Lawmakers yesterday cleared the way for final passage of groundbreaking legislation to revamp decades-old financial services law and permit banks, insurers and securities firms to more easily merge and sell everything from checking accounts to stocks, bonds and life insurance under one roof.
The bill, which has been pushed on and off for two decades, is scheduled for final House and Senate votes tomorrow, where approval by wide majorities is expected. President Clinton could sign the bill next week.
The 400-page bill contains some hidden goodies for individual companies, but lawmakers and lobbyists said that overall the bill contains remarkably few hidden favors for legislation of this size.
The bill does give Cigna Corp., a Philadelphia-based health insurer and HMO operator, special permission to apply for a thrift under current law. Under the new law, regulators at the Federal Reserve Board and the Treasury define what is and is not insurance. If they deem an HMO to be a commercial, nonfinancial enterprise, then Cigna under the new law would be barred from applying for a thrift.
Another special provision allows life insurer Jefferson-Pilot Corp. of North Carolina, which owns a profitable broadcasting unit, to continue to buy broadcast stations over 10 years, by which time it must divest the unit if in that time it has affiliated with a bank.
There are some others, but most notable are the instances where companies fought for but were refused special privileges.
Bank of America Corp. of Charlotte, the nation's largest bank, wanted a way around the law that says no bank can be home to more than 10 percent of the nation's bank deposits. Bank of America has more than 8 percent of the nation's deposits and wanted to broaden the definition of a deposit to allow it to buy a large bank in the Midwest or New England.
Wal-Mart Stores Inc. and Dillard's Inc. were beaten back in their push to be granted special rights to buy a thrift. And investment banking firm Goldman Sachs and banking company J.P. Morgan were defeated in their bid to be allowed to create wholesale banks that would carry no deposit insurance and cater to institutional investors.
The bill also reflects a final parliamentary victory for House Banking Committee Chairman Jim Leach (R-Iowa) over Senate Banking Chairman Phil Gramm (R-Tex.), even though Gramm seized much of the limelight in the final bargaining over the bill, lawmakers and lobbyists said.
Gramm, backed by Senate Majority Leader Trent Lott (R-Miss.), had fought to soften community lending and consumer privacy provisions in the bill, earning a veto threat from President Clinton and alienating many Democrats on the House and Senate Banking and Commerce committees, who felt frozen out of the process.
Leach's style, by contrast, has been to include Democrats and reach compromise language that Republicans, the industry, the White House and congressional Democrats could all support on privacy, community investment requirements for banks and other divisive issues.
The final bill was in theory hammered out from two versions of a bank bill passed by the House and Senate earlier this year. But on most major issues, including those over which the White House threatened a veto, the final bill is far closer to the original House version than the Senate one, which Gramm and his staff crafted virtually on their own.
Gramm's bill had no privacy provisions, while the final product includes most of the House-passed provisions giving consumers some control over how banks and other companies use private financial information. Gramm's bill would not have allowed large national banks to engage in many of the newly permitted financial activities through a subsidiary, while the final bill is very close to the House version, which allowed banks to use subsidiaries.
Gramm's bill froze the Securities and Exchange Commission out of overseeing securities activities in banks, while the final bill allows it some oversight, as did the House bill.
In one instance, Gramm preferred language in the House version of the bill permitting companies that own a single thrift to sell it to a nonfinancial company. Leach, however, favored the Senate version's language, which prevents existing thrifts from being sold to a nonfinancial company; that language prevailed in the final bill.
And Gramm, who dislikes the 1977 Community Reinvestment Act, or CRA, which requires banks to lend to underserved customers, wrote the Senate version with no requirement that a bank have a satisfactory CRA rating from regulators before being allowed to engage in new activities.
The final version of the bill, like the House version, has such a provision, as the White House insisted.
The major provision that Gramm won was to require community groups to publicly disclose the money they receive from banks under CRA agreements. Some lobbyists have joked that the only other key wins for Gramm were to get the bill named S.900--the name of the Senate version--rather than the House version name of HR10, and to have his name listed first, before Leach's, in the official title of the bill.
"We're not in competition with the House," said Gramm's spokeswoman, Christie Harlan. "The senator's position has always been that his goals with the legislation have been achieved. In that regard, he's a victor."
Lawmakers were unable to schedule a final vote until late yesterday because of one final squabble between Gramm and the White House over how to phrase the provision concerning public disclosure of CRA agreements.
Sen. Christopher Dodd (D-Conn.), whose constituents include many major insurance firms pushing the bill, brokered a deal Monday night with Gramm under which the two will insert into the Congressional Record a statement that clarifies that the intent of the requirement is not to burden banks.