The Senate Banking Committee abruptly canceled its vote on financial services legislation Thursday, endangering the reform bill's already slim chances of enactment this year.
Committee Chairman Alfonse M. D'Amato said he hoped to try again within two weeks.
"The committee has made substantial progress in resolving the major issues," the New York Republican said in a written statement. But "we have not been able to resolve all of the differences."
Sen. D'Amato was forced to call off the vote after fellow Republicans demanded that every reference to the Community Reinvestment Act be eliminated from the bill.
Most observers had expected the sticking points to involve rules for bank sales of insurance, powers for direct operating subsidiaries of banks, or limits on unitary thrift holding companies.
Many of those issues remain controversial but they were overshadowed by the broadening ideological war over the CRA between Republicans and Democrats.
Though most Republicans on the banking panel support an amendment by Sens. Phil Gramm and Richard C. Shelby to ax CRA from this bill, congressional sources said Sen. D'Amato opposed the move because it would anger Democrats and steel the Clinton administration's opposition.
Under the legislation, a firm would not be granted the broad powers of a financial services holding company unless its banking units earn a "satisfactory" CRA rating. The Federal Reserve Board could force the holding company to divest its banking arm if it did not maintain a satisfactory rating. Holding companies also would have to offer affordable checking accounts to low-income people and be well-managed and well- capitalized.
Republicans consider the divestiture threat as political leverage that can be used against financial firms, a committee aide said. They also objected to the bill's extension of the CRA to uninsured wholesale financial institutions, or "woofies."
Banks and others have been willing to accept the bill's CRA provisions, but Sens. Gramm and Shelby have been taking shots at the community reinvestment law recently on philosophical grounds.
They introduced separate anti-CRA amendments that nearly jeopardized the credit union legislation in July. Similarly, Republicans on a House Banking subcommittee imperiled regulatory relief legislation last month by attaching a CRA rollback for banks with less than $250 million of assets.
The delay may doom the controversial bill's already tenuous chances.
"This bill is dead," said James J. Butera, a partner with the Butera & Andrews law firm here. "Even if they got it through the committee in two weeks, there is just no chance this thing is going to get resurrected into law this year."
Congress is scheduled to adjourn for the year in early October.
But others-mainly sources who want the legislation enacted-said the postponement is simply another in a series of temporary setbacks for HR 10, as the bill is called.
"HR 10 has continually defied the expectations of its skeptics," said Rep. John A. Boehner, the Ohio Republican who steered the legislation to a narrow House victory in May. "The overwhelming need for financial services modernization will carry us past this latest bump in the road."
Rep. John J. LaFalce, the ranking Democrat on the House Banking Committee, suggested scaling back the bill so that it primarily repeals the 65-year-old Glass-Steagall Act separating commercial and investment banking.
"A streamlined version would still be one of the most significant pieces of financial services legislation in several decades," the New York Democrat said.
Ironically, the banking industry's opposition to the reform bill has suddenly dwindled because of compromises on insurance provisions and other areas.
"There's still a good chance for a markup, but each day that goes by makes it less likely that the full Senate will be able to pass it," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "The industry groups-banking, insurance, and securities-were the closest they have ever been to an agreement."
Still, changes that satisfy banks could alienate insurance agents, thrift executives, and consumer advocates. And administration officials have said President Clinton will veto the bill unless bank operating subsidiaries are granted full financial powers.