Merger Gives Jump-Start to Stalled Banking Bill
Leslie Wayne N. Y. Times News Service, THE JOURNAL RECORD
In a single day, with a single bold merger, pending legislation in Congress to sweep away Depression-era restrictions on the financial- services industry has been given a sudden, and unexpected, new chance of passage. Just a week ago the measure, the 11th attempt in two decades to update the United States' banking laws, was written off as dead.
But the announcement this week of the giant merger of Citicorp and Travelers' Group, not only altered the financial landscape of banking, but it also changed the political landscape in Washington. Now the measure, long a political football in Congress, has a new chance at life when the House takes it up again in early May.
In part, this is because Congress does not want to appear as though it is falling far behind a marketplace that has consistently come up with creative ways to sidestep Congress and federal banking laws with new financial combinations -- banks with securities affiliates, securities firms that offer insurance -- that challenge federal laws. But the Travelers-Citicorp union pushes harder at the edges of federal regulations, and that is why this deal has hit Congress with such force. It is bigger than earlier financial-services deals and the proposed new company cuts across so many lines of regulated business -- insurance, investment banking, commercial banking, asset management, credit cards and retail brokerage. Besides, if Congress does not act, most of the deal can go forward anyway by exploiting existing laws, an action that could encourage others to follow. Within 24 hours of the deal's announcement, lobbyists for insurance, banks and Wall Street were huddling with congressional banking committee staffers to fine-tune the measure that would update the 1933 Glass-Steagall Act separating commercial banking from Wall Street and insurance, to make it politically acceptable to more members of Congress. Sen. Alfonse D'Amato, R-N.Y., chairman of the Senate Banking Committee, said he was willing to speed up his timetable for Senate consideration of the measure, and would take up the measure this spring, if it passed the House. D'Amato has, in general, supported updating Glass-Steagall, but had previously indicated that he did not want the Senate to take up this bill until after the fall elections. D'Amato also called on Treasury Secretary Robert Rubin on Wednesday to urge that the administration drop its opposition to the measure, because it gave more power over banking to the Federal Reserve Board. "This merger creates new impetus that was otherwise lacking in Congress to move forward," D'Amato said. …