Finance Reform Will Pick Up Again Next Year
House Banking Committee chairman James Leach (R-Iowa) said it was likely the House will act on a financial services modernization bill early this year. The Financial Services Competitiveness Act of 1997 (HR 10) would repeal the prohibitions in the Banking Act of 1933, commonly known as the Glass-Steagall act, against affiliations of commercial banks with investment banks and securities firms.
Leach told members attending the American Institute of CPAs National Conference on Banks and Savings Institutions in Washington, D.C., that he had wanted the House to act on the reform bill before it adjourned in November 1997, but the House banking and commerce committees could not agree on the provisions dealing with the powers of bank operating subsidiaries, rules for bank securities and insurance operations and holding company supervision. The two committees did, however, agree to restructure the finances of the Federal Home Loan banks and allow system members to use advances for small business, economic development and agricultural loans.
Leach said a number of other issues had held up the legislation, including determining what federal agency would best serve as the primary regulator of the new financial institutions. He also said there were huge differences between the industry groups involved. "Should banks enter into the insurance industry? Should the insurance industry be allowed to offer banking? Now is the time to move in these directions," said Leach.
Nonetheless, Leach reaffirmed his commitment to repeal the Glass-Steagall act this year. "This law does not serve the American public, particularly in small towns, because business there is tied to banks—not investment banks. Bringing investment services to banks would attract more customers to banks and would be very helpful to the economy," Leach said.
A similar bill in the Senate, the Depository Institution Affiliation
Act, introduced by Senator Alfonse M. D'Amato (R-N.Y.) in 1997, also
would eliminate restrictions on affiliations between banks and other
financial and nonfinancial companies.