In a July 18 memorandum to House Speaker Newt Gingrich, Banking Committee Chairman Jim Leach argued that two insurance amendments - one restricting banks and the other permitting expanded affiliations with insurers - should be either accepted or rejected as a single package.

Both amendments were added to a pending regulatory relief bill, HR 1858, and Rep. Leach wants the House Rules Committee, which sets the terms for floor debate, to package the two. Excerpts from the memo follow.

There are a number of approaches that might be taken to potential floor consideration of these bills, but given the significance and high emotion that surrounds the insurance question and the problems involved in making even the slightest change to language, it is my view that the political situation probably calls for an "all or nothing" approach. Such an approach would involve the Rules Committee permitting a single insurance amendment to be made in order that strikes both the insurance provisions currently contained in HR 1858 (sections 211 and 240) if it passes, and retains both provisions if it fails.

A number of members have made it clear that they do not want to be placed in the awkward position of choosing between industries. Other than disallowing any amendment on insurance questions (which is a credible option), this is the only approach I know of which allows members a voice on the floor, but which at the same time doesn't totally pit industry groups against each other since the groups have mixed feelings on the totality of the insurance language currently contained in HR 1858.

What you have are disputes between and within industries, with insurance agents lining up with small banks on some issues and against on others and with a banking industry divided on whether it likes restraints on the Comptroller (such as small state-chartered banks), or opposes them as most of the big national banks do.

The "all or nothing" approach has appeal on the "all" side in that each of the major industry groups will be divided and on the "nothing" side in that silence from a congressional perspective represents neutrality on the insurance question. Here, on the Comptroller question, it must be borne in mind that the beef of the insurance agents is, after all, with the Clinton administration, not the Congress. Nonetheless, the agents understandably see these legislative vehicles as their opportunity to restrain an unfriendly regulator, but by taking the tack they did of first supporting an insurance neutral approach to Glass-Steagall, then announcing opposition when it was sent over to the Commerce Committee, they inevitably precipitated reconsideration of the affiliations issue which, as I warned them would be the likely case, produced a less than happy result from their perspective when the Banking Committee revisited the issue, despite my personal opposition to the Baker amendment.

While I have not spoken recently to (House Commerce Committee Chairman Thomas) Bliley, it is my understanding that members of the Commerce Committee are generally sympathetic to the affiliations approach and are more mixed on the prospect of placing restraints on the comptroller. Likewise, my impression is that (House Rules Committee Chairman) Gerald Solomon favors curtailment of the comptroller's powers and is also skeptical of allowing affiliations.

In an "all or nothing" scenario, I lean to favoring "nothing," but I would maintain support for the bill if the more comprehensive approach is adopted.

To reiterate, the leadership has the option to submit the insurance issue to open floor consideration or to impose a leadership decision on the membership. My instinct is to let the floor decide on an "all or nothing" basis, but I would stress again that there are many members who have antipathy to voting on insurance questions in an environment in which industry groups are divided and increasingly ambivalent about the framework approach and in which broad public support may not have coalesced.

Efforts to reform Glass-Steagall historically foundered on the insurance issue and this is one of the reasons I worked hard to keep it out of the committee bill. If the decision is made to address the insurance issue in the context of these banking bills, the question remains whether to deal with it in Glass-Steagall reform, regulatory relief, or in a combined bill.

As you know, the leadership agreement contained a tentative decision to combine the bills at the Rules Committee - leaving open the option of a possible reassessment of this approach. At this point, my recommendation would be to deal with the bills separately and in tandem without integrating them, leaving open that prospect in a conference environment.

If they are dealt with as separate bills, it should be understood that Glass-Steagall holds a better chance of presidential signature that the burden relief bill. But prospect of passage of Glass-Steagall reform diminishes if regulatory reform is integrated with the bill or any constraint on the comptroller's powers is prescribed.

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