Banking bill gives agencies more legal clout.

WASHINGTON -- When the Federal Reserve was called into court in the mid-1980s to defend the membership structure of its key monetary policy committee, it was forced to seek help from the Department of Justice.

Michael Bradfield, the central bank's general counsel at the time, said federal law prevented him from representing the Fed before a judge.

Instead, he said, he had to endure rancorous battles with Justice as he tried to explain the Fed's position.

While Justice eventually did provide an effective defense for the Fed, Mr. Bradfield said the case could have been handled much more easily if the central bank had represented itself in court.

And if President Clinton signs the Riegle Community Development and Regulatory Improvement Act - as he is expected to do - Mr. Bradfield's successors will get to do just that.

The bill, which passed Congress last month, gives the Fed, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. the right to litigate nearly all of their own cases.

The agencies, just like the Office of Thrift Supervision (which already possesses the power) still must yield to the solicitor general's views when appealing to the Supreme Court.

The legislation also allows the OCC and OTS to approve regulations without first getting the Treasury Department's approval.

Officials at the Fed and OCC declined to comment. Officials at the FDIC could not be reached for comment.

But former litigators at the agencies were united in support.

"They have finally let my people go," said Mr. Bradfield, now a partner at the Washington law firm of Jones, Day, Reavis & Pogue.

He said the litigating authority is entirely consistent with the Fed's independent status. He also said Congress' action matched moves in other countries to give regulators more independence.

The legislation will affect the FDIC less than the other agencies because the insurer already handles most of its own cases, said John Douglas, the agency's former counsel who now works at Alston & Bird in Atlanta.

"It's clear they exercised it, even if they didn't have it," Mr. Douglas said of the FDIC's litigation authority.

C. Dawn Causey, regulatory counsel for the Savings and Community Bankers of. America, said the OCC is the big winner.

"This is a bigger deal for them because it allows them to go to court and enforce their own orders," Ms. Causey said.

She said the OCC previously had to ask Justice to file suit in federal court to enforce OCC civil-money-penalty claims.

Ms. Causey also said she expected the change to improve relations between the agencies and Justice, because they no longer should be waging turf battles.

Several banking lawyers said the change should allow regulators to appear in court more frequently to present their views on banking cases.

"With independent litigating authority, it is more likely that the agencies will file on behalf of banks," said Ronald R. Glancz, a partner at Venable, Baetjer, Howard & Civiletti in Washington.

Mr. Glancz, a former lawyer at the OCC and FDIC, said the new law eliminated the OTS' advantage.

"It really does create parity," Mr. Glancz said. "There is a certain amount of fairness there."

The law is not trouble free, lawyers concede. Mr. Glancz said Justice still must take the lead when it comes to battling laws that affect banking and nonbanking agencies.

For example, he said it would be inappropriate for an agency to battle a Freedom of Information Act case on its own, because the federal government needs to treat all these claims alike.

But most of the changes will be positive, lawyers said.

Mr. Glancz said the agencies will be able to recruit and retain better lawyers because it can offer them the chance to litigate in court.

A separate provision allowing the OCC and OTS to implement regulations without getting the Treasury Department's approval also should assist the agencies, he said.

"That is something that is important," Mr. Glancz said. "Treasury is usually a bottleneck. They don't have a very large staff that reviews regulations."

He said this delay hurts the OCC because the Fed and other agencies can issue their rules much quicker.

"That makes the OCC second class," he said. "They're not on the same foot as the other agencies."

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