Shadow Panel: Raise Limit on Banks' Securities Revenue

The federal banking agencies should not let the congressional impasse on new bank powers delay their own initiatives, the Shadow Financial Regulatory Committee said Monday.

The committee, which celebrated its 10th anniversary Monday, said in a policy statement that the Federal Reserve Board should expand the amount of revenue a bank can make from underwriting securities to 50%. It currently stands at 10%.

It also said the Office of the Comptroller of the Currency should expand on the U.S. Supreme Court's January 1995 Valic decision, which said the comptroller has broad authority to determine what activities are allowed as incidental to banking.

Finally, it said the Federal Deposit Insurance Corp. should use only sparingly its authority to veto innovative activities by state banks.

"The committee prefers deregulation by legislation," said Peter J. Wallison, a shadow committee member and a lawyer at Gibson, Dunn & Crutcher in Washington. "But that has not occurred."

The committee, in a separate statement, said lawmakers should require the Office of Management and Budget and the Congressional Budget Office to account in the federal budget for the implicit subsidy given to the government-sponsored secondary market agencies.

Edward J. Kane, a committee member and professor at Boston College, said policymakers now don't know how much the government's support of Fannie Mae, Freddie Mac, and other such agencies costs.

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