For years, banks have sought to remove the Despression-era rules imposed by Congress and gain the freedom to deal in securities, insurance, and real estate markets. But what finally looked like victory this year has turned into a form of defeat.
A bill approved earlier by the Senate gave banks some of what they wanted, but a different measure passed this week by the House Banking Committee has turned the whole issue upside down.The House bill would give banks the right to enter into the securities market, but under very strict requirements that might be all but impossible for many banks to meet.
The committee also would close the doors to any entry into the real estate business for at least two years and bar any entry into the insurance industry. The bill would require banks to offer many new services to low-income people as the price for getting into the securities market - although what the two issues have to do with each other is a mystery.
As a result of this action, the banking industry itself has turned against the legislation and now opposes its passage. In any event, passage of the bill seems unlikely since it must now go to the House Energy and Commerce Committee, whose chairman, Rep. John D. Dingell, D-Mich., has opposed letting banks into the securities business.
With summer recess coming up Aug. 12, Congress won't be back in session until Sept. 6, and then only for a month before adjourning for the fall election campaign. Dingall can probably delay long enough to kill the measure.
Its demise should not be mourned. Starting over next year is preferable to the convoluted bill the House committee has wrought.
In recent years, banks have seen securities brokers, insurance companies, non-bank financial institutions, and even retail stores, start offering what had been considered banking services.
In return, banks have tried to compete by getting permission to engage in securities, insurance, and real estate - making "a level playing field," as Sen. Jake Garn, R-Utah, once explained it.
However, lobbyists for those other industries have fought hard against letting banks out of their Depression-days straitjacket. Much of the argument raises the specter of bank failures, but what it really amounts to is opposition to new competition.
In some respects, what the House has produced is worse than no bill at all. The best thing is to let it die in Dingall's committee, and for the banking industry to try to convince the House next year to adopt a new version more like the one passed by an overwhelming 94-2 margin in the Senate.