Treasury Aides See Longer Odds For Reform
WASHINGTON -- As the House Energy and Commerce Committee began work Monday on the Bush administration's banking reform proposals, senior Treasury officials sounded more pessimistic than ever about the fate of their bill.
Treasury Under Secretary Robert Glauber described the draft bill prepared by the Energy and Commerce leadership as a step backward.
His statement came on the heels of the American Bankers Association's leadership conference last week. Bankers were similarly concerned about the prospects for reform and threatened to withhold support from any bill that restricts rather than expands their powers.
Viewed as |Rollback'
"Today, with Glass-Steagall in force, banks have a better opportunity to compete than they would under [the Energy and Commerce] bill," said Mr. Glauber, the Treasury Department's No. 3 official. The measure is sponsored by Rep. John D. Dingell, D-Mich., the committee chairman and a foe of Glass-Steagall repeal; and by Rep. Edward J. Markey, D-Mass., chairman of a key subcommittee.
"This bill is simply a back" of recent liberalizations in Glass-Steagall, Mr. Glauber indicated in a briefing for reporters.
The Federal Reserve Board has interpreted the Glass-Steagall Act to permit bank affiliates to engage in limited underwriting of securities. The Dingell-Markey bill would overturn that ruling.
Few Draft Changes Expected
Mr. Markey's subcommittee on telecommunications and finance took up the measure Monday afternoon and was expected to approve the draft with little change.
Earlier in the day, another Energy and Commerce subcommittee approved, by voice vote, amendments that would prevent Citicorp and other large banks from using Delaware as a base to market insurance nationwide.
In his comments to reporters, Mr. Glauber said the Treasury Department would "have to work with Energy and Commerce to modify" the most restrictive parts of its bill. If that failed, he said, Treasury would make a similar effort on the House floor.
Veto Discussion Premature
However, asked if Treasury is prepared to recommend a veto if an undesirable package reaches President Bush's desk, he said it is too early to discuss such drastic action.
In private, senior Treasury officials sounded even more pessimistic about the prospects for its ambitious effort to overhaul the financial services industry. Asked if the administration could block the most restrictive parts of the Energy and Commerce measure, one senior Treasury official said only, "We have a shot at it."
The administration had proposed a broad-based deregulation of the financial services industry that would permit banks to affiliate with all types of financial services concerns, while allowing nonfinancial companies to own banks.
The House Banking Committee approved an omnibus bill that gave Treasury most of what it wanted, but the Senate Banking Committee dropped important parts of the Treasury proposal and added restrictions on bank insurance activities.
Bankers are concerned that the full Senate might expand the firewalls designed to safeguard banks from the potential losses of securities affiliates.
A senior Treasury official, speaking Monday on the condition that he not be named, expressed little confidence in the ability of the administration to modify the Energy and Commerce panel's bill. The banking industry, he said, would be of little lobbying help in that battle.
"Energy and Commerce has never been their strong point," he said, adding, "The test will come when we go to the floor of the House and Senate." Ultimately, the full House may be asked to choose between the different versions of bank reform proposed by the House Banking Committee and by Energy and Commerce.