Go to the next article or back to the Color of Money index or Power Reporting


The Color of Money

Follow-ups and reaction

Bank bill OK'd after 16 hours of debate

By Bill Dedman, The Atlanta Journal-Constitution

Published July 29, 1988, Page B1

Copyright 1988, The Atlanta Journal-Constitution

Banks would have new rights to enter the securities business but would have new obligations to serve the poor under a bill approved Thursday by the House Banking Committee.

The bill would provide the first crack in the wall between investment and banking that was erected in reforms after the 1929 stock market crash. The bill was approved on a 30-20 vote after 16 hours of debate, ending at 3 a.m.

The bill would not permit bank holding companies to underwrite corporate stocks, but it would allow them into the underwriting of many other securities such as corporate bonds, mutual funds, debt convertible into stock, commercial paper, municipal revenue bonds and securities backed by mortgages.

The underwriting would have to be done through a subsidiary that does not use the bank's name, logo or premises. Banks could not sell real estate or insurance.

In exchange for the new business, banks would be required to provide low-cost "lifeline" checking accounts, and to establish special accounts for cashing government checks such as Social Security and welfare checks with a maximum fee of $2.

The bill also would increase enforcement of federal laws against redlining -- refusing to lend in areas because of race or income. Each bank's grade on complying with the Community Reinvestment Act, the anti-redlining law, would be made public. Only banks with good grades could underwrite securities.

"The bankers were saying that redlining was a thing of the past, but a lot of members became aware that there was a problem because of the stories in Atlanta," said Donald R. Carlson, legislative director for committee member Rep. Joseph P. Kennedy II (D-Mass.). Carlson was referring to a study by The Atlanta Journal-Constitution which found that banks had withdrawn services from minority areas. "When they said there was no problem, we waved the articles."

Georgians on the committee were divided on the bill. Democrat Doug Barnard Jr. of Augusta supported the bill and surprised some of his colleagues by endorsing the consumer provisions. Republican Pat Swindall of Stone Mountain voted against the bill.

The bill faces a difficult future, with opposition from bank and securities groups, differences with a Senate bill passed earlier, and little time left in the legislative year.

The bill now is headed for the House Energy and Commerce Committee, where the chairman, Rep. John D. Dingell (D-Mich.), has said he is opposed to letting banks into the securities business.


Go to the next article or back to the Color of Money index or Power Reporting


Reprinted with permission from The Atlanta Journal and The Atlanta Constitution. Further reproduction, retransmission or distribution of these materials without the prior written consent of The Atlanta Journal and The Atlanta Constitution, and any copyright holder identified in the material's copyright notice, is prohibited.


Please send comments and story ideas to Bill Dedman, Bill@PowerReporting.com

Home page: Power Reporting