Rescue of Insurance Fund Approved by House Panel
WASHINGTON - The House Banking Committee voted Tuesday to send a drastically scaled-back banking bill to the House floor in the closing days of this year's congressional session.
The sponsors of this third committee-backed legislative package labeled it "noncontroversial," but bankers said it retains provisions that would hurt the industry, including a ban on insurance underwriting.
Rules Panel an Obstacle
The bill to aid the Bank Insurance Fund, supported on a 44-to-7 vote, required clearance by the House Rules Committee before going to the floor. The rules panel postponed action Tuesday afternoon. Its senior Republican, Rep. Gerald Solomon of New York, was reportedly seeking to restor language that would limit bank insurance sales.
Some big-bank lobbyists said they would persist in opposing the bill.
The American Bankers Association, though unhappy with the measure, "probably will not oppose it," said Edward L. Yingling, the trade group's chief lobbyist.
The most adverse provisions in earlier versions of the measure are gone, Mr. Yingling said. He added that it is important for Congress to replenish the Bank Insurance Fund, which has become the centerpiece of what began as far-reaching reform legislation.
Still, Douglas B. Kidd, lobbyist for Bankers Trust New York Corp., said his organization is "strongly opposed." The insurance underwriting restriction, he said, "is the last special interest amendment in the bill."
The bill is expected to go to the House floor today or Thursday, and many lawmakers were predicting that this narrower version would pass, despite the two earlier defeats.
Riegle Cites Stock Market
Meanwhile, the Senate continued its slow consideration of broader reform legislation. Sen. Donald W. Riegle, D-Mich., the banking committee chairman, mentioned that the stock market was experiencing another difficult day and urged his colleagues to allow quick passage.
(Stock prices of the largest banks, for a change, did not fall as much as the Dow Jones industrial average, which was off as much as 75 points. See market report, page 24.)
"One or two people have the power to obstruct the process," Sen. Riegle said. "But that's exactly the wrong signal to send today."
Sen. Riegle predicted the Senate would finish work on the measure by late Tuesday, but a number of observers said the process would be concluded only if Sen. Riegle would come back with a narrow bill, similar to the House measure.
As Senate debate bogged down over consumer provisions like lifeline checking and truth in savings, Sen. Riegel accused Republicans of filibustering. When the banking committee chairman sought to close off debate about 3:30 p.m., Sen. Connie Mack, R-Fla., refused to yield the floor.
Credit Card Rate Bill
Separate legislation dealing with credit card interest rates appeared on its last legs. After meeting with House Speaker Thomas S. Foley, D-Wash., Rep. Charles E. Schumer, D-N.Y., said he would continue working with Rep. Esteban Torres, D-Calif., on a proposal to set up a commission to study card rates.
But it was understood that Rep. Foley had refused any help for the measure, and Rep. Schumer is unlikely to proceed without the leader's support.
Rep. Torres said he planned to convene the House Banking subcommittee on consumer affairs this week to consider credit card legislation. He favors having the Congressional Budget Office and General Accounting Office do a nine-month study of the rate-cap issue, while Rep. Schumer wants to create a seven-member presidential commission to do an 18-month study.
Senate leaders were said to be scrambling to find a way Tuesday to retreat from the rate cap that the chamber approved overwhelmingly last week.
The House banking panel resumed work Tuesday on a funding and restructuring measure for the Resolution Trust Corp.
The panel voted to require a portion of the bailout cost to be borne by the federal budget, rather than through borrowings. Rep. Chalmers Wylie, R-Ohio, won approval of a requirement that federal programs be cut, rather than taxes raised, to make those payments.
Bankers are particularly concerned about a provision in the RTC package that would change the standard for proving officer and director liability.
The provision adopted by the panel's financial institutions subcommittee, which was sought by the Federal Deposit Insurance Corp., would permit the FDIC to recover damages if it could prove negligence by directors. The current standard, which varies from state to state, usually requires "gross negligence" or willful misconduct.
"Negligence is a pretty easy standard to prove," said David Danovitch, a banking lawyer at Jones Day Reavis & Pogue. "The FDIC wants to be able to sue anybody."
"Directors would literally put all of their personal assets at risk to serve on a board," said Sally LaHue, a lobbyist for the National Association of Community Bankers. "So who is going to serve on a bank board?"
In one early vote, the committee supported a "pay-as-you-go" amendment that would limit new funding for the agency to $20 billion in the next fiscal year.