Congress Adopts Measure to Repeal Banking Barriers

Congress on Thursday sent President Clinton a sweeping bill for reshaping the financial landscape by tearing down the Depression-era barriers between banks, insurance companies and investment firms.

The vote in the Senate was an overwhelming 90-8, with seven Democrats and one Republican saying no. The House vote several hours later was 362-57, with Republicans in solid support and Democrats split.

Clinton said he was eager to sign the bill, despite warnings from Democratic critics that it could lead to price-gouging of consumers and to financial conglomerates that are simply too big and powerful.

“This is the most important banking bill in 60 years,” an ebullient Sen. Phil Gramm (R-Texas) said.

The legislation marks the successful conclusion to two decades of determined effort by banks to expand their range of business as they came under tough competitive pressures from other financial institutions.

Backers of the legislation said consumers would benefit from lower costs and increased efficiencies as financial firms exercise their new powers. If operating costs are cut by 5%, consumers could save $18 billion a year, according to a Treasury Department estimate.

If the bill becomes law, banks, insurers and brokerage firms will have unfettered freedom next year to enter each other’s area of business through acquisitions, mergers and new ventures.

However, barriers would remain between financial companies and firms from other lines of commerce. About 70 commercial firms outside the financial business already have acquired banks and thrifts. They would be permitted to keep operating those enterprises but would not be able to sell them to firms outside the financial services business.