice president of government affairs. "The reason is, I think the leadership and the Commerce Committee want a bill that's going to pass."

The American Council of Life Insurers will "do whatever we can" to ensure a bill comes to the House floor that a majority can support, according to senior counsel Allen Caskie.

Praising the bill as "historic," Bruce E. Thompson Jr., director of government relations at Merrill Lynch & Co., said "we don't want to pick this apart."

But that's not to say insurance and securities firms won't seek smaller changes. Mr. Thompson said Merrill Lynch is "not thrilled about becoming a bank holding company" upon buying a commercial bank.

Insurers also do not want to come under Federal Reserve Board oversight, which would occur under the bill if a company violated the Fair Housing Act, according to David J. Pratt, senior vice president of federal affairs at the American Insurance Association.

Mr. Rusbuldt said insurance agents will ask the Commerce Committee to better define how bank insurance sales will be supervised. The bill approved by House Banking would apply state insurance laws to banks but bar commissioners from restricting or significantly interfering with bank sales.

The agents want the law to say that states may not "preclude" banks from selling insurance, Mr. Rusbuldt said, noting that no one has defined "significantly interfere."

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