Bank Reform Talks Break Down Lack Of Insurance Compromise Blamed For Collapse

Extensive negotiations to permit banks to affiliate with insurance companies collapsed Thursday, the chairman of the House Commerce Committee said, casting uncertainty over a major bank reform bill.

Rep. Thomas J. Bliley Jr., R-Va., had spearheaded talks in recent days to resolve the central dispute in a major bank reform bill moving through the House: whether banks could expand further into the insurance field.

“The parties are too far apart, and their commitment to their respective positions too firmly held, for such an approach to succeed at present,” said Bliley.

Bliley, speaking as two House Commerce subcommittees resumed hearings on the bank reform bill, said continuing the bank and insurance talks “would only jeopardize this window of opportunity to enact historic legislation modernizing our financial services industries.”

But industry analysts say lack of an insurance compromise could only complicate the bill’s prospects and intensify the battle between the bank and insurance lobbies.

“It really draws the battle line between the banking industry and the insurance agents,” said Bert Ely, an Alexandria, Va.-based bank consultant.

The Commerce subcommittees are considering a bill, sponsored by House Banking Committee Chairman James Leach, R-Iowa, that would repeal laws separating Wall Street firms and commercial banks.

It would streamline regulation for these new hybrid financial institutions, which could offer mutual funds, checking accounts, stock and bond underwriting and investment banking services under one roof.

Bankers say they can’t compete effectively under existing laws, written in the aftermath of the Depression, particularly against non-banking companies that issue credit cards and home mortgages without the burdensome bank regulations.