On the eve of the Senate Banking Committee's vote on financial services reform legislation, a pro-bank compromise emerged Wednesday that committee members are seriously considering, lobbyists said.
According to an eight-point plan circulating on Capitol Hill, the committee would revise the House bill by incorporating protections of bank sales of insurance that negotiators from the banking and insurance industries hammered out in New York last week.
The committee is mulling how to settle a disagreement between the negotiators over whether these protections should apply to existing state laws. Options include delaying a provision that would bar state laws that discriminate against banks selling insurance, or restoring special legal authority that helps federal regulators fight such laws in court.
The eight-point plan also would prevent the transfer of ownership of unitary thrifts to commercial companies, eliminate a House requirement that banks provide low-cost checking accounts, and provide community banks broader access to the Federal Home Loan Bank System.
The plan's remaining provisions would make it a federal crime to trick a bank into divulging private customer data, require megamergers of banks with nonbanks to obtain federal regulatory approval, and make technical changes to securities provisions.
The American Bankers Association would consider such a package "a very positive development," chief lobbyist Edward L. Yingling said.
But a Clinton administration veto threat lingers if the bill does not grant full financial powers to direct operating subsidiaries of banks.
Still, sources said the Treasury Department was reviewing a compromise that would limit the size of a bank's operating subsidiaries, possibly at 25% of total assets. That solution could become moot, however, if bank subsidiaries are barred from underwriting securities and insurance or from providing merchant banking services.
Besides expected amendments on operating subsidiaries, more proposals to protect consumer privacy are also possible. Details were sketchy, but they might prevent a bank affiliated with an insurance company from using a customer's health records when evaluating loan applications, said Samuel J. Baptista, president of the Financial Services Council.
Sen. Chuck Hagel, R-Neb., has added investment limits to his Federal Home Loan bank plan to overcome opposition from the Treasury and Sen. Paul S. Sarbanes, the committee's ranking Democrat. Whether Senate Banking will adopt any Home Loan bank changes remains unclear.
Supporters boldly predicted Wednesday that the committee would approve the financial reform legislation today by a wide margin. At a press conference, securities and insurance industry lobbyists urged the full Senate to approve the legislation this year. Otherwise, the new Congress would have to start over in January.
"There is no reason for delay," Steve Judge, chief lobbyist for the Securities Industry Association, told reporters Wednesday. "There is no benefit that's going to be achieved either for consumers or the industries .... We have a broad consensus over most of the issues in this bill."