As lawmakers return to Capitol Hill this week from vacation, lobbying to influence House-Senate negotiations on financial reform legislation is beginning in earnest.
On Monday, Chase Manhattan Corp. president and chief executive William B. Harrison Jr. and Citigroup Inc. co-chairman Sanford I. Weill separately hosted meetings with House Speaker J. Dennis Hastert, House Majority Leader Richard K. Armey, and Rep. Michael G. Oxley, the chairman of House Commerce's finance subcommittee. The Republican leaders were in New York for a $2,500-a-plate Republican fund-raising luncheon.
Enactment of legislation to bust the barriers among the banking, insurance, and securities industries is closer than ever, but many political hurdles remain. The House adopted legislation two weeks ago by a 343-to-86 vote, and the Senate approved its distinctly different version by a mostly party-line, 54-to-44 tally on May 6.
Many key disputes were postponed until now to keep the legislation moving. The House version would grant broader powers to direct bank subsidiaries and impose tougher consumer privacy protections; the Senate version would roll back the Community Reinvestment Act and crack down harder on unitary thrifts.
House and Senate leaders are expected to appoint lawmakers to a conference committee this week, but a Senate Banking Committee spokeswoman warned that health care and other unrelated issues could delay the selection until next week.
Trade group lobbyists said in interviews over the past week that they have decided to focus on a limited set of issues where they have the best chance of success.
Scarce time and resources are part of the reason for this strategy, as well as the realization that the toughest political issues-such as Community Reinvestment Act requirements and bank subsidiary activities-will be settled by Congress, administration officials, and Federal Reserve Board Chairman Alan Greenspan.
"You just know that you have to go in with two or three of your highest priorities," said Paul A. Schosberg, the president of America's Community Bankers. "You've got to use a rifle. You can't use a shotgun."
The ACB and the Financial Services Council want to defend the thrift industry against efforts by commercial banks to outlaw mergers between nonfinancial companies and grandfathered unitary thrifts. Officials from the American Bankers Association and the Independent Community Bankers of America have made adoption of the Senate bill's ban on such combinations their top priority.
Bankers have an ally on the issue in House Banking Committee Chairman Jim Leach, but Senate Banking Chairman Phil Gramm opposes limits on unitary sales. "Our main problem is Chairman Gramm obviously feels strongly about it on the other side," said ABA chief lobbyist Edward L. Yingling.
Community banks generally favor the Senate bill because of its ban on thrift sales to commercial entities and its CRA exemption for small, rural banks with less than $100 million of assets.
"We have a very strong preference for the Senate-passed bill," said Kenneth A. Guenther, the ICBA's executive vice president. "We are in strong opposition to HR 10 as it passed the House. We are aligning ourselves lock, stock, and barrel with Chairman Gramm" to use the Senate version as the blueprint for the final bill.
Besides unitary thrifts, the ABA's other priorities include fighting for broader title insurance powers for national banks and for the Senate version's softer limits on bank securities activities, Mr. Yingling said.
But the Securities Industry Association wants to preserve the House bill's securities provisions because they narrow the exceptions for banks from broker-dealer rules, said Steve Judge, senior vice president for government affairs. For example, both bills would let bank trust departments conduct traditional securities activities without registering as a broker-dealer but the House version would limit their commissions, he said.
The Securities Industry Association will continue to press for creation of uninsured, wholesale financial institutions, Mr. Judge said. The House bill would establish them, but they are not included in the Senate legislation.
On privacy, several trade group chiefs said they are working to make sure House-Senate negotiators do not bend under pressure from the White House or consumer groups to extend the House bill's broader privacy protections to transfers of customer data among holding company affiliates.
"The battle is not over," warned Joe Belew, the president of the Consumer Bankers Association. "We can't go beyond what the House did."
Insurance industry lobbyists will be trying to ward off any Democratic attempts to create federal anti-redlining laws, but they and banking lobbyists said the insurance sections in the two bills are very similar and predicted they will remain basically intact.
"I don't ever take any of this stuff for granted, but it would come out of left field if we took a hit on those," said Leigh Ann Pusey, senior vice president for federal affairs at the American Insurance Association.
Steve Bartlett, the president of the Financial Services Roundtable, said his group will "strongly resist" any changes to the insurance provisions in the bill and will fight for preemption of state privacy laws, "but our No. 1 priority is to get the bill passed," he said.