Question: Name three good reasons why Congress may finally move to repeal the Glass-Steagall Act. Answer: Alfonse D'Amato, Jim Leach and Bill Clinton.
Here we have the chairman of the Senate Banking Committee, the chairman of the House Banking Committee and the president of the United States--three men who do not always find common agreement--agreeing today that G]assSteagall must go. In addition, all three federal banking regulators have added their voices to the chorus in support of Glass-Steagall repeal.
It's true that the details of the various legislative proposals differ, and in some cases these differences are significant. No one argues that. But the point is that the leadership of both banking committees, the federal regulators and the Administration want to move financial-service modernization forward. And the best first step is to rid the country of one of the most confounding and frustrating of the banking laws enacted in the 1930's.
Glass-Steagall sought to separate commercial and investment banking forever. But beginning shortly after the Act was passed, and continuing until today, more thoughtful observers have come to the conclusion that Congress went too far. That conclusion seems even more valid today given the dramatic changes that have occurred in the delivery of financial services and the ease with which new rivals enter our business. As a result of the growing consensus over Glass-Steagall, our industry today has the best chance yet to set things straight.
Most bankers see repeal of GlassSteagall as a way to improve competitive opportunities for their institutions. What about smaller community banks that have found it harder to make a link between themselves and the securities business? What should they make of this debate?
ABA's market-share study shows clearly that banks have been able to remain competitive over the past two decades only by offsetting their losses in traditional lines of business with a growing role in nontraditional services. These include pension- and mutual funds-management, loan origination and servicing, annuities and mutual-fund sales, and data processing. Certainly the huge growth in banks' mutual fund business reflects this growing awareness by bankers that the future lies somewhere beyond traditional lending and deposit-taking. To ignore the potential opportunities is to put progress on hold for ourselves and our customers. There's little doubt that in the future, traditional banking will hold a smaller proportion of the economy's financial assets. …