Better Days Ahead on the Hill

The 1998 elections are history. The people have spoken (or at least the 30% or so that voted) and the results are in. What do they tell us about the future of banking legislationu00e2u20ac”particularly H.R. 10’s modernization of laws controlling the financial institutions of the United States?

What “the people said” is always a matter of interpretation. Did they say they wanted an end to impeachment hearings? All of the Democrats who voted for the impeachment process to continue were re-elected, and over 90% of post-ballot interviewees say impeachment was not important in their voting decision. But the polls indicate that two-thirds of Americans want the proceedings terminated swiftly.

The best interpretation of the electorate’s decisions is to look at the makeup of the new Congress when the dust settles. Important changes have taken place that will impact future banking legislation.

Most important is the resignation of Speaker Newt Gingrich at the “request” of his party. The former speaker was no friend of the banking fraternity. On every important issue he sided with the oppositionu00e2u20ac”particularly by supporting the credit unions in their successful effort to expand their member bases. He also strongly supported tagging bankers for a part of the cost of the S&L mess. Furthermore, he personally pushed through the House a version of H.R. 10 that was opposed by all major banking groups. He did so by holding open the vote and twisting arms until he achieved a one-vote majority for the bill. Without much doubt, Gingrich was the bankers’ most powerful enemy in Congressu00e2u20ac”and now he is gone.

The second-most important change is the defeat of the chairman of the Senate Banking Committee, Senator Al “Pot Hole” D’Amato. While not nearly as bad for banking as Gingrich, his highest priority was supporting the big New York investment banks’ positions. He also supported anti-banking ideas such as seeking to control interest rate charges and outlawing ATM fees. Thus, much of banking’s sad record on the congressional battlefield in the last couple of years can be attributed to the now-departed D’Amato and Gingrich.

Fresh leadership promises the possibility of better days ahead. It is likely that Chairman Leach of the House Banking Committee will take the lead. Congressman Leach generally has been much more supportive of positions favoring banks, especially small- and medium-size ones. Except for his total support of the Fed on all regulatory turf war issues, Leach’s elevated role should be of real help to bankers during what certainly will be a critical year for their future.

Senator Phil Gramm of Texas will be the new chairman of the Senate Banking Committee. He personally killed H.R. 10 in the last days of the Congress because he opposed extensions of CRA requirementsu00e2u20ac”particularly their use as a means of extorting funds from banks to obtain merger approvals. All bankers should be eternally grateful to the new chairman for his courageous action.

In many contacts with Senator Gramm, I have found him to be a true supporter of the free market and most appreciative of the important part that small- and medium-size banks have played in the creation of the economy enjoyed by the United States today. Texas still has a strong small-bank community, and the new chairman undoubtedly will be interested in this constituency’s views on a continuing basis. (The Texas Bankers were the only group that continued to oppose the much-compromised H.R. 10.)

Newly elected Senator Schumer, who defeated D’Amato, also will be on the Senate Banking Committee and, while he is not a big plus for bankers, he knows the industry well. I have always found him willing to give the banking community’s views his full considerationu00e2u20ac”certainly an improvement over the defeated Senator Carol Mosely-Brown.

All the changes on the Hill indicate a new day is possible for bankers. This revived opportunity may help craft a financial modernization bill that will be a vast improvement over the last version that died in the Senate. Will the opportunity result in legislation that strengthens banking, and particularly community banking? It all depends! It depends on whether the industry can support a unified position (although Citigroup and Bank One may never agree) for a simpler, less radical change in the system. Based on history, it takes a real optimist to believe this unified action will take place, but in my senior years, I’ve become a real optimist. I think better days may well be ahead for bankers in their efforts in our nation’s capital.