Newspaper article THE JOURNAL RECORD

Banking Reform Overhaul a Victim of Election, Split

Newspaper article THE JOURNAL RECORD

Banking Reform Overhaul a Victim of Election, Split

Article excerpt

WASHINGTON -- Congressional efforts to overhaul federal banking laws and grant banks access to lucrative new markets appear to be dying, the victim of a election-year legislative calendar and a split within the banking community over whether the proposed bill goes far enough. At stake are tens of billions of dollars in new bank business.

Legislation before the House of Representatives would overhaul the depression-era laws that established strict barriers to divide the banking, securities and insurance industries. In doing so, the bill would expand the power of banks to sell securities and insurance products.

Some of the nation's largest banks, including J.P. Morgan Co., NationsBank Corp., and Bankers Trust New York Corp., support the bill because it would let them underwrite additional securities.However, most retail banks, including Barnett Banks Inc. in Florida and Summit Bancorp. of N.J., don't think the bill goes far enough to protect their right to offer insurance products. Efforts to expand those provisions, however, have run into stiff opposition from insurance agents battling to protect their business.

Barring a major change of heart, there is almost no prospect that the bill can become law this year. The House calendar is crowded with spending bills; the Senate has yet to hold hearings; and the White House has major objections.

"There's too much fish to fry now for Congress to become embroiled in a financial war of three major industries," said Abe Bettinger, a partner in the New York-based bank consulting firm of Bettinger & Leach.

The lack of congressional action has left the banks on their own, and many are already lobbying regulators to give them some of the powers that the legislation would have bestowed, according to analysts who track bank stocks.

The main stumbling block is the demand by the vast majority of banks -- retail banks that cater to consumers -- for broad new powers to sell lucrative insurance products. Bankers say they are in a great position to sell insurance because they could offer consumers one- stop shopping for banking and insurance needs.

A loose but powerful lobbying group, led by 24 state banking groups and the Independent Bankers Association of America, is pushing Congress to take its cue from a recent Supreme Court decision, Barnett Bank of Marion County v. …

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