The Office of the Comptroller of the Currency has been playing a waiting game with Congress, and it's starting to look like the agency may be winning.
Just over a year ago - Jan. 29, 1995, to be exact - the public comment period closed on the OCC's controversial proposal to expand the activities allowed in national banks' operating subsidiaries.
The "op-sub" proposal, contained in a plan to revamp "Part 5" of the OCC rulebook, has been on the agency's back burner, awaiting the fate of Glass- Steagall repeal legislation pending in Congress. A House bill goes the opposite way on new securities activities by banishing them to bank holding company subsidiaries.
"We're still in a holding pattern," said OCC chief counsel Julie L. Williams. "We're still monitoring what Congress is doing."
But Congress has not been doing much in the financial services legislation arena lately.
OCC and industry officials say they're skeptical that the Glass-Steagall bill will make it to the President's desk before this session of Congress ends in October. The measure has been mired in squabbles between the banking and insurance industries.
The Part 5 proposal would be a boon for national banks, essentially allowing their subsidiaries to offer products and services prohibited for the parent.
"This proposal is so significant because in full flower it recreates the national bank as a universal bank, which in its own right controls an array of both banking and nonbanking services, as opposed to doing that under a holding company," said Karen Shaw Petrou, president of ISD/Shaw Inc.
John P. LaWare, a former Federal Reserve Board governor, said the universal bank model is far more efficient than - and just as safe as - the holding company model. Mr. LaWare admitted his support for the OCC's plan is not shared by many at the Fed.
"People in the hierarchy of the Fed have a general feeling that there is significant risk in this," said Mr. LaWare, now vice chairman of the Secura Group. "That's patent nonsense."
Yet numerous industry sources agreed that the Comptroller's Office would be well advised to hold off a little longer with a final rule.
"If they move forward with the op-sub proposal now, it's going to irritate Congress, which is already mad about the expansion of insurance powers the OCC is engaged in," said former Comptroller Robert Clarke, now a partner at the law firm Bracewell & Patterson in Houston. "The OCC is damned if they do, damned if they don't - like they usually are when they try to change things administratively rather than through Congress."
Banking consultant Bert Ely said two things must happen before the political waters are safe for the op-sub proposal: the Glass-Steagall bill must have absolutely no chance of passage, and the Supreme Court must rule in the Barnett case, which challenges state regulators' ability to bar national banks from the insurance business.
If Congress doesn't attempt to counter a Supreme Court decision in favor of the banking industry with legislation protecting insurance agents, the op-sub proposal will be good to go, he contended.
"Assuming Congress doesn't work to give the agents what they want in the aftermath of Barnett, it increases the odds for the Comptroller to be able to safely issue the op-sub regulation," Mr. Ely said.