WASHINGTON - parting company with a senior member of his panel, is siding with insurance agents against banks in the Glass-Steagall debate. In a June 2 letter to House Speaker Newt Gingrich, R-Ga., Rep. Gerald B. Solomon warned that one initiative favored by banks runs counter to the GOP's mandate to return powers to the states. Rep. Solomon expressed concern that some members of the House Banking and Commerce committees are trying to ram through a proposal to let banks affiliate with insurance companies. That approach, he said, would preempt state laws. "Legislation of this nature would be a blatant infringement upon states rights and is totally inconsistent with the Contract with America," Rep. Solomon added. As one bank lobbyist put it, the Solomon letter "balances off" a possible amendment by Rep. David Dreier, R-Calif., to Glass-Steagall legislation. The Dreier amendment would allow national banks to affiliate with insurance companies wherever state-chartered banks can do the same. The Rules Committee sets the terms for floor debate in the House, and its members have considerable latitude to advance measures they support. The Commerce Committee holds its first hearing on the Glass-Steagall bill today, and is expected to unveil the very kind of proposal that Rep. Solomon warned against. In general terms, the proposal would allow banks to affiliate with insurance underwriters through a holding company structure, thereby preempting antiaffiliation laws that exist in some states. Although the details were not finalized Monday, industry sources said they expect the measure would also restrict national banks' powers to sell insurance out of offices in towns with populations under 5,000. National banks would be allowed to sell insurance only within the town or adjoining counties. However, national banks already selling insurance out of small towns would be grandfathered. The measure would also limit cross-marketing activities between a bank and an insurance affiliate, said a bank lobbyist. The proposal as a whole appeared to have garnered tepid support from banking industry representatives. "As far as the banks are concerned, only about 65% of us are saying, 'This isn't a bad deal,'" the bank lobbyist said. In his letter, Rep. Solomon also suggested placing a "permanent moratorium" on the Comptroller of the Currency's authority to expand bank insurance powers. The letter was hailed by the Independent Insurance Agents of America, who support a measure co-sponsored by Rep. Solomon that would authorize states to regulate bank insurance sales. Alluding to the states rights issue, insurance agent lobbyist Phil Anderson said he hopes the Solomon letter "will remind people ... what this Congress is all about."
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