Magazine article American Banker

Changes Due from House Panel Would Threaten Reform Bill

Magazine article American Banker

Changes Due from House Panel Would Threaten Reform Bill

Article excerpt


Broad changes expected today from a House subcommittee would certainly turn the industry and the White House against the financial reform bill.

The House Commerce subcommittee on finance is expected to scale back powers for direct subsidiaries of banks, force more bank securities activities into holding company affiliates, and tighten restrictions on bank sales of insurance.

Lawmakers are also weighing tough consumer privacy protections that would force financial companies to lobby against the legislation.

"Based on those changes, we would oppose it," said Edward L. Yingling, chief lobbyist for the American Bankers Association. "I think that would be a consensus within the industry."

The banking, securities, and insurance industries have rallied around the compromise bill adopted March 11 by the House Banking Committee on a 51-to-8 vote. (Most financial firms also support the different version that the Senate adopted May 6 on a 54-to-44 vote.)

But the Commerce subcommittee is expected to reverse a deal House Banking brokered on bank subsidiaries. While the original bill would let banks underwrite securities and do merchant banking directly, House Commerce is expected to force these activities into holding company units.

President Clinton has threatened to veto any legislation curbing bank subsidiary powers.

On securities issues, the subcommittee is expected to force banks to move some derivative products sales and most private placement services to holding company units. The Securities and Exchange Commission would get more authority to define which new financial products are classified as securities for regulatory purposes.

On insurance sales, the subcommittee may further trim the legal bias toward federal regulators in court disputes with state insurance commissioners. …

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