Defying skeptics, Senate Banking Committee Chairman Phil Gramm unveiled a broad agenda Tuesday that includes sending long-sought financial reform legislation to the floor by the end of February.
"The No. 1 piece of unfinished business from the last Congress-in fact, for the last 10 Congresses-is financial services modernization," the Texas Republican said at a news conference. "I am determined to act, and act swiftly."
Many industry officials were stunned by Sen. Gramm's aggressive timetable, because he was the lawmaker most responsible for killing financial reform three months ago.
"Are you serious?" said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America, on hearing the news. "Frankly, it is moving much faster than I had anticipated."
"Boy, I am turned on," said David J. Pratt, senior vice president of federal affairs for the American Insurance Association. Even if the impeachment trial or other events slow action, Sen. Gramm has re-energized disappointed supporters by putting the legislation on the front burner, Mr. Pratt said.
Firing up expectations further, Sen. Gramm said he hoped that financial reform could be the first major legislation adopted by the Senate this year-and he dropped several clues on possible solutions to sticking points such as community reinvestment requirements and bank operating subsidiaries.
Overall, Sen. Gramm laid out a pro-bank agenda that represents a shift in direction from that of his predecessor, Alfonse M. D'Amato, who pushed the credit union law last year and campaigned against automated teller machine fees.
Sen. Gramm also vowed to quickly advance the Shelby-Mack regulatory relief bill, which, among other things, would permit banks to pay interest on business checking accounts and earn interest on reserves held at the Federal Reserve.
Longer term, Sen. Gramm said, he plans to hold hearings that could lay the foundation for reform of the Community Reinvestment Act next year. He said he also plans to investigate proposed know-your-customer rules because regulators may "have gone too far" in a recent federal proposal to get financial institutions to uncover money launderers.
As part of a new emphasis on oversight, Sen. Gramm said the committee would carefully review bank regulators' handling of the bailout of Long Term Capital Management. The agencies may not have been thorough enough in determining whether lenders were improperly evaluating risk, he said. Sen. Gramm vowed to exert more jurisdiction over derivatives issues.
Sources said Sen. Gramm's turnaround on reform arises partly from political realities. Republican leaders are eager to move legislation early in the session to disprove President Clinton's claims that they are more interested in removing him from office than in accomplishing the public's business.
"This 'do-nothing Congress' charge really stings them," said Joe Belew, president of the Consumer Bankers Association. As chairman, he said, Sen. Gramm "is in a position to make some changes and get it going."
Sen. Gramm said he was eager not to lose the historic consensus among the warring factions of the financial services industry. "I am concerned that if you wait ... those same forces that have produced political consensus to act on these issues will begin to produce distortions in the market," he said, noting that many companies are trying to skirt legal barriers to the banking business by chartering federal thrifts.
On the two big issues that blocked the reform bill last year, Sen. Gramm suggested devising a short-term compromise on the CRA. He has said reinvestment requirements should not be extended beyond banking to other financial companies, and has also complained that the CRA amounts to extortion because it allows community groups to pressure banks into making large donations. If a short-term compromise remedies the latter problem, Sen. Gramm said, he would be willing to examine larger issues later.
Though he provided no details, Sen. Gramm said he is working on a deal with the Fed and Treasury Department over where new bank activities will be housed.
Sen. Paul S. Sarbanes and other Democrats did not immediately react to Sen. Gramm's plans, but community groups objected.
Considering CRA separately would ignore the needs of working class, said John E. Taylor, president of the National Community Reinvestment Coalition. "For us, it is trying to make a peanut butter and jelly sandwich without the bread."
Sen. Gramm added that he supported letting commercial firms own thrifts because such diversified entities have proven economically resilient. But he said he would be willing to compromise, a nod to the fact that Sen. Sarbanes and House Banking Committee Chairman Jim Leach want to ban any mixing of banking and commerce.