Heinz Discusses Banking, Securities, and Fairness; Let Each Industry Have Its Own Turf, He Says
Kahn, Ephraim, American Banker
WASHINGTON -- Sen. John Heinz thinks he is getting shortchanged by bankers. The Pennsylvania Republican -- a key member of the Senate Banking Committee -- often doesn't agree with a banking industry that largely views him as a partisan of the securities industry.
True, it was Sen. Heinz who in 1982 caused a major setback for committee chairman Jake Garn and the banks when he successfully blocked expanded securities powers for the industry.
And in an interview last week, as the Senate nears a vote on a major banking biil be again voiced his "strongest dissent" to proposals to allow banks and bank holding companies to engage in securities activities not presently permitted. In fact, he finds it "alarming that the Congress would seriously consider at this time undermining the Glass-Steagall Act."
But while Sen. Heinz is expected to be a major player in the debate over expanded powers, he pointed out in the interview what he has been doing for banks. He cites his support in 1982 for the proposal that created the money market deposit account and the Super NOW account. And this year he is proposing that banks be paid interest on the reserves they must hold on these accounts.
Sen. Heinz, 45, an affable and articulate scion of the founder of the H.J. Heinz Co., famous for its catsup, also stressed that his major goal is fairness. To his mind, fairness requires that the securities industry get out of banking and that banks be kept of the securities industry.
He said he believes that Congress feels "less favorable today" toward conferring new powers on banks than it was eight months ago. It's not just a matter of the well-known problems of foreign lending and the troubles of Continental Illinois, he said. It is a belief that "the quality of bank loan portfolios has not improved relative to the strength of the company." Indeed, he adds, loan quality is perceived to have worsened.
It can be argued, he says, that "banks have been too aggressive in looking for deposits, that they have paid too much for deposits, and that banks are part of the reason interest rates are high, simply because they are trying to grow in nonconventional ways."
But he balances these views with the position that as long as we ask banks to engage in commercial loans and take deposits, "We should get Sears and other similar nonbank competitors out of their business."
Sen. Heinz qualifies his opposition to bank securities powers by adding the words "at this time." He also says that banks could continue in the business of offering customers discount brokerage services, "as long as it's not combined with giving advice."
After serving in the House since November 1971, Sen. Heinz won election to the Senate in 1976, when his campaign spent what at the time was a record $3 million. He was reelected to the Senate in 1982 with 60% of the vote, the largest total for any statewide candidate in Pennsylvania in fifty years.
In the wide-ranging interview, Sen. Heinz also commented that:
* Chairman Garn's pending banking bill (S. 2851) "has always been aimed at being pro-big bank." He thinks that even Sen. Garn "would be the first to admit there is no possibility of passing the real estate and insurance brokerage" provisions that would really help small banks. The new powers in the bill, he points out, "are principally opportunities for the largest banks."
* Proposals for banks to issue mortgage-backed securities and commercial paper would put banks at a new label risk. But, he adds, these Garn bill provisions are "both unlikely to survive the Senate floor, and certainly not the conference" if one is needed to iron out differences between the bank powers bills that may pass the Senate and the House. But Sen. Heinz said the provision enabling banks to underwrite and deal in municipal revenue bonds may be written into law.
* It is important to provide a federal framework for regional banking compacts. …