Republican Bids to Alter Banking Bill Fall Short

The House, taking up what was to have been a sweeping overhaul of the nation’s Depression-era banking laws, Thursday endorsed a version of the legislation that stops well short of what President Bush had wanted.

The bill that is being shaped in several hard-fought days on the House floor would, at least technically, allow banks to go into the securities business, an area now forbidden to them.

But critics, including Bush, say the restrictions, or “fire walls,” in the House measure are so daunting that most banks would not be able to use their new powers.

Debate will continue today, and a final vote is expected Monday. The Senate plans to consider its version of the bill later this month.

“Incredible as it may seem, some in Congress actually want to move banking laws backwards, to make our banks even less competitive in the global marketplace,” the President said at the swearing-in ceremony of William Taylor as chairman of the Federal Deposit Insurance Corp.

“Nothing will stop me from fighting on principle for real bank reform that gets our economy moving toward the future,” Bush added.

The President has threatened to veto the measure that was crafted by two powerful House committee chairmen--Henry B. Gonzalez (D-Tex.) of Banking, Finance and Urban Affairs and John D. Dingell (D-Mich.) of Energy and Commerce.

While supporters of the House proposal acknowledge that some changes in the laws are necessary to make U.S. banks healthier and more competitive, they warn that going too far would invite a financial debacle on the scale of the savings and loan crisis. Indeed, time after time in the first day of debate Thursday, lawmakers recalled the 1982 law that made it possible for the S&Ls; to forge ahead into an array of new businesses, sowing the seeds for the industry’s collapse.

“Don’t make the same mistakes. Learn from the mistakes of history,” said Rep. Charles E. Schumer (D-N.Y.), a member of the Banking committee. “Don’t let the big banks bamboozle you.”

Republicans attempted to strip the Democratic plan out of the bill. They contended that even a bare-bones measure without the far-reaching changes originally envisioned is better than the Democratic bill, which they described as a step backward. However, they lost by a 216-200 margin.

The House also turned down, 272 to 137, an amendment that would have allowed commercial companies, such as General Motors or IBM, to acquire failing banks, if that is the least-costly rescue alternative.

Also rejected, 312 to 106, was Schumer’s amendment setting limits on the amount that a federally insured bank could pay to depositors. Schumer contended that his proposal would lessen the pressure on banks to invest in risky and speculative ventures. Opponents, however, insisted that it would merely encourage depositors to take their money elsewhere.

Remaining provisions of the bill include:

* Increasing the Federal Deposit Insurance Corp.’s line of credit with the Treasury Department to $30 billion from the current $5 billion--a relatively non-controversial provision that is considered vital to keeping the insurance fund solvent.

* Allowing interstate banking three years after the bill becomes law.

* Mandating that the FDIC use the least costly method of protecting insured deposits when it steps in to rescue insolvent banks--a provision designed to answer criticism that the agency has been too generous in such cases.