John LaFalce, a longtime Democratic congressman known for forging consensus across the aisle on financial issues, died April 11 at the age of 85.
LaFalce served his western New York district from 1975 until his retirement in 2003. He chose not to run for reelection when his district was combined with that of another Democrat.
He made a mark on two major pieces of financial legislation at the time: The Gramm-Leach-Bliley bill of 1999 that broke down Depression era barriers between investment banking and commercial banking. He was also instrumental several years later in steering the Sarbanes-Oxley corporate accounting bill to enactment.
LaFalce’s four years as ranking member of what became the House Financial Services Committee gave him a reputation for crafting bipartisan bills, often in consultation with Republican leaders and administration officials, that addressed financial services industry priorities as well as Democrats’ goals of stronger consumer protection and improved banking services for the poor.
Both the Gramm-Leach-Bliley bill, making fundamental changes in the structure of financial firms and enabling them to offer an array of services to customers and clients, along with the Sarbanes-Oxley legislation emerged during his four years as the top Democrat, from 1998 to 2002.
LaFalce also chaired the House Small Business Committee from 1987-95.
Rep. Nancy Pelosi, D-Calif., whose tenure as the top House Democrat hadn’t yet begun, praised LaFalce for those achievements in the Nov. 19, 2002, Congressional Record as his term was ending.
“As this record attests, John LaFalce made a great deal of law during his outstanding career, without making a great deal of noise,” Pelosi said.
The financial modernization law repealed parts of Glass-Steagall Act of 1933. The 1999 bill allowed financial holding companies to include banking, securities and insurance subsidiaries. For the first time, commercial banks could offer investment banking and insurance underwriting.
The bill gave the Federal Reserve new supervisory powers and contained consumer protections, such as restricting cross-marketing and financial transactions between bank and nonbank subsidiaries of holding companies. It also limited the size of banks’ financial subsidiaries.
The law became known as Gramm-Leach-Bliley because of its primary backers, Sen. Phil Gramm, R-Texas, and Reps. Jim Leach, R-Iowa, and Thomas Bliley, R-Va.
LaFalce helped secure support for the bill from the Clinton administration’s Treasury Department and his congressional colleagues, Pelosi said in her tribute.
“He was able to fashion a revised bipartisan bill that ultimately served as the basis for committee passage,” she said. “That bill provided the basis for the bipartisan agreement that led to enactment of the Financial Services Act of 1999.”
Pelosi called LaFalce “the prime mover of the sweeping corporate accounting reform legislation” that became known for its primary backers, Sen. Paul Sarbanes, D-Md., and Rep. Michael Oxley, R-Ohio. The law came in response to the collapse of Enron, WorldCom, Global Crossing and other companies.
That law established the Public Company Accounting Oversight Board to oversee the audits of public companies subject to securities law. Sarbanes-Oxley included provisions intended to deter and punish corporate accounting fraud and corruption.
LaFalce attributed his political views to his working-class childhood in Buffalo. His father was a laborer at General Mills and his mother worked at a bakery.
LaFalce paid his own way through the private Canisius High School in his hometown, becoming the first high school graduate in his family. He went on to earn an undergraduate degree from Canisius College and a law degree from Villanova University.
In his first public speech as a student at the high school, he discussed two papal encyclicals that dealt with worker rights. LaFalce later said that preparing that speech had convinced him of the need to ensure people the right to a job and a just wage.
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