Fed faulted for opposing merger of regulators.

WASHINGTON - A group of independent industry experts scolded the Federal Reserve on Monday for opposing a merger of the bank agencies.

The Shadow Financial Regulatory Committee endorsed the Clinton administration's plan to consolidate bank regulation into a single agency, but did offer five suggestions to improve the proposal.

Speaking for the shadow committee, bank turnaround specialist Lawrence Connell said a simplified and streamlined Federal Banking Agency would reduce regulatory costs. Accountability, too, would be improved, he said.

Agencies Under Fire

"The most vigorous opponents are the agencies themselves, in particular the Federal Reserve, which has claimed that its participation in bank supervision is necessary," Mr. Connell said at a press conference on Monday.

"Under the administration's proposal, the Federal Reserve will have sufficient information to implement monetary policy."

Treasury Secretary Lloyd Bentsen announced Nov. 23 that the administration wants to combine the bank supervisory functions of the Fed, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.

Would Have Access to Exams

The Fed opposed the move, arguing that it must retain its current relationship with banks to conduct monetary policy. The administration's plan does give the Fed access to any bank exam report. The Fed also would retain control over the discount window and operation of the payments system.

The shadow committee is not completely satisfied with the administration's plan.

The Treasury secretary should not get one of the five seats on the new banking commission, Mr. Connell said. The new agency's independence will be limited with Mr. Bentsen on the board.

The committee also said the FDIC chairman should be a member of the new commission's board in order to provide more protection to the deposit insurance fund, Mr. Connell said.

The shadow group had three other recommendations:

* Organize the new commission by function rather than by industry. For example, there should be one supervision division for all types of institutions.

* Do not view consolidation as a substitute for reform of the laws governing banking.

* Include credit union regulators in the consolidation.

* This last suggestion is noteworthy, since Mr. Connell used to chair the National Credit Union Administration.

Architect of Recent Deal

Mr. Connell is currently a private consultant to troubled banks, working from a base in New Hampshire. He recently completed the turnaround of Society for Savings and the sale of the Hartford institution to Bank of Boston.

Beyond Mr. Connell, shadow committee members include a lawyer, a banker, and nine academics. The committee announced Monday that attorney Roger Mehle resigned to become executive director of the Federal Retirement Thrift Investment Board.

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