Magazine article American Banker

Greenspan Assures Dingell on Bank Security Powers

Magazine article American Banker

Greenspan Assures Dingell on Bank Security Powers

Article excerpt

WASHINGTON -- Federal Reserve Chairman Alan Greenspan has assured wary legislators that he has no immediate plan to expand banks' authority to underwrite securities through so-called Section 20 affiliates.

The Fed has received no formal requests to increase the volume of securities that a bank's Section 20 affiliate may underwrite, the Fed chief said in a Feb. 4 letter.

However, the Fed is poised to work its way through a backlog of 20 applications by banks seeking to engage in securities activities. And it will act "within the next several months" on several regulatory proposals to modify restrictions on securities activities, including rules on cross-marketing and director interlocks.

Response to Legislators

Mr. Greenspan gave a status report on bank securities activities in a letter to two leaders of the House Energy and Commerce Committee: Rep. John Dingell, D-Mich., the chairman, and Rep. Edward Markey, D-Mass., chairman of its subcommittee on telecommunications and finance.

The legislators had asked Mr. Greenspan in December to spell out the Fed's plans.

His response was sweet music to the lawmakers, who blocked the Bush administration's banking reform proposal last year to knock down the legal walls separating the banking and securities businesses.

"I think Chairman Greenspan is saying, 'Look, we have an obligation to act on these proposals, and we're going to,'" said Melanie Fein, a lawyer with Arnold and Porter. …

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