After a month of contentious internal negotiations, the Bankers Roundtable on May 22 gave qualified support for House Banking Committee Chairman Jim Leach's Glass-Steagall repeal bill.

Although Rep. Leach told House leaders the big bank trade group now backs a vote on his bill, the organization actually laid down two conditions that must be met before it climbs on board:

First, the bill must protect the ability of the Comptroller's Office to grant new insurance powers to banks. Second, banks must be allowed to affiliate with uninsured wholesale financial institutions.

Rep. Leach initially played down the organization's demands, but on May 23 he warned the group that the insurance industry would oppose the legislation unless some restriction on the agency were retained. (See accompanying story.)

An edited version of the letter from Bankers Roundtable follows. The letter was signed by the group's president, Roger L. Fitzsimonds.


For the Roundtable, the following two key issues must be addressed prior to consideration by the Rules Committee of HR 2520.

1. The Roundtable strongly believes that the principles set forth in the Valic and Barnett decisions of the Supreme Court and in state court rulings must not be weakened. The Roundtable cannot support restrictions on the ability of the Office of the Comptroller of the Currency to exercise its authority to determine the products and services of banking firms.

The language of HR 2520 relating to the OCC must make certain that the interpretive authority of the OCC regarding permissible bank products remains clearly intact. Clarification of the impact of OCC determinations and removal of ambiguities regarding the OCC are critical. First, the legislative language should be revised to make clear that the opinions of a state insurance regulator are viewed as part of a broad spectrum of information regarding what is or is not insurance. OCC interpretations must be valid in application across the country.

Second, legislative history needs to insure that provisions of the legislation are not construed to alter the current ability of the OCC to determine what is a permissible bank product. Third, and in keeping with your public expressions of no retrenchment on the Barnett decision and the ability of the OCC to define products for banks, there needs to be a clear and specific indication that a full reading of the Barnett decision is intended where it is referenced in HR 2520. The Roundtable has worked on language to accomplish these goals and will share this with your staff.

2. In the Glass-Steagall reform section of HR 2520, the creation of wholesale financial institutions, that are unavailable to insured depositories, poses a true competitive imbalance. Banks must be able to affiliate with wholesale financial institutions in order to insure that banks do not lose their market position to investment firms gaining access to wholesale markets with lower cost operations. If the structure is safe for an investment firm, then it likewise is safe for affiliation with a bank.

Beyond these points, the Roundtable remains opposed to any final package in the legislative process that does not include a workable affiliation framework. The Roundtable believes that affiliation among financial service providers should be the policy of the federal government. This is consistent with the new laws on interstate banking, where Congress determined that while states have an important role to play in regulation, the marketplace demands rational structures that permit operations of businesses across state lines. Affiliation should be fully authorized by federal law with a date certain. Affiliation must also be available on a nondiscriminatory basis and must not be restrictive as to cross-marketing of products.

In any transition of interim steps to full affiliation and in line with nondiscrimination, insurance firms that become affiliated with banks should not have to divest operations in states with anti-affiliation laws simply because of affiliation with a bank; this is true under the proposed Section 105 of the bill and should be under the new Section 4(c)(8)(H) of the new Financial Services Holding Company Act as well. Affiliation under Section 105 of the bill must also be clear and unambiguous. Acquired insurers must be able to retain operations in any state where they operated prior to affiliation with a bank. Such insurance firms must be able to expand geographically and operate any line of insurance as agent, broker, or underwriter.

The Roundtable continues to believe that banking companies should have the flexibility to offer products and services through banks and through subsidiaries of banks or bank holding companies consistent with safety and soundness considerations.

Mr. Chairman, the Roundtable greatly appreciates the commitment of you and your staff to moving the package as far as you have. However, the imbalances that remain and the potential for damaging, rather than protecting, national bank operations, particularly where they need flexibility, leads us to request your assistance in resolving these problems. Finally, a commitment from the Banking Committee leadership and the House leadership to defend a revised package would be important to the future course of HR 2520. The Roundtable will be in opposition to moving forward if changes regarding OCC and wholesale financial institutions are not made prior to the Rules Committee's consideration. Further, the Roundtable would oppose a final package if the legislative process does not produce a workable approach to insurance affiliation.

In summary, the Roundtable commits to continue working with you to ensure these issues may be resolved. The staff is fully prepared to discuss this letter and our position with you and your staff. Thank you for considering our views and for your hard work in this matter.

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