WASHINGTON -- Merging the agencies that regulate financial institutions was declared a top priority Tuesday by both the Senate and House banking committee chairmen.

The existing system "is costly, burdensome, inefficient, archaic. and must be reengineered and modernized," Senate Banking Committee Chairman Donald W. Riegle said. "Now is the time to address this issue head on."

The idea of combining the regulatory agencies is not new, but it has gained momentum recently and does fit neatly into the Clinton administration's plans to streamline the federal government.

Backing from Ex-Regulators

The Michigan Democrat bolstered his case Tuesday during a hearing in which five former regulators and former Sen. William Proxmire. D-Wis., backed his plans.

Mr. Riegle said the next step is to get the Clinton administration on board. Treasury Under Secretary Frank Newman is slated to present the administration's position in early November. Mr. Riegle said he hopes to enact legislation by the end of the congressional session, which concludes in the fall of 1994.

Two years ago, Mr. Riegle endorsed combining the Comptroller of the Currency and the Office of Thrift Supervision. But his appetite has increased.

"I now believe that we must go much further in our consolidation efforts," he said.

Gonzalez Favors One Agency

House Banking Committee Chairman Henry B. Gonzalez, D-Tex., who testified at the Senate hearing, said he supports pulling all bank and thrift oversight into one independent agency. That would mean the Federal Reserve Board and the Federal Deposit Insurance Corp. would lose their bank supervision duties.

Mr. Riegle said that is a good start, but added that credit union regulation could be folded in as well. Eventually, even the Securities and Exchange Commission and the Commodities Futures Trading Commission could be merged in, he said.

This one super-agency must be independent, the banking committee chairmen insisted, as did all the witnesses. That could prove to be the sticking point with the Clinton administration. Historically, the executive branch has argued that it should continue to have a hand in financial institution regulation.

De Facto Merger

A Treasury spokeswoman said Tuesday that the Clinton administration will not take a position on this question until November. But the administration already has accomplished a de facto merger of the OCC, the OTS, and the FDIC by not appointing anyone to run two of the three agencies.

Mr. Riegle noted that consolidation is made easier by the fact that the FDIC and OTS do not have permanent chiefs. There are fewer people in positions of power to fight the turf wars that have blocked legislation in the past he said.

Besides Mr. Proxmire, others testifying in support of sweeping regulatory consolidation yesterday were former FDIC Chairman L. William Seidman, former OTS Director Timothy Ryan, former SEC Chairman Richard C. Breeden, former Fed Governor Andrew F. Brimmer, and former Comptroller John G. Heimann.

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