House Banking Committee Chairman Jim Leach plans to fight if the Clinton administration pushes to let banking and commercial companies own each other.
"There is simply no public purpose that I can see in allowing Chase Manhattan to integrate with General Motors, Wal-Mart, or Dow Jones," the Iowa Republican said Tuesday at a conference sponsored by investment banking firm Friedman, Billings, Ramsey & Co.
Rep. Leach warned that lawmakers would not tolerate massive industrial consolidation.
"It will not be well-received by consumers, community bankers, small businesses, and many of us on the House side," he said. "The invitation to conglomeration of such unfettered dimensions could precipitate dangerously imprudent changes in the economy."
Recently, Treasury Under Secretary John D. Hawke Jr. said the administration may propose letting banks and commercial firms own each other as part of a financial services reform bill to be unveiled by yearend.
Like administration officials, Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y., has indicated he may push to let banks and commercial firms affiliate.
Undaunted by those likely opponents, Rep. Leach said he would resurrect his financial services reform bill in January. That legislation, which stalled in the last Congress, was opposed by the Treasury Department. While upholding barriers between banking and commerce, his bill would let banks add activities that are now off-limits, but only through holding company affiliates.
Despite Rep. Leach's plan to forge ahead, he said it is too early to predict whether financial modernization legislation can pass.
Rep. Leach complained that the "landscape has been peremptorily tilted" by Comptroller of the Currency Eugene A. Ludwig's recent decision to let banks directly enter new businesses through subsidiaries.
Because of the decision, Rep. Leach said, some banks may decide they don't need reform legislation anymore. If banks sit out, however, they may end up disappointed, he said, because insurance trade groups have pledged to fight Mr. Ludwig in court.
"For the banking industry, there is, of course, a risk of unfulfilled expectations if the courts should reach the conclusion that the Comptroller's Office has overstepped its bounds," he said.
Rep. Leach also said his reform bill may roll back the comptroller's decision.
