Banking Industry Flexes Its Political Muscle; a Unified Lobbying Effort Thwarts Passage of Thrift Fund Bailout

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In beating back a plan to bolster the Savings Association Insurance Fund, the banking industry demonstrated last week that it can still muster the political firepower to score big wins on Capitol Hill.

Following disappointments on Glass-Steagall reform and other legislative initiatives, the victory surprised many observers and offered fresh hope for future lobbying efforts.

The key, experts said, was that the often-divided industry managed to pull together and wage a compelling grass-roots fight. That was enough to defeat a heavyweight lineup that included the Clinton administration, House Speaker Newt Gingrich, and banking regulators.

"Anytime you can beat that kind of full court press, it's impressive," said Mark Olson, a partner in the Washington office of Ernst & Young.

Commercial banks have fought the savings fund bailout tooth and nail because it would force them to pick up $600 million in annual interest payments on thrift rescue bonds issued in the late 1980s. Last week's victory kept the plan out of the federal budget agreement, but the administration is sure to keep pushing the measure.

The American Bankers Association has been especially effective on the issue, observers say. Since the beginning of the year, ABA members nationwide have sent thousands of letters to lawmakers, urging them to block the thrift fund fix.

At the same time, 19 state banking trade groups traveled to Washington, bringing 25 or so bankers to complain to their elected officials about the bailout.

"The ABA had all their resources lined up," said former Federal Reserve Governor John LaWare, now a partner with the Secura Group. "They did a high- powered job of lobbying the issues."

Added William Seidman, former chairman of the Federal Deposit Insurance Corp.: "Given the past effectiveness of bank lobbying, it was a little surprising. One lesson is banks have got to have agreement among themselves."

Certainly, the industry overcame remarkable odds last week.

When Rep. Gingrich and House Majority Leader Richard Armey agreed to tack the thrift fund bailout onto a one-day spending bill that had to be passed April 23, thrift lobbyists believed they had a can't-fail lineup pushing the plan.

But fail it did. Just hours before Congress passed the stopgap "continuing resolution," the House Rules Committee stripped the thrift fund fix from the spending bill.

Mr. Olson points out that the victory in the Rules Committee was no accident. Remembering defeats of interstate banking bills in that committee a decade ago, the ABA paid special attention to lobbying members of the panel this time.

"That's what makes it unique," Mr. Olson said. "The Rules Committee is not an area where the industry has had great success before."

The House Rules Committee is a key panel that must approve almost all legislation before it is brought to the floor for a vote.

"Our basic strategy for many months was to make the SAIF plan as controversial as possible," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "That helped get the key players on the Rules Committee sensitized to our concern."

Convincing Rules Committee members to quash the savings association fund rescue was a classic piece of political gamesmanship, Mr. Yingling said. Republicans on the panel, who hold a 9 to 4 majority, are appointed by the Speaker and rarely challenge his pet projects.

Fortunately for banks, two members of Congress supportive of the industry sit on the panel - Rep. Deborah Pryce, R-Ohio, and Rep. …