WASHINGTON - Improving odds that the Glass-Steagall Act will be repealed, Rep. Thomas J. Bliley announced Thursday that he is abandoning efforts to broker a compromise between banks and insurance companies.
The decision by the House Commerce Committee chairman simplifies the debate over Glass-Steagall repeal by eliminating what has been a major stumbling block.
"To pursue the insurance affiliation issues further, it is now clear, would only jeopardize this window of opportunity to enact historic legislation modernizing our financial services industries," Rep. Bliley said.
"The parties are too far apart, and their commitment to their respective positions too firmly held, for such an approach to succeed at present," he added.
Over the last few weeks, representatives of the banking and insurance industries have failed to hammer out a palatable compromise that would let banks and insurance companies affiliate under a holding company.
However, Rep. Bliley may still have plans to limit the banking industry's insurance powers.
The Virginia Republican is contemplating an amendment that would freeze the authority of the Office of the Comptroller of the Currency to expand bank insurance powers.
"That is one of the possibilities that the Commerce Committee is going to consider," House Banking Committee Chairman Jim Leach, R-Iowa, said in a brief interview Thursday.
Rep. Leach conceded that such a provision would turn much of the banking industry against the measure.
Even if the amendment were not tacked on to Glass-Steagall repeal, Rep. Leach said, it "might become part of the regulatory burden relief issue."
Deliberations on House regulatory reform legislation, sponsored by Rep. Doug Bereuter, R-Neb., are to start next Wednesday in House Banking's financial institutions subcommittee.
Rumors also were flying Thursday about another measure that would block the Comptroller from letting a bank subsidiary offer products and services prohibited for its parent. This measure also might be tacked on to the Bereuter bill, sources said.
According to Edward L. Yingling, executive director of government relations at the American Bankers Association, such an amendment could kill the Bereuter bill.
"We'd oppose it, the securities industry would oppose it, and the Democrats would oppose it," Mr. Yingling said.
And more than one bank lobbyist feared that a separate bill already introduced by Rep. Bliley to let state insurance regulators restrict bank insurance sales may be attached to the Glass-Steagall legislation.
"All signs are that this bill (Glass-Steagall repeal) is one that the industry will have to oppose," said a bank lobbyist. However, he doubted that banks would be able to kill the legislation.
"The insurance agents swarmed all over the Hill on this," the lobbyist said. "We didn't lobby this thing because we were focused on the regulatory relief bill."
Rep. Bliley's decision Thursday was a victory for the insurance agents, who are opposed to any legislation that would override state laws precluding banks from affiliating with insurance underwriters. The plan that Rep. Bliley yanked from the table would have done exactly that.
"We are very pleased by the direction that the process is moving," said Paul Equale, senior vice president of government affairs for the Independent Insurance Agents of America.
The Commerce Committee is expected to begin deliberations on Glass- Steagall repeal as early as next Thursday.