Magazine article American Banker

Drive to Merge Charters Faces Rocky Road

Magazine article American Banker

Drive to Merge Charters Faces Rocky Road

Article excerpt

By voting to capitalize the Savings Association Insurance Fund, Congress set the stage for the next legislative battle - melding the bank and thrift charters.

The thrift fund rescue, signed into law Monday by President Clinton, calls for the insurance funds to be merged by Jan. 1, 1999, but only if the industry charters are combined.

The Clinton administration will push lawmakers to take up the issue.

"We expect that to be our first order of business in the next Congress," said Treasury Under Secretary John D. Hawke Jr. "We've got to find a way to eliminate the thrift charter so the funds can merge."

But Congress may go further than that.

Key lawmakers on the House and Senate Banking committees plan to tackle charter reform as part of a larger "financial modernization" package.

The broader bill would repeal the Glass-Steagall Act, expanding banks' securities underwriting powers, and could permit affiliations between banks and other financial firms.

"We're going to find areas where we have agreement and build on it," Senate Banking Committee Chairman Alfonse M. D'Amato said Tuesday. "Next year you will see some financial reform legislation.

"There's been prattle about it for years, but we're going to get it done."

House Banking Committee Chairman Jim Leach said on the House floor Saturday that he will revive his financial modernization legislation. The Iowa Republican also said he wants to require state licenses for bank employees when they sell insurance.

"These issues are not going away and will be addressed in the next session of the Congress," Rep. Leach said.

In an interview Thursday, Sen. Richard Shelby, R-Ala., said he backs broad financial reform. He plans to resurrect his regulatory relief bill, and this time he will try to eliminate the Community Reinvestment Act.

"We must make sure government doesn't stand in way as technology and markets develop," Sen. Shelby said.

Chief lobbyist Edward L. Yingling said the American Bankers Association is optimistic about winning next year. Though the industry had to accept a share of the thrift fund fix, banks were able to fight off insurance restrictions and win modest regulatory relief.

"All that is a big plus for getting a bill that has broad powers," Mr. Yingling said.

But Treasury's Mr. Hawke said charter merger must come first. "Merging the charters and the insurance funds is really a transitional effort toward financial modernization," he said.

If the administration gets its way, the thrift industry is likely to split, said lobbyist Ken McLean.

Many thrifts will oppose legislation that curbs their powers or changes their ownership structure. But the big thrifts are expected to lobby for a common charter even if that means taking the existing commercial bank charter. …

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