BY PAUL BARTON
Enquirer Washington Bureau
WASHINGTON -- Rep. John Boehner is pushing hard to get the House to pass this week one of the most far-reaching financial laws since the Great Depression, enabling consumers to obtain from one source items as different as credit cards, stocks and car insurance.
The Financial Services Act would override the 1933 Glass-Steagall Act to allow banks, securities firms and insurance companies to cross into one another's businesses.
A vote is expected Wednesday or Thursday. Congress has been toying with the idea for more than 20 years, but observers say the momentum behind it seems stronger than ever, especially after the recent spate of bank and corporate merger announcements.
Among the mergers: Citicorp and Travelers Group, NationsBank and BankAmerica, Banc One and First Chicago, and First Union and Core- States Financial Corp.
"In light of the recent wave of mega-mergers in our nation's financial sector, passage of these reforms is more urgent than ever," said Mr. Boehner, R-West Chester.
"We have a clear responsibility to ensure that financial institutions of all sizes can compete with the new financial giants being created." But critics say the legislation could lead to more bank failures and expose taxpayers to potential losses on government-insured bank deposits. They also fear the pre-emption of state consumer protection laws.
Mr. Boehner, the fourth-ranking GOP leader in the House, has made financial services modernization his pet project for the 105th Congress.
For more than a year, he has led a special House task force devoted to developing the legislation.
Among the members of the task force have been Reps. Jim Leach, R-Iowa, chairman of the House Banking Committee, and Tom Bliley, R- CP:John Boehner
Va., Commerce Committee chairman.
While the Clinton administration has so far refused to support the bill, the legislation has won endorsements from Alan Greenspan, chairman of the Federal Reserve, and Arthur Levitt, chairman of the Securities and Exchange Commission.
The enhanced competition that the law would create in the financial services sector would benefit consumers, Mr. Boehner argues. "The products that people want will be priced more competitively," he said.
Others say the bill recognizes the world is on the verge of a new financial era in which consumers will increasingly be able to secure mortgages and other financial products across national boundaries. For U.S. financial companies to be able to compete with their foreign counterparts, they will have to have the authority to get into more financial businesses.
Keith Stock, a financial services consultant with A.T. Kearney in New York, said the bill is critical for U.S. firms for other reasons also.
"It will enable companies to merge more freely and diversify their businesses and therefore their risk," he said.
But others see red flags.
If banks get into securities and other new areas and encounter trouble, they would be tempted to shore up those businesses with funds from their traditional banking operations, said Anjan Thakor, professor of banking and finance at the University of Michigan. As a result, their core banking business would be more at risk. And with deposits insured by the government, that means taxpayers would be more at risk, too, he said.
The group Consumers Union contends that the House bill will pre-empt many state consumer protection laws that deal with everything from mortgage lending practices to bank fees.
"What is clear is that if the bill is not re-engineered to protect states' rights, it represents a potential disaster for consumers," the group said.
