House Panel Approves Limited Bank Bill

The House Banking Committee on Wednesday approved a slimmed-down version of the banking reform bill, including $76 billion in borrowing authority for the ailing deposit insurance fund and a grant of new powers to regulators for early intervention at troubled banks.

The vote was 37 to 15 for the narrowly focused bill that would replace the broad measure overwhelmingly rejected by the House on Monday.

The full House is expected to consider the bill next week, and the Democratic leadership will decide whether to permit a torrent of amendments that could threaten to send the new measure down to defeat.

With Congress hoping to finish its work for the year by Thanksgiving, it appears that there is time only for a basic bill to rescue the insurance fund and tighten bank regulation.

“I know that many on this committee have other amendments they would like included in this package,” said House Banking Committee Chairman Henry B. Gonzalez (D-Tex.), appealing to his colleagues.

“I am among them, but we must deal with the priority of refinancing the bank insurance fund,” Gonzalez said. “To open the door to other amendments is an invitation to another blood bath on the floor, and most importantly a delay in protecting depositors. I urge my colleagues to forget the differences of the last few days and the incessant drumbeats of the lobbyists so we may be unified in the effort to refinance the bank insurance fund.”

The Bush Administration, however, still hopes to salvage its original plan to allow banks to cross state lines without restriction, and to enter the securities and insurance businesses.

A bill approved by the Senate Banking Committee includes many of the expanded powers sought by the Administration and the banking industry. But it also includes a requirement that banks offer guaranteed check cashing for government checks and a basic checking account for low-income people. This proposal for new mandated service is strongly opposed by bigger banks and would be grounds for a tough fight when the bill reaches the Senate floor.

Sen. Donald Riegle (D-Mich.), chairman of the Senate Banking Committee, said Wednesday that he is “respectful” of the House committee approval of the narrow bill, but still believes that “we should do more than that.”

“I prefer a broader bill if the votes are there to pass it,” he said.

The full Senate is expected to consider the bank reform bill next week. Committee sources said it appears increasingly likely that the Senate measure may be stripped of everything but financing for the bank insurance fund and new regulatory powers, in order to reach a compromise with the House on a bill that could be passed in the next few weeks.

The insurance fund, which guarantees bank deposits up to $100,000, must be given new financing because it will run out of money to close troubled banks by the end of the year.

Both House and Senate banking committee bills call for temporary borrowing, to be repaid from fees paid by the banks. If the economy deteriorates further, and more banks fail, the taxpayers rather than the industry may be called on to furnish the funds.