Senate opponents of a deregulation bill that would give banks new powers and promote regional compacts led a lengthy floor debate yesterday designed to kill the controversial legislation.
Sen. Daniel Patrick Moynihan (D-N.Y.) spoke for 70 minutes in order to prevent the legislation from coming to a vote. He was followed by Sen. Donald W. Riegle Jr. (D-Mich.). Moynihan and Sen. Alfonse M. D'Amato (R-N.Y.) are scheduled to speak again today, but Majority Leader Howard H. Baker Jr. (R-Tenn.) is reported to have a cloture petition with enough signatures to cut off debate.
These tactics put in doubt the fate of the comprehensive bill offered by Banking Committee Chairman Jake Garn (R-Utah) and may well doom the chances of further banking deregulation in this session of Congress. Garn repeated yesterday that he would prefer to have no bill at all now rather than accept a substitute like the House version that halts the spread of so-called nonbank banks.
Garn's bill would allow bank and savings institution holding companies to underwrite and deal in mortgage-backed securities, municipal revenue bonds and commercial paper. It also encourages the development of regional banking.
Over the past few months, opposition to further deregulation has been growing around the country in reaction to the near collapse of Continental Illinois National Bank and continued high interest rates.
Money center banks in New York, especially Citicorp and Chase Manhattan, oppose the regional provision because it gives a green light to banks in areas like New England to arrange interstate mergers among themselves to the exclusion of New York.
The other main objection to the Garn bill is its expansion of bank powers. A number of senators, whose constituents include small and medium size banks, oppose those provisions.
The New York banks oppose closing the nonbank-bank loophole because it would deprive them of an easy way to get around laws against interstate banking. They, like Garn, would prefer no bill at all.
However, there is still sentiment among legislators for passing such a bill out of fear that without a ban the Comptroller of the Currency will approve pending applications of hundreds of nonbank banks, thus creating a shadow banking system never intended by Congress.