The Way Leach Sees It
WASHINGTON -- Jim Leach will leave Congress Jan. 2 after 30 years in the House, including six as Banking Committee chairman. He was a key force in developing the Gramm-Leach-Bliley Act of 1999, an outspoken opponent of mixing banking and commerce, and a passionate supporter of the Fed.
After his midterm election loss, Rep. Leach reflected on partisanship, saying "the center has really collapsed within both parties." The Iowa Republican also lamented how few lawmakers work for "the greatest good for the greatest number." (A fuller version of this Q&A is available at www.americanbanker.com.)
Rep. Leach said he plans to join a university's faculty next year and is open to private-sector offers. Roughly 300 people in the financial services industry were scheduled to toast Rep. Leach at a reception Tuesday night.
What follows are edited excerpts of an interview conducted by American Banker reporter Stacy Kaper.
What do you hope your legacy will be?
LEACH: You hope to leave a legacy of public service -- a standard, or be part of a standard, that you can hold your head up high about. In terms of legislation I am proud of the banking modernization legislation, of legislation that created debt relief for the poorest countries in the world, legislation that caused the creation of an international AIDS trust fund, and legislation that expanded the core of the [International Monetary Fund].
If you could go back and change anything what would it be?
LEACH: The country has to be very careful about the advantageous empowerment of institutions such as GSEs [government-sponsored enterprises] and giving disproportionate regulatory advantage such as with ILCs [industrial loan companies].
One of the aspects of Gramm-Leach-Bliley was not only a competitive empowerment applied to the financial industry but an equalization of regulatory restraint with functional regulation as well as a mandate that regulators cooperate instead of compete. ... [That is] a good model for the financial services industry as a whole. And it ought to apply more to the two great maverick institutional arrangements that continue to exist, those being GSEs and ILCs.
What do you expect will happen in the next session on ILCs?
LEACH: I would expect that ILCs would be subject to compromise legislation ... probably an approach that grandfathers existing arrangements and puts new restraints on future ones.
My own view has always been that a better approach is to put all ILCs under the Bank Holding Company Act, which would have the effect of causing nonfinancial companies to have to divest banking functions and cause financial companies like investment banks to be able to maintain an ILC but to come under Federal Reserve holding company regulation, which I believe is economic common sense.
On the other hand, to move in a compromise direction is far better than not to move at all.
Do you think Congress needs to modernize the insurance industry?
LEACH: The case for that grows. I would be very surprised if in the next few Congresses there would not be an increasing momentum toward an option of a national regulatory regime -- analogous to the Comptroller of the Currency regulating aspects of national banks, versus state regulation over state banks -- within the insurance industry. ...
One of the things that insurance companies chafe at is the ability to develop new products and get them approved in all states instead of just one state. So can you develop approaches to get multistate acceptance that is more rapid than what currently exists? In addition there are lots of different compliance issues between states, and I think the more that states can move toward regulatory uniformity, the better the system will be, too. So in my view you are either going to have ... a movement toward a national regulator or toward greater state standardized practices. …