Banking bill falters in House
GOP overcome by defections, resistance from Democrats
ASSOCIATED PRESS
WASHINGTON, March 31 — House Republican leaders, overcome by GOP defections and resistance from Democrats, abruptly withdrew an effort Tuesday to disolve half-century-old legal barriers between banks, stock brokers and insurance companies.

The banking industry had mounted an intensive campaign against the sweeping deregulatory measure.

       THE MOVE was a blow for GOP leaders, who had thrown their prestige behind the effort to eliminate the Depression-era barriers by piggy-backing the change onto a more politically popular bill sought by credit unions. The bill also would have allowed mergers between banks and industrial or commercial companies.
       The maneuver’s failure after less than two hours of debate was the latest setback in a 20-year effort to let banks, securities firms and insurance companies get into one another’s businesses.
       The banking industry had mounted an intensive campaign against the sweeping deregulatory measure. House Speaker Newt Gingrich indicated it was possible that the credit union bill, which would overturn a Supreme Court ruling restricting credit unions’ customer base, could be voted on separately Wednesday.
       “Clearly, combining the two bills together is something that our members weren’t comfortable with,” said Rep. John Boehner of Ohio, one of the Republican leaders. “It’s clear also ... that they need more time to really understand the issues.” in the financial overhaul legislation.
       He suggested the House might take up the legislation when lawmakers return from the two-week Easter recess.
       Proponents claim repealing the 1933 Glass-Steagall Act that erected barriers between financial institutions is needed to keep America competitive in an increasingly global marketplace. They also maintain it would save consumers some $15 billion by providing one-stop financial shopping.
       But the legislative language in the proposal that failed Tuesday was opposed by most of the banking industry, which has won permission from federal regulators in recent years to skirt some of the 1933 barriers, and many state regulators of financial institutions.
       They were joined in their opposition by the Clinton administration, which said in a statement Tuesday that the legislation would “stifle innovation and efficiency” in the banking system, harm communities and consumers and impose “needless costs” on small banks.
       Ralph Nader and other consumer activists also denounced the measure, contending it would concentrate economic power to the detriment of financial service customers.
       But the package was strongly supported by the brokerage houses, insurance companies and Federal Reserve Chairman Alan Greenspan, who met with Gingrich and other Republican leaders last week.
       It went down to defeat after three key Republicans, Reps. Bill McCollum of Florida, Richard Baker of Louisiana and David Dreier of California announced their opposition, saying the language “places significant new burdens on financial services firms to the detriment of their customers.”
       Rep. John Dingell of Michigan, the House Commerce Committee’s senior Democrat, tried unsuccessfully to get a series of investor protection measures added to the bill. He then withdrew his support, warning that lifting the remaining barriers between bankers and stock sellers could make U.S. banks like those in Japan — “rotten” and “eaten out from within.”
       Sen. Alfonse D’Amato, R-N.Y., chairman of the Senate Banking Committee, has said the House would have to approve a package with broad bipartisan support in order for a similar measure to even be considered by the Senate.

       © 1998 Associated Press. All rights reserved.
       


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