The debate about interstate branching spilled onto the "MacNeil/Lehrer News Hour" on public television last week.
In a discussion about the state of the banking industry, Jerome Powell, the Treasury Department's under secretary for finance, and Rep. Charles Schumer, D-N.Y., agreed that widespread support exists for legislation permitting branching across state lines. That prompted news anchor Jim Lehrer to ask why such legislation hadn't been approved. Excerpts from the discussion follow.
LEHRER: Why could you all not agree on [interstate banking], Mr. Secretary?
POWELL: Interstate banking was stopped in its tracks by one senior member of Congress last year.
It has bipartisan, majority support in both chambers, and we ought to have it. We should have gotten it done. It had nothing to do with....
LEHRER: And one member of Congress was opposed, and he was powerful enough to stop it?
POWELL: Sure was.
LEHRER: Is that true, Congressman?
SCHUMER: Well, I don't quite agree with the Secretary's view.
LEHRER: Who was the congressman, Mr. Secretary? POWELL: Chairman [John] Dingell [D-Mich.] of the Energy and Commerce Committee.
SCHUMER: But he didn't. His main thrust was for helping preserve [the Glass-Steagall Act's separation of banking and underwriting].
There was a big package that the administration put in, including interstate banking and including the banks' getting into new powers. And it was the new powers, using the insured deposits for those new powers, that was the real deadlock.
And that's when Chairman Dingell got up on the floor and defeated it, with a majority of congressmen backing him up.
Congress is very - if I just might finish - Congress is very mindful of what happened in the S&L crisis. And then at the end of the session the Secretary came in and said, "Well, let's try to do just interstate banking," and that made some sense to some of us.
And then they started fiddling around with new powers in insurance and new powers in these other areas. And that did it in.
LEHRER: Is the key word here, Mr. Secretary, "fiddling around"?
POWELL: I think that's a fair way to put it. I think that you put your finger on something there. I mean, you got to it at the end there, Congressman Schumer.
Long after securities underwriting and Glass-Steagall were off the table, we were told pointblank by Chairman Dingell that you can have interstate banking but you've got to agree to roll back riskless insurance-agent sale powers by banks.
You would have had it, except for that.
SCHUMER: As you. know, Mr. Secretary, some of us said and tried to put together a coalition - and this does get arcane to the average person ...
LEHRER: I think you've just gotten....
SCHUMER: ... tried to put a coalition together that said interstate banking, and no change, and then preventing the banks from getting security powers.
We would have had a majority for that. The administration didn't want it.