Despite lawmakers' promises, it may be impossible to revive the financial reform bill that nearly passed the House this year.
By the time Congress reconvenes Jan. 27, very different legislation may be needed.
"The market is going to change dramatically while we are out," said Rep. Richard Baker, R-La. "I want to start over with a fresh look, and I don't feel bound by the negotiations of recent weeks."
"Mergers and innovative regulatory decisions will make the pending bills seem very distant from reality," agreed Karen Shaw Petrou, president of ISD/Shaw Inc. "That will make it very hard for lawmakers to pick up where they left off."
Over the next few months, action by Congress could become less important as regulators let banks enter new businesses and allow large insurance and securities firms to charter federal thrifts.
First in a recent wave of insurance companies seeking thrift charters, Principal Group got the nod from Office of Thrift Supervision late Friday. Travelers Group is expected to get its thrift charter as early as this week.
Meanwhile the Office of the Comptroller of the Currency is mulling requests from NationsBank Corp. and Zions Bancorp., Salt Lake City, to develop real estate and underwrite municipal revenue bonds in direct subsidiaries. The legislation under consideration in the House would have required new businesses to be housed in holding company units.
"Most of the applications pending are going to create a market that is more intertwined and convoluted," Rep. Baker said.
A Supreme Court decision on federal credit union membership, which could occur as early as Nov. 20, also could complicate efforts to pass legislation.
If the court prohibits occupation-based credit unions from accepting members from more than one company, Congress could include a remedy in financial modernization legislation-a move sure to fuel opposition from banks.
"We would be obligated to provide them (credit unions) with relief," said Rep. Bruce Vento, D-Minn. "Just as banks need modernization, credit unions can't be held to outdated membership rules."
Finally, the chance that this year's work can be resuscitated is also hurt by way talks between the Banking and Commerce committees broke down. Hard feelings among senior lawmakers and their staffs may make them reluctant to resume negotiations.
Financial reform passed House Banking on June 20. House Commerce adopted another version of the bill on Oct. 30. While House leaders pressed the two committees to come up with a consensus bill, no middle ground could be found on bank operating subsidiaries, holding company regulation, or restrictions on banks' securities and insurance operations.
Fed up, lawmakers are already floating new plans.
Rep. David Dreier, a member of the powerful Rules Committee, has introduced a bare-bones modernization bill that would allow banks to affiliate with …