Financial service giants pump up for next turf battle in Congress
Three giants of the financial services industry - banking, securities, and insurance - are squaring off for the next major battle over the laws that separate them. As these groups struggle to expand their support in Congress, consumers have seized the opportunity, winning a voice in the unfolding legislative debate. To the chagrin of insurers and brokerage firms, a bill giving commercial banks the right to operate securities affiliates and sell certain insurance policies passed the Senate Banking Committee earlier this month and is headed for a floor vote this week.
Although the Senate seems eager to give bankers a green light into the securities market, and a yellow into insurance, the House has drafted a more cautious measure that would leave most of the barriers between the three in place. Bankers argue that such blockades are anti-competitive and anti-consumer, while brokerage houses and insurance firms insist that banks already dominate financial services, and easing restrictions would give them an unfair edge.
The stock market's plunge last October only fed opponents' concerns about letting banks enter the higher-risk securities arena.
But the Senate compromise, drafted by Sen. William Proxmire (D) of Wisconsin, reflects the strong support that exists for modernizing banking regulation and removing most of the Glass-Steagall restrictions that have kept banks out of securities underwriting since the depression.
Although several senators have reserved the right to amend Mr. Proxmire's compromise on the floor, the measure is expected to pass without much ado, since ``support is fairly complete,'' a Banking Committee aide says. As it is, Proxmire dropped several provisions in order to achieve consensus and included another to keep banks out of one of the more profitable and controversial underwriting areas: corporate equities.
``We would like to go further and faster in this area,'' says Edward Yingling, executive director for government relations at the American Bankers Association. ``But we're satisfied that this is the best we can probably do in the Senate.'' And the measure does require Congress to vote on the corporate equities issue in April 1991, and if it gives banks the go-ahead, brokerages would also be allowed to own or operate banks.