D'Amato Slams Fed Plan to Aid Japanese

WASHINGTON - Senate Banking Committee Chairman Alfonse M. D'Amato last week questioned the Federal Reserve Board's plan to aid Japanese banks should they need cash fast.

Fed officials are concerned that staggering bad-loan problems at Japanese banks could lead to a run on deposits. The Fed's plan, revealed during a House Banking Committee hearing last week, calls for the central bank to buy U.S. Treasury securities held by the Japanese subsidiaries if they need the liquidity.

In an Oct. 18 letter to Federal Reserve Board Chairman Alan Greenspan, Sen. D'Amato said he has "serious misgivings" about the agency's plans.

"This arrangement of swapping U.S. dollars for Treasury bonds appears to shift typical market risks from Japan, where they rightfully belong, to the Federal Reserve and, ultimately, U.S. taxpayers," Sen. D'Amato wrote.

Sen. D'Amato warned the Fed that it must "fully brief this committee before formally entering into or implementing any such secial financing arrangements with Japan."