Garn, expressing his frustration over four years of congressional hearings and still no banking reform law, said, ""I do intend to push as hard as I possibly can for comprehensive banking legislation. The time to act is not this year. It was last year.''
Garn said the bill would close the so-called "non-bank" bank loophole, clarify interstate banking rules and allow depository institution holding company subsidiaries to offer mutual funds and underwrite and deal in municipal revenue bonds, mortgage-backed securities and commercial paper.
Although the Senate approved legislation last year, the House did not act, so the bill died at the end of the last Congress.
Federal Reserve Board Paul Volcker told the panel that legislation is ""urgently needed'' to update the definition and authority of depository institutions and to close loopholes that allow commercial firms to offer limited banking services without being subject to many banking regulations.
""If it looks like a bank, if it acts like a bank, if it makes noises like a bank, it ought to be subject to the same restrictions of a bank,'' Volcker said.
Volcker also urged Congress to establish federal guidelines for interstate banking since many parts of the country have already slipped through the back door by authorizing ""discriminatory'' regional banking compacts and utilizing the modern technology of automatic teller machines.
""I think the federal government has every right to step in and set the ground rules,'' he said, noting that the federal government is the principle insurer.
But Garn adamantly opposed the suggestion.
""There ain't no way we're going to put that provision in this bill,'' he said. ""I can see that as a nice little time bomb in the middle of my bill ready to blow it apart.''
Garn suggested that the only senators who would vote for interstate banking would be those from the two states with major financial centers - New York and California. Volcker disagreed with the assumption that interstate banking would lead to the consolidation of the nation's banking industry in the hands of a few large banks.t
Sen. William Proxmire, D-Wis., the ranking Democrat on the banking panel, said a comprehensive banking bill can be passed through the committee before the summer recess if the committee sticks essentially with the same bill it passed last year and does not reopen all of the issues. …