The genteel jousting over bank reform by Fed Chairman Alan Greenspan and Treasury Secretary Robert E. Rubin looks like just another turf fight. Both want to get rid of ancient laws that prevent banks, securities firms, and insurers from forming full-service financial supermarkets. But reform efforts have stalled because Greenspan demands that the Fed supervise the new mega-combines, while Rubin insists that Treasury should be in charge.
With Congress preparing to debate bank reform measures, Clinton is again backing Rubin. On Mar. 2, he pledged to shoot down a Senate bill, sponsored by Banking Committee Chairman Phil Gramm (R-Tex.), mostly because it favors Fed policing. Now, Rubin's hard line has some lobbyists and critics of the White House buzzing. The charge: He and President Clinton are less concerned about high principle than a loss of future fund-raising leverage.
The theory goes like this: If Treasury, which now regulates national banks through the Comptroller of the Currency, were handed authority over securities, insurance, and real estate as well, the Democratic Party could raise bushels of campaign money in the coming Presidential contest. But fund-raising might drop off if Congress decides that nonbank financial activities must be offered through separate affiliates, under a Fed-supervised holding company. A Rubin win, says House Banking Committee Chairman James A. Leach (R-Iowa), would make Treasury "the greatest fund-raising machine in history."
Most observers agree that the Fed is largely immune to bigwigs bearing gifts. And while neither Fed officials nor the Comptroller can legally accept campaign contributions, the Comptroller, unlike the Fed chairman, must answer to the President. True, Rubin has always sought to insulate his Comptroller from political interference, but the next Treasury chief might not be so high-minded. Even Rubin got caught flat-footed in 1996, when Democratic fund-raisers orchestrated a White House coffee attended by Clinton, Rubin, then-Comptroller Eugene A. Ludwig, and 17 of the nation's top bankers, who later contributed $550,000 to party coffers. Rubin and Ludwig denied knowing the coffee was a fund-raiser.
Through a spokesman, Rubin says he has no ulterior motive in the banking flap. "Fund-raising has played absolutely no role in this debate," says an aide. Indeed, Rubin refrains from direct fund-raising and takes pains to wall himself off from politics. But he is no political naif. As CEO of Goldman Sachs, he helped launch Clinton's first Presidential bid by raising millions on Wall Street.
MONEY MAGNET. Actually, Rubin wouldn't have to try very hard to get checks flowing. In the last election cycle, members of Hill banking panels raked in $15 million from political action committees and financial execs. The President's '96 reelection drive got $19.4 million from financial firms, according to the Center for Responsive Politics, or 17% of all soft-money donations--the unlimited funds companies and individuals can give to political parties. "The ability to regulate is a magnet," says Ellen S. Miller, of Public Campaign, a watchdog group. "Bob Rubin understands how the money-politics game is played better than anybody."
Not everyone buys the conspiracy theory. The Comptroller serves for five years, faces Senate confirmation, and isn't easy to influence, says Bert Ely, an Alexandria (Va.) financial consultant. Besides, adds the Treasury spokesman, Rubin's regulatory views are rooted in the principle that publicly accountable officials ought to set economic policy. That's a position that Clinton and the Dems' campaign-finance machine can certainly live with.