It's an election year, so it's time for biennial rituals. Lawmakers are cutting ribbons at senior citizen housing projects. They're touring local schools. And Congress is debating whether to overhaul the Depression-era law that kept banks, securities firms, and insurers out of each other's business.
When the dust settles this fall, two things will be certain: The 1933 Glass-Steagall Act will still be on the books. And the campaign coffers of Washington lawmakers will have been filled by financial-services firms, which forked out more than $19 million in 1997 alone. "They are raising money from the competing industries big, big time," says one bank lobbyist.
This year, House Speaker Newt Gingrich (R-Ga.) is pushing for passage of a financial-services deregulation bill by Easter. It wouldn't do anything for banks, which have won approval by the courts and regulators to sell mutual funds, do some securities underwriting, and peddle insurance. Indeed, it would impose new restrictions on the ability of banks to sell insurance. But the bill, a compromise cobbled by Representative John A. Boehner (R-Ohio), would give brokers a boost, permitting them to acquire banks, which have the power to lend and take federally insured deposits.
FLOOD OF CASH. The bill's backers vow they will succeed at last. "I know it has failed 10 times in the past 20 years, but this time is different," says Bruce E. Thompson, Merrill Lynch & Co.'s chief lobbyist.
Fat chance. The Clinton Treasury Dept. opposes the bill. So do consumer groups. And banks, long advocates of Glass-Steagall reform, now contest any change in an act that still limits the powers of brokers and insurers. Even if the bill clears the House, Senate Majority Leader Trent Lott (R-Miss.) has said he won't consider controversial legislation this year.
But the mere threat of a House vote has unleashed a flood of campaign contributions from banks, insurers, and brokerage companies. In 1997, securities firms ponied up $4.3 million, while insurers gave $3.8 million and banks and other lenders gave $1.8 million to the national Democratic and Republican parties. That was nearly 20% of all the unlimited soft-money donations the two parties got from Corporate America. It's the same with political action committees. Financial service PACs have given $10 million so far in this election cycle--nearly double the next most generous industry.
Boehner knows the fund-raising power of Glass-Steagall legislation well. In January, just before he brokered the GOP bill, he hosted a golf outing at California's Rancho La Quinta that attracted a gaggle of financial-services representatives. The price to tee off: $1,500. Boehner has scheduled another golf fund-raiser for Jacksonville, Fla.
But the big bucks buy only stalemate on Capitol Hill. Elsewhere, court decisions and new technology such as electronic banking are rendering Glass-Steagall as obsolete as the Model T. Except, of course, when it comes to driving home those campaign contributions.