WASHINGTON -- Two key House members may call for regulations that would require state and local governments to declare at the time of a bond offering whether they were coerced into naming a bank as underwriter of their bonds.
The two congressmen also may seek a provision that would require banks to honor a "cooling off" period during which they could not extend credit to an issuer whose securities are being underwritten by the bank's securities affiliate.
The ideas were floated this week by Rep. John Dingell, D-Mich., and Rep. Edward Markey, D-Mass., in a letter to Charles A. Bowsher, comptroller general of the General Accounting Office.
Dingell, who chairs the House Energy and Commerce Committee, and Markey, who heads the panel's subcommittee on telecommunications and finance, have been concerned about reports that some banks are violating the federal "anti-tying" law, which bars banks from requiring a customer to purchase one service as a condition of obtaining another, such as credit.
The House members, responding to a recent report in The Bond Buyer that NationsBank may have violated the anti-tying law, sent a letter to the Federal Reserve Board and the Office of the Comptroller of the Currency on Aug. 8 asking if they are investigating the situation. They also wrote Bowsher asking the GAO to study the validity of the federal antitying law in light of changes in the nature of competition between banks and securities firms.
The comptroller's office responded Sept. 6 that it has launched an investigation. But it added that the Securities Industry Association, which has charged that bank tying may be a broad problem, has alerted the comptroller's office to only a handful of complaints. The congressmen asked Bowsher to study the "effectiveness of the regulators' examination techniques ."
"Questions have been asked about the veracity" of the assertion by the comptroller's office about the level of complaints, the congressmen said in the letter. "Injured customers often are reluctant to admit that they have been forced to purchase products and services," they said. Also, few banks may put their demands for tied services in writing. Nevertheless, it appears that regulators may be limiting their investigations to cases where there is evidence of tying on paper.
"Much of the regulatory energy invested in preventing tying abuses is spent searching for such smoking guns and, when they are not found, the conclusion seems to be drawn that tying has not Occurred," the chairmen said.
