The staff of the Senate Banking Committee was planning to work through the weekend to try to reach a compromise on a bill to repeal the 55-year-old law that separates commercial banking from securities underwriting, congressional aides and lobbyists said Friday.
The committee hopes to reach an agreement early this week so that it can start Thursday to draft and vote on a final version of the bill and send it to the full Senate.
The proposed bill was introduced last fall by Senate Banking Committee Chairman William Proxmire (D-Wis.) and Sen. Jake Garn (R-Utah), the ranking minority member of the committee. It would repeal the Glass-Steagall Act, which was passed during the Depression on the theory that the stock market crash of 1929 was caused in part by abuses in firms that engaged in commercial banking and in the buying and selling of stocks.
The bill is a response to the deregulation of financial services that has taken place in the market because of loopholes in federal law. Congress, hoping to regain control over the way banks and securities firms do business, last summer temporarily barred regulators from giving banks additional authority to sell securities.
The ban expires March 1, when Congress had planned to have passed a comprehensive banking law that defined how far the banking, securities and insurance industries should be allowed to mix.
Congress will miss that deadline, congressional aides and lobbyists said. The best the Senate can hope to do is pass a new bill within the next few weeks. But the Senate Banking Committee then will have to wrestle with the House Banking Committee, whose chairman, Rep. Fernand J. St Germain, is sympathetic to the securities, insurance and savings and loan industries that want to keep bankers out of their business.
Late Friday Senate staffers were trying to arrive at a compromise that would:
Phase in the repeal of Glass-Steagall, with complete repeal in 1990.
Provide for a "two-way street," so that when banks have a green light to buy and sell securities, securities companies would be given full power to sell a full range of banking products.
Give the Securities and Exchange Commission regulatory oversight of all new securities powers that banks would get and over most of the limited securities powers banks now have.
Give regulators greater authority to make banks stop unsafe practices.
Force financial institutions to provide consumers with easy-to-read information about mutual funds and savings accounts.