House to Vote on Bill to Bolster FDIC : Banking: Passage of the proposal is necessary to keep the deposit insurance fund solvent. A broader, more comprehensive industry reform measure was defeated.
WASHINGTON — Rebounding from Monday’s defeat of a massive banking overhaul bill, a House committee will vote today on a stripped-down measure aimed at replenishing the federal deposit insurance fund and tightening regulation of bank operations.
The new legislation, advanced by House Banking, Finance and Urban Affairs Chairman Henry B. Gonzalez (D-Tex.), does not include proposals by President Bush to give banks new powers to branch across state lines and to sell securities and insurance.
Gonzalez said Tuesday that expanded powers contained in a much broader bill led to its overwhelming rejection in the House on Monday, 324 to 89. There also was evidence, however, that many lawmakers opposed the measure because of restrictions placed on those powers.
Gonzalez said it is urgent to provide by Thanksgiving a $30-billion line of credit to the Federal Deposit Insurance Corp.’s nearly insolvent bank insurance fund, which safeguards deposits up to $100,000 per account.
“Confidence in the banking system is fragile, and we must act quickly to assure the public that the funds will be available to pay off depositors when banks fail,†the chairman said.
Gonzalez said it also is important to strengthen regulatory authority over banks. His revised legislation calls for prompt intervention when a bank’s condition deteriorates, as well as new accounting and internal control requirements.
The Administration, which argues that enabling banks to diversify will strengthen their financial standing, turned its attention to the Senate.
Administration officials and bank lobbyists pressed the Senate to approve a new-powers measure that would fare well in compromise talks between Senate and House negotiators.
However, Gonzalez warned that the Administration needs a “quick reality check†because there is little chance of getting new-powers provisions soon. And Senate Majority Leader George J. Mitchell (D-Me.) put off bringing up a comprehensive bill today, indicating that leaders need time to assess the situation.
“Secretary of the Treasury Nicholas Brady has to face the fact that a comprehensive set of powers expanding the banks’ geographical and product horizons was defeated overwhelmingly last night,†Gonzalez said in a statement. “The Administration and the banking industry had its chance to get behind the legislation, but instead they played an all-or-nothing game that wrecked all chances for passage.â€
Gonzalez added that the House “clearly wanted (regulatory) safeguards if there were to be new powers, but in the end the members made it clear they did not want the expanded powers to begin with.â€
Opponents of new powers said they feared that banks would follow the disastrous path of savings and loans, which plunged into risky ventures after Congress loosened regulatory reins in the early 1980s.
But many House members said they were simply confused by the complex legislation.
At the same time, House Speaker Thomas S. Foley (D-Wash.), who was believed to support expanded powers, took a neutral public position, frustrating many Democrats looking for guidance from the top.
And lawmakers were whipsawed by competing interest groups--big banks and securities firms versus smaller financial institutions, insurance companies and consumer groups.
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