Magazine article American Banker

Fed Rejects White House Regulatory Compromise

Magazine article American Banker

Fed Rejects White House Regulatory Compromise

Article excerpt

WASHINGTON - The Clinton administration is ready to compromise on its regulatory consolidation plan, but not enough to satisfy the Federal Reserve Board's desire to retain significant oversight.

The administration would give the Fed joint examination authority over a cross section of large and small banks.

But Fed Governor John P. LaWare said in an interview Friday that no deal resulting in a single regulator is acceptable. He also made it clear that the Fed will insist on retaining a major role in the supervision of the banking system.

Senate Hearings This Week

The administration and the Fed will face off this week in hearings on the agency consolidation bill before the Senate Banking Committee.

Treasury Secretary Lloyd Bentsen is expected to tell the committee Tuesday that the administration is willing to let the Fed choose 10 of the largest banks to examine each year - as long as those banks' combined assets do not add up to more than 25% of the industry total.

The Fed also could examine some smaller bank holding companies; their assets could not exceed 5% of the aggregate.

Another compromise floated last week would allow the Fed to do joint exams of the 20 largest holding companies. In those, the central bank would be the principal examiner only when the holding company's biggest bank is state chartered. Six of the top 20 holding companies are led by a state bank.

"Totally Unacceptable"

After the 20-bank plan was explained to him, Mr. …

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