Senator Opposes Deregulating Financial Services : Even Proxmire’s Foes Will Miss Him

When Sen. William Proxmire, chairman of the Senate Banking Committee, retires from Congress in 17 months, opponents of financial service deregulation will lose a powerful voice.

Proxmire, the Wisconsin Democrat who announced Thursday that he will not seek reelection in the fall of 1988, will depart at a crucial time for the banking industry, which is undergoing a rapid restructuring as its members struggle to enter the securities, insurance and real estate industries.

The announcement came just weeks after Federal Reserve Board Chairman Paul A. Volcker stepped down as chief of the nation’s central bank. Volcker and Proxmire, two of the most powerful federal overseers of the financial service industries, have also been the most influential opponents in government of the Reagan Administration’s efforts to relax the 50-year-old laws separating banking from the securities industry and other types of businesses.

“The Senate will be a lesser place without him,” Alan Greenspan, the new Fed chairman, said. Greenspan said that while he and Proxmire have had their differences over the years, “I have never questioned his integrity or his competence.” That view was echoed by many top officials of both parties, including Treasury Under Secretary George D. Gould, who is chief Administration spokesman on banking deregulation.

Adding to the uncertainty created by the departure of Proxmire and Volcker will be continuing questions about whether House Banking Committee Chairman Fernand J. St Germain (D-R.I.), who is under investigation by the Justice Department for possible improprieties involving entertainment expenses, will be fully effective during the next year.

Proxmire this year helped achieve passage of the first major banking bill in five years. The bill freezes the current hodgepodge of banking powers while Congress considers how to permanently change the system. That second bill is expected to address just how far bank companies may engage in securities underwriting.

In addition to that challenge, Proxmire has promised to pass legislation to restrict hostile business takeovers and to limit insider trading. Industry analysts and others said after he announced that he will not run again that they think Proxmire’s lame-duck status will not hamper his effectiveness in pushing for either of the bills. They say it may even help him push through banking legislation if legislators see it as a tribute to his 30-year service in the Senate.

In a telephone interview, Proxmire said he is optimistic about the banking bill.

“I think we really have momentum on this,” he said. “From everything I hear . . . we’ll have a good fighting chance in (the banking) committee and it looks better on the (Senate) floor.” He was less optimistic about the chances for passage of a banking bill in the House but, on the positive side, noted that his takeover legislation is co-sponsored by 10 of the banking committee’s 20 members.

Proxmire will leave the committee after two terms as its chairman. He headed it from 1974 to 1980, lost his position when the Republicans gained control of the Senate that year, and regained it when the Democrats won back the Senate in the 1986 elections. Proxmire also chaired the Joint Economic Committee twice, in 1967-68 and 1971-1972.

Change of Attitude

During his tenure in those positions, Proxmire adhered to a Midwestern populism that favored giving a break to the unsophisticated bank customer by increasing disclosure of loan terms and charges. But he also realized that sweeping regulatory and technological changes in the banking system meant that the old way of regulating the industry had to be modernized.

“There were a lot of bankers who were worried sick about Sen. Proxmire (when his tenure began) who are going to be sorry to see him go,” said Kirk Willison of the American Bankers Assn.

It was not immediately clear who would succeed Proxmire as chairman of the committee. Sen. Alan Cranston (D-Calif.), the Senate majority whip, is next in seniority but would have to give up his chairmanship of the Veterans’ Affairs Committee. He could retain his position as whip. Next in line for the committee chairmanship is Sen. Donald Riegle (D-Mich.).

The ranking Republican on the committee is Sen. Jake Garn of Utah.