House Debate Will Focus On Fate of Thrift Charter

Fights over the thrift charter's future will dominate the House Banking Committee's debate when it meets today to vote on financial reform legislation.

Committee Chairman Jim Leach's plan to eliminate the thrift charter has bitterly divided banking and thrift trade groups, which are mounting aggressive last-minute lobbying efforts. Opposing the Iowa Republican are Reps. John LaFalce, D-N.Y., and Jack Metcalf, R-Wash., who have promised to fight any effort to roll back thrift powers.

While charter reform may be the most contentious issue, the committee also must make a host of other difficult decisions during hearings that are expected to run through Thursday. Dozens of amendments are expected on such controversial topics as letting banks affiliate with nonfinancial firms, strengthening state regulation of bank insurance sales, and expanding the Community Reinvestment Act.

Despite the many contentious issues, committee members appear determined to pass a bill and continue fighting over details as it moves through the House, said J. Denis O'Toole, lobbyist for Household International. "There's consensus to get a bill," he said. "We are in the preliminary stages of a very long process."

As of Monday afternoon, more than 65 amendments had been filed with the committee. The panel meets at 2 p.m. today to begin working, but opening statements and debate are expected to take up most of the afternoon. No ballots are expected until Wednesday.

The legislation is aimed at replacing the nation's outdated financial services laws and would allow banks to affiliate with securities and insurance companies.

To make the case for abolishing the thrift charter Rep. Leach on Monday released a Congressional Budget Office report that concluded the move would "level the competitive playing field" between banks and thrifts.

"This study bolsters my view that it is essential for the Congress to enact modernization legislation that is balanced and fair to all," Rep. Leach said. "Since to the average customer there is little practical difference between a bank and a S&L, no longer is there a need for separate charters."

America's Community Bankers, the thrift trade association, was joined by 80 industry groups and financial institutions in a June 13 letter urging lawmakers to defend the charter.

Rep. Leach's bill would "take away thrifts' business opportunities and damage their ability serve their community," said the letter, which was signed by the Association of Financial Services Holding Companies, the American Financial Services Association, Citicorp, and Capital One Financial Corp.

The American Bankers Association and other banking trade groups have vowed to fight the entire financial modernization bill unless all depository institutions are governed by the same rules.

In another key debate, Reps. Marge Roukema, R-N.J., and Bruce Vento, D- Minn., are expected to sponsor an amendment allowing bank holding companies to invest in a "basket" of nonfinancial businesses. Fights over the size of that investment are expected.

"There will be so many baskets offered it will look like a shop at a cheap seaside resort," said Karen Shaw Petrou, president of ISD/Shaw Inc.

Reps. Richard Baker, R-La., and Bill McCollum, R-Fla., are expected to go one step further and propose allowing nonfinancial firms to own a limited amount of banking assets.

Democrats vow to win new consumer protections and community reinvestment requirements or oppose the entire bill.

Reps. Maxine Waters of California and Jesse Jackson Jr. of Illinois have pledged to expand Community Reinvestment Act requirements to holding companies' nonbank affiliates.

Rep. Joseph P. Kennedy 2d of Massachusetts plans to introduce an amendment that prohibits mortgage insurance companies from denying coverage in low-income communities.

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