House Panel Exempts Banks From Fairness Law

After a grueling debate, the House Banking Committee approved a broad deregulation bill Thursday that would exempt many banks from a major fair-lending law and permit them to buy insurance companies.

The Consumers Union called the bill a “hodgepodge of consumer-law rollbacks.” Treasury Secretary Robert E. Rubin said the latest version of the bill is “strongly objectionable” and that he will recommend that President Clinton veto it.

Joe Pigg, a staff member for Rep. Doug Bereuter (R-Neb.), the bill’s main author, accused Rubin of making an “alarmist overstatement” about the bill’s effects and said it is not anti-consumer. Bereuter has said the measure is intended to trim a thicket of 1970s and ‘80s regulations that may not be relevant today.

The panel sent the bill to the House floor on a 27-23 vote, concluding four contentious days of work on more than 90 amendments, all of which kept the committee working until midnight twice this week.

Rep. Jim Leach (R-Iowa), House Banking Committee chairman, issued a statement saying the bill’s prospects are uncertain on the House floor, chiefly because of its insurance provisions.

The panel, in a surprising action, approved an amendment Wednesday to let banks affiliate with insurance companies, subject to state law. That would allow banks to dramatically expand their reach in the financial services business, especially if Congress also approves a separate bill to let banks combine with Wall Street firms.

That amendment riled the insurance lobby, a potent opponent that has killed previous bank reform bills. The Independent Insurance Agents of America said it will fight the measure because independent agents would be placed at a “severe competitive disadvantage.”

Changes to the bill were so substantial that the banking industry’s main trade group, the American Bankers Assn., said it was not yet ready to take a position on the measure because of conflicting language regarding insurance.

Consumers and the Clinton Administration prevailed in several battles to change the bill’s more controversial provisions.

The latest version would no longer prevent the Justice Department from initiating lending-discrimination cases under the Fair Housing Act, an important means of policing unfair banking practices. It also would retain the current $50 limit on what consumers must pay for misuse or irresponsible handling of their ATM or credit cards.