July 6, 1999
 
 
 

                   Financial-Services Overhaul Bill
                   May Reach Clinton Before Fall

                   By MICHAEL SCHROEDER
                   Staff Reporter of THE WALL STREET JOURNAL

                   WASHINGTON -- The House's overwhelming approval of a
                   financial-services overhaul last week has given lawmakers and
                   administration officials confidence that final legislation could be presented
                   to President Clinton as early as the end of this summer.

                   Thursday's 343-86 vote marked the first time both chambers have passed
                   a bill that tears down Depression-era barriers between banks, insurers and
                   brokers; the Senate version passed two months ago.

                   The next step is for a House-Senate conference committee to reconcile
                   differences between the two bills. Lawmakers then must approve the
                   combined version before seeking the president's signature.

                   The House leadership, in particular, is interested in pressing ahead quickly
                   while the issue is still hot. The most ambitious plan is to craft a joint bill by
                   the Aug. 6 recess; the compromise bill would still need to clear both
                   houses.

                   With House passage last week, "the bill has tremendous momentum," said
                   Ed Yingling, chief lobbyist for the American Bankers Association.

                   Any combined bill that meets the administration's goals will require the
                   cooperation of Senate Banking Committee Chairman Phil Gramm of Texas
                   and the newly confirmed Treasury secretary, Lawrence Summers. Capitol
                   Hill staffers believe the two are prepared to work together to hash out a
                   compromise.

                   "Together with Congress we believe we can construct a bill," said Gary
                   Gensler, the Treasury's undersecretary for domestic finance. While Mr.
                   Gensler has been the administration's policy point man on financial-services
                   overhaul, Mr. Summers has also played a key role.

                   'Within Our Grasp'

                   Mr. Gramm was equally optimistic. "With the House vote, we now have it
                   within our grasp to pass a good bill, and that's my objective," he said.

                   Although he has been at odds with the administration on several issues,
                   Mr. Gramm is known to work well with Mr. Summers. Within the past
                   few weeks, Mr. Gramm has huddled with Mr. Summers to discuss the
                   overhaul legislation and other issues. "Larry Summers is closer to my point
                   of view than 95% to 98% of the people in the Clinton administration," Mr.
                   Gramm said.

                   Both the House and Senate versions would allow banks, brokerage firms
                   and insurers to enter the full range of financial businesses. If the reform
                   becomes law, a raft of major interindustry mergers is expected as firms
                   position themselves as one-stop financial companies offering customers
                   virtually any insurance, banking or investment product.

                   Still, there are significant differences between the Senate and House
                   versions. Although the administration said Mr. Clinton supports the House
                   bill, he has threatened to veto the final legislation if it doesn't satisfy his
                   positions on protecting personal consumer information, low-income lending
                   requirements and the Treasury's role in overseeing new financial
                   conglomerates.

                   Issue of Community Lending

                   The Senate version contains provisions, sponsored by Mr. Gramm, that
                   water down the 1977 Community Reinvestment Act, which requires banks
                   to make loans in low-income and minority neighborhoods. The Senate bill
                   would exempt small rural banks from the community-lending law and make
                   it harder for the government to use satisfactory community-lending ratings
                   as a requirement for banks' being allowed to expand.

                   On the other hand, the House bill extends CRA compliance to the holding
                   companies as a way for regulators to block mergers if bank units don't
                   have satisfactory records of low-income lending. The only middle ground
                   likely would be leaving CRA untouched -- neither cutting back nor
                   extending its reach.

                   The issue of protecting consumer financial information emerged in the past
                   few weeks as the most controversial. While the Senate doesn't address the
                   issue, the House added provisions that would give customers the right to
                   block financial institutions from sharing personal information with outside
                   companies. Consumer polls show such overwhelming support for
                   protecting financial information that lawmakers aren't likely to weaken the
                   House privacy provisions.

                   Battle by Lobbyists

                   The administration will try to expand protections, but pushing too hard
                   could scuttle the bill. Financial-industry lobbyists fought back attempts to
                   extend limitations on sharing information among affiliated companies.
                   Cross-marketing to customers is a prime rationale for consolidating
                   financial firms, they argued.

                   A major fight also looms on provisions to reinforce privacy protections for
                   customers' medical information.

                   In addition, Mr. Gramm believes the Federal Reserve Board should be the
                   primary regulator of new financial conglomerates. But the House bill
                   endorses the administration's position that the Treasury Department should
                   have significant oversight authority. On this matter, lobbyists believe the
                   House view is likely to prevail.