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By Jay MacDonald • Bankrate.com

How much you pay for banking and insurance, how much financial privacy you have, and whether you have access to loans and bank tellers is being decided right now.

In the wide-ranging Financial Services Modernization Act, Congress aims to abolish legal barriers separating banking, insurance and brokerage firms. It likely would unleash a flurry of mergers that would create financial-services supermarkets offering everything from checking accounts to homeowners insurance policies to mutual funds.

A House-Senate conference committee began crafting the final version of the bill Oct. 14. At the same time, the committee's leaders were bargaining with the White House, which signaled approval on Oct. 22. Members of the conference committee will have a week or two to review the White House-approved bill before deciding whether to bring it to the floor of the House and Senate.

Far-reaching effects
The law could have far-reaching effects on your life. The impact of the law on consumers has been the subject of some discussion, but not a lot. Instead, the debate over financial services reform devolved into an intense turf battle between Congress and the White House over who would exert more regulatory control: the Federal Reserve or the Treasury Department. They finally came to an agreement, crafting a law that would, among other things:

• Allow banks, brokerages and insurance companies to share common ownership and create "financial supermarkets" by merging.
• Let financial institutions use your private financial information unless you tell them not to -- although, in many cases, they can use the information without asking your permission.
• Require automated teller machines to warn you about any fees you will be charged.
• Reduce the amount of scrutiny that some banks undergo to make sure that everyone in their service areas has access to banking services and loans.

For the most part, the debate consists of businesses and regulators jockeying for position against one another: big banks vs. little banks, commercial banks vs. savings-and-loan institutions, the Treasury Department vs. the Federal Reserve. Only occasionally have the effects of the proposed law on consumers dominated the debate.

One person who has acknowledged the consumer is Sen. Phil Gramm, chairman of the Senate banking committee. The conservative Texas Republican, who has never been a favorite of liberal consumer groups, said in August: "The reason for doing this bill is to expand both the volume and the quality of financial services, and to do it in a way that will end up producing lower prices for the American consumer."

A look at the proposed law's effects
Will consumers have more choices and fewer prices? And what about privacy? In a series of sidebars to this main story, Bankrate.com has reviewed how the bill would affect consumers in the following areas:

• Affordability: If the bill becomes law, it likely will result in accelerated mergers of banks, insurance companies and investment firms. Experts disagree on whether that will increase or reduce competition, innovation and costs to consumers.
• Privacy: When a bank and an insurance company are owned by a parent corporation that has scores of marketing agreements with other businesses, the temptation to sell and share your personal data will be hard to resist. You will have the option of opting out of the sale of some of your personal data, but not all of it.
• Accessibility: The bill makes some changes in the Community Reinvestment Act, which encourages banks to offer access to everyone in their service areas. Small and rural banks wouldn't receive as much scrutiny as they do now, and bank payments of more than $10,000 to community groups would have to be disclosed.
• Other ways, including a requirement that ATMs disclose fees up-front and a stiff-arm to Wal-Mart's application to buy a savings-and-loan.

The appeal of a repeal
Congress has periodically considered financial-services reform for 20 years, but this is the most serious attempt. At its core, the idea is to repeal the Glass-Steagall Act of 1933, a law that was passed in response to the Great Depression, which barred banks, insurance companies and securities brokerages from getting into each others' business.

The restrictions on financial services were enacted because legislators blamed the Depression partly on conflicts of interest among banks, real-estate developers, manufacturers, insurance companies and brokerages. Lately, historians have disputed the conclusions from which the Glass-Steagall Act arose.

And then came the merger in 1998 of banking colossus Citicorp and insurance and investment-banking titan Travelers. The $83 billion deal formed Citigroup, the world's largest financial-services company. At least in spirit, the merger violated the Glass-Steagall Act but regulators allowed it anyway, and the push to repeal Depression-era banking restrictions became a shove.

The result is the Financial Services Modernization Act of 1999.

Congress and White House turf battle
The biggest disagreement between Congress and the White House had to do with how combined corporate monoliths would be structured -- and, therefore, who would regulate them. On Thursday, Oct. 14, the Federal Reserve, an independent agency, and the Treasury Department, which answers to the president, settled their turf war. The battle had to do with how banks would offer services such as insurance and securities underwriting, and which agency would regulate those activities. Basically, the two antagonists agreed to split the difference.

Proponents and opponents imagine differing scenarios if the bill becomes law.

The dream scenario
Under the dream scenario, you will walk into a bank to open a checking account and you'll be able to walk across the lobby and buy your auto, homeowners and life insurance.

Later, when you alter your life insurance policy because of the birth of a child, a brokerage firm affiliated with the bank will call and offer you a good deal on a mutual fund, based on your financial needs as a new parent.

You refinance your mortgage over the Internet and the insurance company shoots you an e-mail offering a lower rate on your homeowners policy, which you accept. During an economic recession, an earthquake causes the insurance company to lose lots of money, but your bank remains safe and strong.

The nightmare scenario
Under the nightmare scenario, you'll be required to pay all sorts of charges for your checking account unless you buy life, homeowners and auto insurance from the same company.

In continuing invasions of your privacy, you receive repeated phone calls offering insurance and investments every time your life circumstances change. The bank charges you for using an ATM, talking to a teller or banking by phone. You don't move your banking accounts, insurance policies and investment portfolio to another financial-service conglomerate because it's too much of a hassle -- and, anyway, the other companies levy the same charges because there's little competition after all of the mergers.

Your bank is barely holding on during an economic recession when an earthquake causes its insurance subsidiary to lose lots of money, and the government has to bail out your bank. You select another financial conglomerate and hope for the best.

The truth probably will fall somewhere between the dream and nightmare scenarios. Both sides of the debate would agree that globalization, technology and the urge for companies to merge will make for changes in the next few decades that are beyond our imaginings.

-- Posted: Oct. 15, 1999