Treasury Department officials are continuing work on a package of bank reforms that President Bush vowed in his State of the Union address would bring "America's financial system into the 21st century."
The sweeping reform package, expected to be released early next week, is likely to include a number of proposals to streamline and deregulate the financial services industry.Banking industry observers expect the proposals to include reforms to bolster the sagging federal deposit insurance system, give banks a greater competitive advantage in international markets and allow banks to participate in a broader range of services, such as stocks and insurance.
"There is in the study a discussion of some of the expanded services that the banking industry ought to be able to provide," a senior administration officials said of the reform package.
Bush offered few hints during his address Tuesday about the specifics of the reform package, which has been under discussion by top Treasury officials for months.
Bush said the package would "bring America's financial system into the 21st century - so that our banks remain safe and secure and can continue to make job-creating loans for our factories, businesses and home-buyers."
In an apparent reference to the credit crunch that has made several banks reluctant to lend even to usually trustworthy customers, Bush said, "sound banks should be making more sound loans, now."
He even took a not-too-subtle swipe at the Federal Reserve, saying, "and interest rates should be lower, now."
White House officials said the banking reform package is being designed to continue to protect the depositors while assuring the "safety, soundness, and competitiveness of our financial institutions."
The reforms also will "create a regulatory system that is strong, simple, and streamlined," the officials said.
As for deposit insurance reform, the package will seek a move toward a deposit insurance fund that is well capitalized with industry funds.
The Treasury is considering several options regarding deposit insurance, which now guarantees deposits of up to $100,000. Among the suggestions under consideration are proposals to limit insurance to $100,000 per account or per person.
The package also is likely to suggest ways to shore up the fund that insures deposits. On Tuesday the Congressional Budget Office said the fund is in jeopardy of failure without additional funding.
"CBO's assessment indicates that, within a year or so, the fund will be out of cash and insolvent without some form of cash or capital infusion," CBO Director Robert Reischauer told the Senate Banking Committee.
Reischauer said the Bank Insurance Fund will suffer a loss of $12 billion through the end of the current fiscal year and nearly $30 billion by the end of 1993.