By Garsson, Robert M.
American Banker , Vol. 156, No. 132
Rep. Dingell Attacks Bid To Broaden Bank Powers
WASHINGTON - Launching a vigorous attack on the Bush administration's banking bill, Rep. John D. Dingell on Wednesday warned that dangerous conflicts of interest will result if commercial banks are allowed into investment banking and other businesses.
Mr. Dingell, a Michigan Democrat who is chairman of the powerful House Energy and Commerce Committee, signaled that his committee will be a major obstacle to the wide-ranging reform bill.
Inherent Conflicts Cited
He used a hearing on the investment practices of Miami-based BankAtlantic Financial Corp. to dramatize his contention that there are inherent conflicts of interest when banking activities mix with commercial concerns.
"Should the federal government loosen regulatory controls on banks and allow them to enter into other financial fields like real estate, investment banking, and insurance, and allow the officers and owners to have entangled fiduciary duties?" Mr. Dingell asked.
"The best and simplest answer is no."
Mr. Dingell previously hinted he would oppose key aspects of the reform plan, using the Energy and Commerce Committee's jurisdiction over the securities and insurance industries as leverage.
Although the panel is unlikely to kill the bill outright, bankers fear it could saddle the legislation with so many restrictions on the use of new powers as to make them unworkable.
While Mr. Dingell's hearing focused on Bank Atlantic, a thrift that ran into problems with sophisticated real estate investments, another Energy and Commerce subcommittee heard from witnesses who warned that the changes the administration's reform proposals are too sweeping.
Comptroller General Charles Bowsher, head of the General Accounting Office of Congress, told the telecommunications and finance subcommittee that Congress should beef up the regulation and supervision of financial institutions before banks are given new powers.
Stephen Pizzo, a journalist who wrote a book on the thrift crisis, called the Treasury proposal "nonsense." Current arguments for banking deregulation, he said, are the same as those made a decade ago by thrifts, and will lead to the same type of crisis.
Mr. Dingell, who attended both hearings, ridiculed Treasury Secretary Nicholas Brady's contention that passage of the reform bill will avert a bailout of the banking industry. Mr. Dingell also indicated he is willing to play hardball with the Bush administration, saying said he will not let the bill move unless Mr. Brady testifies before his committee.
Mr. Dingell said the Treasury Secretary had not yet agreed to a hearing date. It was not possible to obtain comment from the Treasury Department.
Bailout Called Necessary
After hearing Mr. …