After months of controversy, the House plans to vote next week on legislation reforming the nation's financial laws.

Known as HR 10, the 358-page bill is divided into four main sections. An overview of each follows.

The initial section would repeal the 65-year-old Glass-Steagall Act to end the legal barrier separating commercial and investment banking and would eliminate Bank Holding Company Act restrictions on banks affiliating with insurance companies. State laws preventing affiliations would be overridden.

Diversified financial services firms would have to form holding companies that would be regulated by the Federal Reserve Board under a streamlined system.

Nonfinancial activities of financial holding companies would be capped at 5% of their worldwide revenues, to a $500 million maximum. However, the cap on securities and insurance companies that affiliate with a bank and already own commercial firms would be 15%.

The legislation would also create a new type of bank-the wholesale financial institution-which would provide securities and insurance firms with access to the payments system and the Fed's discount window. It could not accept retail deposits or deposits less than $100,000 nor receive federal deposit insurance.

National banks would be permitted to underwrite municipal revenue bonds directly and could sell insurance (except title insurance), travel services, and other agency products through a direct operating subsidiary. Other insurance underwriting would have to be done through a holding company subsidiary.

Under the bill's second section, the Securities and Exchange Commission would regulate all securities activities. Banks would lose their general exemptions from federal securities laws. But they would not have to register as broker-dealers in a dozen categories including trust and fiduciary services for which no fee is charged, government securities, and sweep accounts.

Banking regulators still would oversee deposits, loans, loan participations, derivatives, and other "traditional" banking products. The SEC would decide whether new banking products qualify as securities.

The third section covers insurance, which would continue to be regulated by the states as long as they do not restrict or significantly interfere with sales by banks.

The definition of interference would be based on an Illinois insurance law. A federal court of appeals would settle clashes between federal bank regulators and states, but federal bank regulators would lose their traditional legal advantage.

Banks could only start selling insurance in a state by purchasing an existing licensed agency.

Federal regulators also are required to develop consumer protection rules that bar tying and coercive sales practices, separate banking and nonbanking activities, mandate proper disclosures, and create a grievance system.

The legislation's final section would prohibit the formation of new unitary thrift holding companies and would prevent commercial entities from chartering thrifts unless they applied by Sept. 16.

Existing thrift holding companies would be grandfathered, but they would be regulated by the Fed and could not change ownership.

The thrift charter would be weakened. The bill would confine new thrift branches to the stricter interstate branching laws that national banks follow. It would also require that thrifts hold 10% of their assets in home mortgages.

The Office of Thrift Supervision would become part of the Office of the Comptroller of the Currency on Jan. 1, 2000. That shift could undermine the legal authority that lets thrifts pre-empt state laws.

The federal bank and thrift insurance funds would be merged.

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