Financial service giants pump up for next turf battle in Congress

It would also require banks to cash all federal, state, and local government checks for customers and non-customers alike, and the latter would be given a bank ID card for a small fee.

Bankers are not happy with the House committee version.

The ABA has called it both ``anti-competitive and anti-consumer,'' and opposes its inclusion of more regulation for bank activity as well as its stiffening of barriers between banks and securities affiliates.

``The ability of money-center banks to compete internationally is tied to allowing them into securities underwriting,'' says Herman Greene, a partner at Mayer, Brown & Platt, one of the major law firms representing banking interests.

``Banks will oppose the emphasis on community reinvestment in both bills, as well as the measure of commitment to the local community,'' Mr. Greene says. ``Their problem is maintaining their profitability, and they should be able to close branches in places where cash machines now provide the same services.''

While the CFA is pleased with the items the bankers dislike, it ``is very upset about the basic lifeline banking provisions,'' which have not defined what minimal fees should be, or eliminated requirements that are prohibitive to many low-income applicants, Ms. Miller says.

A study commissioned by the Alliance for the Separation of Banking and Insurance, a consortium of insurance companies and agents, which was released last week at a briefing by the House Committee on Banking, Finance, and Urban Affairs, reports that ``expanded bank powers would decrease the competitiveness of financial markets, imposing costs on consumers and increasing banking system risks.'' The report contends that banks entering the insurance market are likely to acquire existing insurance operations rather than establish new ones, thereby decreasing competition and letting prices go up.

Countering the report's statement that ``the cost of life insurance is generally higher than when purchased through insurance agents,'' Mr. Yingling at the ABA says the opposite is true in states where banks are allowed into insurance selling.

In fact, says Robert Litan, a senior fellow at the Brookings Institution, ``banks that sell insurance in New York and Massachusetts are the lowest-cost providers of insurance.'' The Consumer Federation agrees, saying that banks tend also to provide consumers with complete information about policy rates, which insurance companies do not.

Indeed, ``competition has forced banks to become more customer responsive,'' says Michael Warner, vice-president of advertising at the Bank Marketing Association in Chicago.

Since most of the United States' 14,000 banking institutions are small community banks, ``a structural requirement that precludes them from providing [mutual funds and other asset-backed securities] would be wrong and unnecessary,'' said Martha Seger, a Federal Reserve Board governor.

Such a restriction, Ms. Seger told the press last week, prevents local banks from serving the specific needs of their communities, and prevents those in economically distressed regions from nursing themselves back to health.

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