House Pulls the Plug on Bank Reform Legislation for ’96

Attempts to sweep away a Depression-era law that restricts banking activities collapsed in Congress on Tuesday, ending any hope for major reform before the November elections.

House Banking Committee Chairman Jim Leach (R-Iowa) pulled the plug on the Glass-Steagall reform bill, acknowledging that opposition was too great for it to move ahead this year.

“In this setting, it would appear that comprehensive bank modernization legislation cannot move forward this year,” he said.

That ended months of numerous revisions to the bill as Leach tried to achieve consensus among squabbling industry groups.

The Glass-Steagall reform bill would have allowed banks to affiliate with securities and insurance firms. The details of how to accomplish that sparked disagreements between the banking and insurance industries and opposition from the Clinton administration.

Leach, who had maintained public optimism about the chances for the legislation in the face of opposition, announced the decision at a “markup,” where committee members were to vote on amendments to the bill. About 80 amendments had been offered, mostly by Democrats on the committee.

Efforts to break down barriers imposed by the Glass-Steagall bill, which separates commercial and investment banking, have picked up in the last decade but failed to get through Congress.

Senate Banking Committee Chairman Alfonse M. D’Amato (R-N.Y.) at the outset said his committee would not undertake Glass-Steagall until it passed the House, because previous efforts had died in that chamber.

“This is the third major attempt in this decade; this is the third time that the bill actually really was run up in either the Senate or the House and didn’t make it,” said Ed Yingling, executive director of the American Bankers Assn.

The trade group had opposed the latest version of the bill because it viewed some insurance-related provisions as too restrictive for banks.