EDITORIAL: GET OFF THE DIME

Enough talk. Enough lobbying. The Senate should pass its version of financial services deregulation, negotiate its differences with the House of Representatives and send a compromise bill to the White House for President Clinton’s signature.

A New York Times report last week quotes an unnamed administration official who vows the president will veto any bill that gives the Federal Reserve greater regulatory power over financial services holding companies than the Treasury Department. The administration, according to the report (obviously prompted by Treasury Secretary Robert E. Rubin, on the eve of deregulation hearings in the Senate no less), says it wants everyone to start afresh next year.

That’s ridiculous. Debate over financial services deregulation has been going on since Gerald Ford was in the White House, Leonid Brezhnev was in the Kremlin and Lawrence Welk was still alive and popular on TV. After almost 25 years of talk, we don’t need to start all over again.

This is especially true now that the House of Representatives has done the heavy lifting and constructed a recognizable form of deregulation out of the muck of entrenched industry self-interest. The vision is only partly realized, but it’s now up to Sen. Alfonse D’Amato, R-N.Y., and the Senate Banking Committee to produce their version of reform.

It will be hard work — some of the senators’ major campaign contributors inevitably will end up disappointed — but work they must. Deregulation will mean more competition. Banks, insurance companies, stockbrokers, money managers, mutual fund companies — all will be able to enter one another’s businesses more easily, leading to better service and lower costs for consumers.

Current law, for example, allows banks to enter the securities and insurance businesses by buying brokerage firms or insurance companies, but brokerages and insurance companies can’t buy banks. The House bill repeals the barriers to brokers and insurance companies buying banks; meantime, it eliminates the cap on the size of securities firm a bank may have and takes steps to make sure that banks and insurance companies compete on an equal footing.

Hamstrung by near-70-year-old laws, financial institutions are moving into each others’ territories through rickety, jury-rigged structures designed to evade regulations. This is inefficient — and costly to the consumer.

The House bill would reduce, equalize and smooth, but not eliminate, regulation. And that’s appropriate.

Both the Treasury Department and the Federal Reserve have legitimate roles to play overseeing the competition to protect the consumer and the U.S. economy. The House bill has one version of those roles. The Senate Banking Committee seems to see the roles differently. The administration apparently wants a third balance. Let the negotiating begin. And let it begin now and be finished by the end of the Congressional session. The consumer has already waited too long.