Gramm To Head Banking Committee
By PATRICIA LAMIELL
.c The Associated Press
NEW YORK (AP) -- Earlier this year, Sen. Phil Gramm single-handedly defeated legislation that banks have sought for two decades that would remove laws that separate commercial banking from securities underwriting and insurance.
Now, with the defeat of Sen. Alfonse D'Amato, R-N.Y., Gramm is in line to become chairman of the Senate Banking Committee, giving rise to fear the bill has no future.
Gramm moved to quell fears Thursday, however, that he would once more hold up the legislation, which would remove Depression-era restrictions on the banking business.
Speaking with reporters, the Texas Republican said the banking industry's priorities won't necessarily be his next year.
When considering banking legislation in the next session, Gramm, a one-time economics professor, said he will ask, ''Does it make financial services more available? Does it lower the cost? Does it create more jobs? If the answer is no, then I'm not for it, whether or not Wall Street or anybody else is.''
Asked today about working with Gramm, Securities and Exchange Commission Chairman Arthur Levitt said he respects his ''intelligence and his patriotism.''
''He has his priorities and I have mine and hopefully we will work together,'' said Levitt, who has had sharp differences with the lawmaker in the past. Levitt said he and Gramm share important goals such as protecting investors and avoiding excessive regulatory burdens for the securities industry.
The banking legislation came very close to passing this year after some very delicate negotiations and a compromise between the insurance and banking industries and their federal and state regulators.
Gramm, however, blocked it, objecting to language in the bill that he said would inappropriately expand the Community Reinvestment Act, which requires banks to invest in low- and moderate-income neighborhoods.
The bill had also faced a veto threat, with the White House complaining it gave too much regulatory power to the Federal Reserve.
It was Gramm's position on local lending that angered community groups, consumer activists and liberal members of Congress. These same people worry now that as chairman next year, Gramm will have more power to tinker with community investment laws.
For their own part, banks were also frustrated to see the bill die once more. While they agreed with Gramm that the Community Reinvestment Act, known as CRA, should not be strengthened, they were willing to give on that issue if it meant getting a financial-overhaul bill passed that would make it easier for them to compete with insurers and other financial services businesses.
But on Thursday, banking executives and lobbyists were also extending the olive branch.
''Sen. Gramm has always been a strong proponent of financial modernization,'' said Edward Yingling, executive director of government relations for the American Bankers Association. ''He made a statement yesterday indicating that it was a top priority of the committee.''
Said Joseph Belew, president of the Consumer Bankers Association: ''Sen. Gramm is a brilliant economist. He understands the issues. I think the speculation has been, 'Is he too much of an idealogue to work as the committee chair.' I think he's put that that to rest.''
Belew pointed out that the Democrat who defeated D'Amato, Rep. Charles Schumer, is a likely appointee to the Senate Banking Committee because he sat for many years on the banking committee of the House. ''We can work with him,'' Belew said.
Schumer is viewed as close to New York's securities industry and a moderate on financial issues, Belew said. In addition, he is a ''ferocious legislator'' who, if he made financial modernization a priority, would help get a bill passed.
Schumer would need that to counter Gramm, who is not likely to display the same independence from the banking industry that D'Amato did, banking experts said.
While he worked very hard for the passage of the industry overhaul, D'Amato also courted consumers by trying this year to outlaw surcharges at automated teller machines. A few years ago, he drew the scorn of the banking industry and many in Congress by floating the suggestion, unthinkable to people like Gramm who are avid supporters of the free market, that credit card interest rates should be capped.
Gramm will be much more pro-banking than that, the bankers said. He might be expected to push for regulatory relief and lower deposit insurance rates for banks, predicted Robert Rusbuldt, executive vice president and lobbyist for the Independent Insurance Agents of America.
But Rusbuldt said he wasn't sure Gramm could moderate his position long enough to accomplish the bipartisan work necessary to pass a financial-modernization bill.
''He has said time and time again he supports financial reform except for CRA issue,'' Rusbuldt said.
''I'm convinced that he could come up with a bill that's acceptable to Republicans, but that's not anywhere near enough. He needs Democratic support, too.''
AP-NY-11-06-98 1131EST
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