New York Times
October 17, 2001


House and Senate Leaders Clash on Banking Measuree


By JOSEPH KAHN and KURT EICHENWALD

WASHINGTON -- With some bankers and conservative groups alarmed about legislation intended to make it harder for terrorists to move money through the banking system, House and Senate leaders are clashing about whether to include banking controls in the pending terrorism bill.

Leaders in the Republican-controlled House say broad new rules designed to crack down on domestic and international money laundering should be dealt with separately from a bill that would provide the government with more policing power to combat terrorism.

The Senate has passed a single, comprehensive bill. Democratic leaders say that they will not take any more action on the overall bill unless it includes tougher banking rules.

Terrorists involved in the Sept. 11 attacks left a long paper trail of bank accounts, credit cards and money transfers showing that they used the ordinary banking system with little scrutiny. As a result, both sides in the debate say the attacks highlight the need for tougher banking procedures. Money-laundering legislation in the House and Senate would impose similar mandates on banks to scrutinize customers and report suspicious activity. It would also give the Treasury secretary broad powers to track money overseas and to punish foreign governments that fail to help in the crackdown.

But the urgency of fighting terrorism has not entirely overtaken a longstanding debate about whether banks are doing enough to make sure that criminals do not use the international financial system to help commit crimes.

The philosophical differences, people involved in the wrangling said, were revealed in procedural battles because opponents were reluctant to formally oppose any measures viewed as vital to fighting terrorism.

Senate Democrats said the banking controls must be considered as a package with the new terrorism law. Otherwise, Republican opponents will find a way to delay or kill the provisions, said Senator Carl Levin, Democrat of Michigan, whose money-laundering bill was incorporated into the Senate's terrorism bill.

"If the bill is separated, it could be the death warrant for our anti-money laundering legislation," Mr. Levin said.

Senator Tom Daschle of South Dakota, the majority leader, has said repeatedly that there will be no terrorism bill without the money-laundering measures included.

On the House side, Representative Dick Armey, Republican of Texas, told reporters today that the House will vote on its own money-laundering bill "no later than tomorrow." But he continued to reject the Senate strategy of linkage.

"We want to deal with them separately," Mr. Armey told reporters.

Though the White House backed the Senate bill when it was completed last week, it has taken a largely hands-off position on the tussle between the House and Senate over how to handle the banking rules.

Claire Buchan, a White House spokeswoman, said that the Bush administration wants the terrorism package become law as quickly as possible. If the banking rules get in the way of doing that, she said, then the administration does not oppose handling them independently.

"If it's possible to move them together quickly, then we'd like to see them together," Ms. Buchan said. "If not, then we'd like to see the counter- terrorism bill done quickly" and the banking legislation done shortly thereafter, she said.

The neutral position, several lawmakers and Congressional aides said, reflects a debate within the administration over how strongly to push the new banking controls. Law enforcement officials, including Attorney General John Ashcroft, have pushed hard for new rules that would allow law enforcement officers to scrutinize bank accounts and have easier access to bank records filed with the Internal Revenue Service and other federal agencies.

Treasury Secretary Paul H. O'Neill and Lawrence B. Lindsey, the White House economic adviser, often criticized money-laundering rules as burdensome and ineffective before the Sept. 11 attacks. Since, Mr. O'Neill has been leading the administration's high profile campaign to curtail terrorist access to the financial system.

Mr. Lindsey has continued to oppose some new banking measures as draconian. His office has taken the lead in seeking to work out differences between House and Senate versions of the terrorism bills, Congressional staffers and White House officials said.

Conservative groups and bankers have lobbied against the measures, although their approach has been low key relative to the intensive efforts to kill such legislation in the past.

Some 25 conservative leaders organized by the Center for Freedom and Prosperity sent a letter to President Bush earlier this month urging him to reject the Senate's money- laundering proposals. They called the new rules a backdoor attempt to eliminate international competition in the financial industry and complained that it gave too much power to the Treasury secretary.

Some banking groups, including the influential Texas Bankers Association, have also pushed House supporters, including Mr. Armey, to strip some of the most contentious provisions out of the banking bill, Congressional aides said.

"Bankers are very uncomfortable with this bill. It tries to turn banks into spies for the government," said Bert Ely, a banking consultant who opposes the new legislation. "But in this environment, most bankers are very shy about saying so."

Copyright 2001. New York Times Company. All rights reserved.

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