WASHINGTON - House Banking Committee Chairman Jim Leach is brokering a deal on bank insurance powers designed to break the logjam stalling his Glass-Steagall bill.
Rep. Leach would link the fate of bank insurance powers to the outcome of a Supreme Court case involving Barnett Banks Inc. of Florida. If Barnett won the case, national banks would be able to sell insurance nationwide from towns of 5,000 or fewer people. If Barnett lost, banks would be subject to a five-year moratorium on new insurance powers.
Aides to the Iowa Republican said Tuesday an agreement between banking and insurance interests is imminent, though industry trade groups on both sides voiced reservations about the plan.
Edward L. Yingling, the chief lobbyist for the American Bankers Association, said he is encouraged by the proposal. However, he added that his trade group continues to oppose the Glass-Steagall package, which he said contains too many negatives.
The Independent Insurance Agents of America is "very unhappy" with the proposal, according to one of its top lobbyists, Robert A. Rusbuldt. Even so, Mr. Rusbuldt said the group has not taken a position on the plan.
Bank industry sources said the insurance agents are being pressured to accept the plan by their allies in the House leadership, including Speaker Newt Gingrich and Rules Committee Chairman Gerald B. Solomon. A number of sources said the Republican leaders were determined to see the banking bill enacted into law.
In fact, the leadership appeared ready Tuesday to give the insurance industry one sought-after plum by moving a bill that would strip the so- called retirement CD of its deposit insurance. Insurers say the product is an annuity that, because of its federal insurance, competes unfairly with their own offerings.
Kenneth Guenther, executive vice president for the Independent Bankers Association of America, said Rep. Leach's reliance on the pending Barnett case "is the jump-ball approach."
Mr. Yingling said agents will be making a major concession if they agree to live by the Barnett decision. "This is a significant offer from the insurance side," he said.
Mr. Rusbuldt agrees. "It's clear the concessions are coming from us," he said.
Oral arguments in the Barnett case are set for Jan. 16. A decision is expected by spring.
Rep. Leach's plan also would:
*Allow state insurance commissioners to regulate bank insurance sales. State regulators could not treat banks differently than other insurance sellers, however.
*Allow banks to continue selling insurance products already approved by the Comptroller, such as annuities and credit insurance.
*Require banks to follow several new consumer protection laws.
The new plan was developed after a month of talks led by the Bankers Roundtable, which represents large banks interested in Glass-Steagall repeal, and the Independent Insurance Agents of America.
Anthony T. Cluff, president of Bankers Roundtable, said he doubts his members would accept the package in its current form, but added that he is "not pessimistic" about the prospects for a compromise.
The IBAA is most upset by a provision that would forbid loan officers from selling insurance products. The provision would reverse a common practice at banks based in states that already allow insurance sales, he said.