Riegle Bill May Be Eased, Pleasing Banks and Thrifts
WASHINGTON - The Senate Banking Committee appears likely to retain much of the comprehensive bill proposed by Chairman Donald Riegle but with modifications favorable to the banking and thrift industry on a number of key issues.
Aides to key Republican and Democratic senators said a majority of the committee are pleased with Sen. Riegle's approach. But they added that majorities also appear to favor relaxing the bill's restrictions on securities underwriting and interstate branching.
The committee may want to go further than Sen. Riegle, D-Mich., in easing the qualified thrift lender test. And it is likely to dilute a provision that could force the Federal Deposit Insurance Corp. to raise premiums.
Riegle's |Come a Long Way'
Sen. Riegle, said a Republican aide, "has come a long way" to meet the concerns of other committee members advocating a comprehensive approach. The chairman earlier had argued that the panel should act only on a narrow bill that did little more than shore up the Bank Insurance Fund.
"But there are important parts of the bill with which the committee does not agree," added the Republican aide.
In particular, he said, "a majority of the committee is concerned about a whole variety of things that impede the ability of the industry to raise capital."
One such item is the proposed "cross-guarantee" provision that would require all affiliates of a failed bank, including non-bank subsidiaries of its holding company, to share in losses sustained by the deposit insurer.
Glass-Steagall Repeal Backed
Similarly, while a committee majority favors repeal of the Glass-Steagall Act, lawmakers "want to provide greater flexibility for the Fed on the firewalls," said an aide to a key Democratic member.
With other steps that have been taken to enhance safety and soundness, including higher capital requirements, the Riegle firewalls "are like a belt with suspenders," said the aide.
Other provisions in the Riegle bill that are likely to be attacked when the panel considers the measure, probably this month, include:
* A measure that would require banks with assets of more than $1 billion to provide market-value estimates of assets, liabilities, and net worth.
* A proposed three-year delay in full interstate bank branching. At a minimum, some senators will likely push for an amendment to require existing interstate organizations to consolidate their banks immediately.
* A provision that would levy a special assessment on all bank assets to pay part of the cost of rebuilding the insurance fund. Sen. Jake Garn of Utah, the panel's ranking Republican, said he believes the measure, which would have the effect of assessing foreign-branch deposits, would impair the competitiveness of U.S. banks overseas.
* A requirement that the Federal Deposit Insurance Corp. bring reserves to 1.25% of insured deposits within 10 years, or 13 years if losses are significantly worse than projected.
* A requirement that foreign banks wishing to use new securities powers establish U.S. holding companies and banks.
A number of observers said it is likely the bill will be amended to include new funding for the Resolution Trust Corp.