Magazine article American Banker

House Panel Seen Retreating on Bank Insurance Limits

Magazine article American Banker

House Panel Seen Retreating on Bank Insurance Limits

Article excerpt

The House Commerce Committee is expected to drop from its financial modernization bill a controversial plan to boost the power of states over bank insurance sales.

Despite lawmakers' change of heart, however, banking lobbyists said it is still too early to say whether the industry will support the broad legislative package, which allows banks to merge with insurance, securities, and nonfinancial firms. The industry has lobbied intensely during the past two weeks to fight off any new insurance restrictions.

The committee's surprise reversal indicates that the panel is still struggling to complete its proposal and is unlikely to be ready for a vote on the legislation Wednesday as scheduled. Staffers for the committee say Chairman Thomas Bliley, R-Va., is determined to craft a plan that will gain broad industry support to avoid a bitter legislative fight.

Other important changes to the bill are also under discussion, sources said. For instance, the commerce panel also may weaken a measure approved by the House Banking Committee in June that would let banks merge with nonfinancial firms. One possible proposal would scale back plans to let banks earn up to 15% of their revenues from nonfinancial business. Plans to let nonfinancial firms acquire banks may be dropped altogether.

The commerce panel's plan also may eliminate a banking committee provision that would let banks sell municipal revenue bonds.

The commerce panel's latest plan came as a shock to insurance industry officials because preliminary drafts unveiled late last month had included many of the provisions they wanted.

"We're now getting close to a dream bill for bankers on the insurance provisions," said Gary E. Hughes, general counsel for the American Council of Life Insurance. "If this stands, we have absolutely no choice but to oppose this bill. …

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