House Panel Approves Financial Overhaul Package Measure Would Create Most Sweeping Changes In U.S. Banking Laws In 60 Years

A House panel narrowly approved legislation Friday that would create the most drastic reshaping of U.S. financial laws in 60 years and tear down the barrier between banking and commerce.

To cushion the impact on consumers, the measures would require banks, among other things, to clearly disclose whether their financial products are federally guaranteed and to sell them in a separate area.

The 28-26 vote by the House Banking Committee cut across party lines. It came after 3-1/2 days of drafting work by the lawmakers, as lobbyists for an array of powerful financial industries thronged the committee room and the corridors.

“No, no, no,” said Rep. Maxine Waters, D-Calif., as she voted against the legislation.

She won her push earlier for an amendment that would require banks merging with other entities to provide no-frills, low-cost checking accounts to consumers of modest means. But she was stymied in her efforts for adoption of other measures focusing on consumers and poor neighborhoods.

Rep. Marge Roukema, R-N.J., one of the bill’s authors, acknowledged the vote was closer than she had expected.

“The committee addressed the needs of both consumers and businesses,” she said. “This legislation allows our financial institutions to compete more effectively at home and in the global marketplace, and acknowledges the changes already under way.”

The panel sent the legislation to the full House, where prospects for passage were unclear. Congressional proponents and the banking industry have unsuccessfully tried for years to push such a package through Congress.

The Senate has not acted on a similar bill this year. Banking Committee Chairman Sen. Alfonse D’Amato, R-N.Y., has focused on other issues.

The House panel, going beyond the removal of Depression-era restrictions that bar banks, brokerages and insurers from getting into each other’s businesses, adopted far-reaching measures earlier this week allowing banks and commercial companies to combine.

The latter actions came over the opposition of the committee’s chairman, Rep. Jim Leach, R-Iowa, who nonetheless voted for the final package.

Continuing to press their overhaul initiative, the lawmakers voted Thursday evening to eliminate the separate charter and federal regulator for the savings and loan industry, which currently has more freedom to engage in commercial activities than banks.

That 42-4 vote approved an effective merger of the banking and thrift industries. It had been recommended by the Clinton administration and others as an adjunct to taking the radical step of allowing banks and commercial companies to mix.

Leach’s concerns were echoed by consumer activist Ralph Nader, who Friday urged the full House “to put the toxic mixture of banking and commerce back in the bottle” by rejecting the bill.

A range of groups representing consumers, the elderly, farmers, community groups and smaller banks have raised concerns about the legislation. The critics contend that the radical financial changes could bring about a concentration of economic power that could hurt consumers.

But backers of the overhaul package insist the changes are needed because of upheavals in the banking and financial services industry. If approved, the legislation would enable Americans to save money with one-stop financial shopping, they say.