Greenspan Backs Bank Overhaul with Limits
Marriott, Anne, The Washington Times (Washington, DC)
Federal Reserve Chairman Alan Greenspan yesterday urged Congress to tear down the walls that separate the banking, securities and insurance industries, but he cautioned against allowing financial companies to merge with commercial businesses.
His testimony before the House banking committee was somewhat of a step back for Mr. Greenspan, who in the past supported modernization plans that would allow a mix of banking and commerce.
"Congress should widen the permissible range of affiliations for banking organizations in order to expand the choices for consumers and increase the efficiency of the financial markets," Mr. Greenspan said.
But opening the door for banks to merge with nonfinancial companies would be a mistake before Congress sees the impact of repealing the 1934 Glass-Steagall Act, he said. That law, among other things, separates banks from brokerage houses and insurance companies.
Bankers argue that the shrinking global marketplace, coupled with the advent of on-line banking, forces them to offer more services to remain competitive. Banks in several other countries, including Germany and Japan, have this leeway.
Restrictions have been loosened somewhat. The Supreme Court ruled that banks may sell insurance in towns with fewer than 5,000 people, and the Office of the Comptroller of Currency said banks may derive up to 25 percent of their revenues from securities and underwriting.
"The changes are already taking place in the marketplace," said Ed Yingling, the American Bankers Association's executive director of government relations. "We need to bring the regulatory structure up to date with what's happening in the United States and internationally."
Congress has tried for nearly 10 years to revise complicated laws that regulate banking. …