On July 2 the senior legislative director of the Bankers Roundtable recited in this newspaper a list of questions that he felt needed to be resolved before the banking industry should consider supporting HR 10, the financial modernization legislation that the House passed in May and that is now pending in the Senate.
Bank lawyers and lobbyists are wonderfully adept at raising questions- and doubts-regarding proposed legislation, especially legislation like HR 10 that involved important change for the industry. Indeed, we have been at it for decades. The result, of course, is that our industry has remained shackled by badly outmoded restrictions, while our competitors have aggressively moved forward.
In such an environment, it is not surprising that the share of American families' financial assets held by the banking industry has fallen from 90% in 1980 to 55% today.
Instead of simply raising questions and effectively endorsing a status quo in which we have routinely been the losers, let's consider for a moment some specific things that HR 10 would do to improve our banks' competitive position:
Bar the creation of new unitary thrift holding companies.
Let bank affiliate with insurance underwriters, thus enabling banks to diversify and integrate their product lines and offer one-step shopping to their customers.
Let national banks sell insurance as agents from any location through operating subsidiaries.
Let banks have merchant banking affiliates, thereby substantially expanding banking organizations' ability to make venture capital investments.
Let bank affiliates engage in a full range of securities underwriting and dealing activities without artificial revenue limitations.
Let banks sponsor and distribute their own mutual funds through affiliates.
Afford national banks parity with state banks in the sale of title insurance.
Significantly reduce Federal Reserve regulatory oversight of bank holding companies.
To set the record straight, it also is important to clarify a few particular things HR 10 would not do.
Impose any form of low-cost, or lifeline, account requirement on any bank that is not affiliated with a holding company.
Overturn the Barnett decision; to the contrary, the bill codifies Barnett and even extends it beyond the "town of 5,000" authority on which the case was decided.
Cut back national banks' existing insurance sales authority under the "town of 5,000" provision.
As one consider what HR 10 would and would not do, it is perhaps telling that the Bankers Roundtable's legislative director effectively criticizes HR 10 for giving too much to the insurance industry and too little to the banks. Ironically, however, the National Association of Insurance Commissioners in recent Senate committee testimony assailed HR 10 as giving too much power to the banks and taking too much authority away from the states.
As often is the case, the truth lies in between these two extreme positions.
Is HR 10 perfect from the banks' perspective? No. Does HR 10 represent a significant step forward in strengthening the banks' competitive position? Unquestionably.
The fact is that we can spend another decade raising questions, seeking perfection-and watching our competitive position continue to erode. Or, we can take a very good bill and get down to business. It really is our choice.