Greenspan to Congress: Rethink Banking Rules

By Klinkerman, Steve | American Banker, May 7, 1993 | Go to article overview
Save to active project

Greenspan to Congress: Rethink Banking Rules


Klinkerman, Steve, American Banker


CHICAGO - Federal Reserve Board Chairman Alan Greenspan on Thursday called on Congress and regulators to change their perceptions about the risk profiles of the nation's banks and to loosen restrictive laws.

Banks and the nation's economy will be hurt by a continuing emphasis on risk avoidance, he said, adding that Congress should stop "micromanagement" of banks and expand their powers.

Speaking at a conference sponsored by the Federal Reserve Bank of Chicago, the nation's senior banking regulator said Congress overreacted when it passed the Federal Deposit Insurance Corporation Improvement Act of 1991.

He cited section 132 of the law as "the most inconsistent with appropriate bank regulation."

The section directs federal bank agencies to set standards "regarding operations, management, asset quality, earnings, stock values ... and employee compensation.," Mr. Greenspan said.

|Risk Taking Is Essential'

"There is danger," he added, in moving too aggressively to protect taxpayers from the cost of bank failure, since risk taking is essential to the creation of wealth.

"If minimizing risks to taxpayers is interpreted as minimizing bank failure, then we are very likely to deter banks to an excessive degree from accepting the kinds of risk that create the value of their franchises," he said.

Mr. Greenspan also urged lawmakers to carefully consider proposals now being prepared by the Federal Financial Institutions Examination Council to modify certain sections of the law.

Recent Regs Defended

At a separate session of the conference, Harrison Young, director of resolutions at the FDIC, defended many of the recent laws and regulations.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Greenspan to Congress: Rethink Banking Rules
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?