The Shape of the Future

Someone reminded me that it's been nearly a decade since Gerald Corrigan, the former president of the Federal Reserve Bank of New York, proposed a sweeping restructuring of the financial services industry. His plan would have permitted bank holding companies to engage in financial services from insurance to securities. The Wall Street Journal summed things up in Jan. 1987 when it said far reaching regulatory reforms such as the one Mr. Corrigan suggests aren't likely to emerge from the current How prophetic! The Journal was talking about the 100th Congress. Ten years later, the 104th Congress is still wrestling with the issue. Is it possible that the ten-year wait for financial modernization is ending? I honestly do not know, but I do know there is one hopeful sign in Washington. Congress is considering a comprehensive proposal that looks and feels like the financial services holding company concept. This is the latest bill advanced by House Banking Committee Chairman James Leach (R-Iowa). At the same time, there is a proposal for financial modernization in the Senate, which has been advanced by Senate Banking Committee Chairman Alfonse D'Amato (R-NY). The Leach bill takes a comprehensive approach to financial modernization that would incorporate regulatory-burden relief, affiliations between banks and insurance agencies or companies (thanks to the favorable Baker amendment), Glass-Steagall reform, and other enhancements. In short, the Leach proposal seems to have something in it for every bank. However, the chairman's proposal also includes a permanent moratorium on the Comptroller's authority to grant banks new insurance powers in the future, which ABA opposes. Still, the framework of a financial modernization bill exists, and bankers should pay close attention. In an effort to keep financial modernization alive, the ABA has sought to link up, wherever possible, with other industry groups that also favor modernization. The ABA's goal is to create a stronger, broader front in the battle for financial reform. Last year, for example, the ABA helped to form the for Financial Modernization. The ABA Board of Directors asked specifically that the ABA reach out to other sectors of the financial services industry in the interests of modernization, and this new allows us to do that. The Alliance for Financial Modernization is made up of several trade associations that have come together to advance the cause of broad financial reform. …