Broad banking legislation dealing with all aspects of financial-institution ownership and geographical limitations may be on the agenda of the next Congress, according to Sen. Jake Garn (R-Utah), who is slated to become chairman of the Banking, Housing and Urban Affairs Committee in January.
A major goal of such legislation would be to prevent "a few large banking institutions in this country from dominating the industry," Garn said in an interview.
The GOP lawmaker admitted he was as surprised as the pollsters by last week's Republican landslide that has propelled him into a major committee chairmanship. He emphasized his determination to help small financial institutions survive and said he doesn't want the character of banks or savings and loan associations to change so drastically that they would become identical in services to the public.
Garn also had a warning for the new Depository Institutions Deregulation Committee (DIDC), which was established earlier this year and given the task of phasing out controls on interest rates paid for savings deposits over a six-year period.
Many savings and loan industry officials have complained bitterly that the DIDC, headed by Federal Reserve Board Chairman Paul Volcker and composed of representatives of various agencies that oversee financial institutions, has leaned toward the interests of big banks in its initial decisions about allowable interest rates.
"After all the struggle" to secure passage of massive banking legislation earlier this year which permits interest-bearing checking accounts and mandates the phasing out of interest-rate ceilings, "I did not expect DIDC to do what it is doing . . . they are not following our intent of gradual change, a subject of considerable dismay that needs to be addressed," Garn stated.
He ruled out new legislation to abolish the DIDC as "too drastic," but indicated that he would press for legislation that is "more specific" about how swiftly the interest-rate committee can move, possibly through amemdments to this year's Depository Institutions Deregulation and Monetary Control Act.
S&Ls have voiced objections to DIDC orders eroding the difference between rates paid by banks and S&Ls for money market certificates and in setting above-market-rate ceilings for small savers certificates, forcing the thrifts to pay higher rates to attract funds.
Garn who will replace Sen. William Proxmire (D-Wis.) when the Republicans assume control of the new Senate, has been described in recent years as one of the banking industry's friends in Congress. But a rapidly changing competitive environment for all financial institutions, dictated in part by the legislation already passed, is raising new questions about ownership concentration, acquisitions and branching that will become issues of vital importance in the 1980s.
In contrast to some bank industry leaders' predictions of nationwide branching coupled with an extensive wave of mergers and consolidation among all types of lending institutions, Garn emphasized his support for maintenance of a diversified financial industry with separate federal regulatory agencies to look after each category.
Garn said a variety of complex but interrelated issues faces his committee, and he said it would be impossible to act on one problem without facing all of them.