The controversial "safe banking" bill was renamed "the institute regulatory bill of 1978" during the first day of markup yesterday before the House Banking, Currency and Urban Affairs Committee.
"I don't know any unsafe banks in Kentucky", said Rep. Carroll Hubbard Jr. (D.-Ky.), who added that bankers in his district were "infuriated" by what they viewed as the legislation's pejorative original name.
Another legislator noted a recent Gallup Poll that showed Americans held bankers in higher esteem than politicians. The only committee member to stand by the safe banking name in fact, was its author, Rep. Fernand St. German (D.-R.I.).
But St. German suffered a more serious setback than a simple name change.
The Clayton Act of 1914 specifically prohibited competing businesses from having common directors on their boards, but the courts so far have ruled that banks are exempt from the prohibition.
During the subcommittee hearings, major banks and insurance companies lobbied heavily to keep this exemption from the Clayton Act in the proposed law. There are numerous examples of common directors on the boards of banks and insurance firms, the country's two leading financial institutions.
St. Germain's bill, as originally drawn up, tried to include these institutions under the Clayton Act ban. But the subcommittee refused to go along.
Yesterday, he introduced another amendment that would have made the Clayton Act apply to banks. He lost again, as the full committee defeated his amendment by a vote of 23 to 16.
The committee did approve sections of the bill that expand the prohibition of interlocking directors between depository institutions. For example, the legislation would bar such interlocks among banks, savings and loan institutions, credit unions, and mutual savings banks.
Leading the attack against the St. Germain amendment on bank interlocks was Rep. Garry Brown (R.Mich.), who also led the fight on the same issue during subcommittee hearings.
Yesterday, St. Germain introduced a letter from Federal Reserve Chairman G. William Miller. Miller said that the board agreed that banks should not be exempted from provisions of the Clayton Act prohibiting interlocking boards of directors.
St. Germain has indicated that he will introduce his amendment again when the legislation reaches the House floor.
On a related issue, Brown and St. Germain had clashed during subcommittee hearings over the Justice Deterlocks. St. Germain's bill gave Justice concurrent jurisdiction with bank regulators.
A Brown amendment to the original legislation provided that the Justice Department could bring suit against bank interlocks only when a case is referred to it by a regulatory agency.
Yesterday, arguing that bank regulators have shown reluctance to refer cases, St. Germain attempted to get the Brown amendment stricken, but he was defeated on this issue, also.
The committee did vote yesterday on a title to the St. Germain bill that expands federal supervision over state banks. But one committee member served notice he may revive the issue at a later time.
Another title that was passed gives bank regulators expanded subpoena power to carry out bank exmainations and investigations.