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November 1, 1998

The Man Who Butchered Section 31 Relief Bill: How Virginia's Tom Bliley Foiled House Rules Chairm

By Jeffrey L. Winograd

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  • The Man Who Butchered Section 31 Relief Bill: How Virginia's Tom Bliley Foiled House Rules Chairm

Tom Bliley has an appearance straight out of central casting: tall, white-haired and courtly. But he's no actor. Bliley is chairman of the House Commerce Committee.

And the Republican congressman from Virginia was at the center of a political storm in the waning hours of the 105th Congress last month.

Bliley single-handedly derailed proposed compromise legislation that would have placed a one-year cap on revenues for the federal government raised from Section 31 transaction fees. The cap would have limited the levy to an estimated $150 million in 1999 based on current equity-transaction volume, enough to buttress the Securities and Exchange Commission's budget.

Bliley foiled the efforts of House Rules Committee Chairman Gerald Solomon (R-N.Y.), who was spearheading a Section 31 relief campaign spurred by an activist group of trade associations and exchanges led by the Security Traders Association.

So for now, the equity-trading community must face the continued toll of full-scale Section 31 fees, though efforts to reintroduce a relief bill are expected on Capitol Hill sometime during the next session

(Solomon's unsuccessful legislation is separate from a proposal by the National Association of Securities Dealers, filed with the SEC, to eliminate the double-counting on Nasdaq market makers' riskless principal trades.)

Solomon's Strategy

Solomon's aim was to attach his proposed fee-cap legislation to the omnibus spending bill in Congress, coming just hours before lawmakers headed home for Election Day. But in the end his effort collapsed because of Bliley's strong opposition.

"When [lobbyists and others] came to see me about reducing Section 31 fees, I said what you have to do first is get the agreement of all the committees involved, and I will go right along with that," Bliley told Traders Magazine, recounting the background of his efforts.

Speaking minutes before the floor debate on the spending bill, Bliley, who chairs the panel which has jurisdiction over the SEC, said the problem was that supporters of a reduction didn't get agreement from the relevant committees.

"They tried to do an end run and go through the [House] Rules Committee," he said. "And it wasn't just me objecting, but the appropriators were objecting too. The White House was objecting. [SEC Chairman] Arthur Levitt was objecting. And so it just didn't make it."

Capitol Hill observers dismissed Bliley's public position, saying it was a smokescreen for his deeply-rooted opposition to the Section 31 relief campaign. "Bliley's opposition doesn't stem from any philosophical disagreements," said an aide to a Republican congressman. "It stems from a fear of being perceived as helping liberal Democrats that lobby for groups such as the Securities Industry Association," claimed the aide. The SIA is a member of the ad hoc Section 31 coalition.

Bliley, an avowed conservative, bucked the hopes of many key Republicans who co-sponsored the original bill of GOP colleague Solomon for permanent fee-cap relief, including House Majority Leader Richard Armey (R-Texas), House Ways and Means Committee Chairman Bill Archer (R-Texas), and House Appropriations Committee Chairman Robert Livingston (R-La.).

Bliley even ignored the sentiments of the staunch GOP allies among the Washington tax-cutting crowd. Even the U.S. Chamber of Commerce and the National Federation of Independent Businesses went on record in support of the Solomon bill.