Magazine article American Banker

Treasury Hits Regulated-Rates Plan; Says 'Core Banks' Proposal Could Be Destabilizing

Magazine article American Banker

Treasury Hits Regulated-Rates Plan; Says 'Core Banks' Proposal Could Be Destabilizing

Article excerpt

Treasury Hits Regulated-Rates Plan

Says |Core Banks' Proposal Could Be Destabilizing

WASHINGTON -- The Bush administration warned on Tuesday that a proposal to establish "core banks" with regulated interest rates is an "untried theory" that could place the entire financial system in jeopardy.

The core banking proposal "would fundamentally alter the traditional business of banking in the United States in ways that are difficult to forecast, but that are potentially destabilizing," Assistant Treasury Secretary Jerome H. Powell told the House Banking Committee.

The plan, promoted by Rep. Charles Schumer, D-N.Y., "could create or aggravate future credit crunches," Mr. Powell warned.

Limits on Rates and Loans

Rep. Schumer would peg core banks' deposit rates to Treasury securities and restrict their lending to individual borrowers. Depositors seeking higher interest rates would have to go to a separate, uninsured bank that presumably would be making more risky investments.

Treasury's strong opposition, along with doubts voiced by other members of the banking committee, suggested that core banking may not survive committee votes this week and next.

But some observers believe Rep. Schumer is gaining ground with his proposal, which was unveiled just as the panel prepared to consider the Bush administration's bank reform package.

|A Golden Opportunity'

Rep. Schumer has held out the prospect of bringing it up on the House floor if it fails in committee. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.