Comptroller Emerging As Strong Proponent Of Expanded Powers

WASHINGTON - The nation's top national bank regulator made it clear in a letter to a Democratic lawmaker that he is laying the groundwork to expand bank powers.

In a letter to Rep. John D. Dingell, Comptroller of the Currency Eugene A. Ludwig took exception to the Michigan Democrat's view that banks should not be able to offer expanded powers through operating subsidiaries.

"There is no reason a national bank should be denied such corporate flexibility" for conducting corporate activities through subsidiaries, Mr. Ludwig said.

"In a sense, the Comptroller has thrown down the gauntlet," said Bert Ely, an Alexandria, Va., consultant whose firm bears his name. "It is what I would call a very firm response."

Banks and their subsidiaries are now limited to offering certain traditional banking activities.

Rep. Dingell is the ranking Democrat on the House Commerce Committee, which has long stood guard over the securities industry - and efforts by bankers to enter those markets. Rep. Dingell is a staunch opponent of expanded bank securities powers.

Mr. Ludwig was responding to an earlier letter from Rep. Dingell that raised questions about the agency's proposal to liberalize rules pertaining to bank operating subsidiaries.

The regulator's reply was sent last Tuesday, the day before the Supreme Court strengthened the agency's hand by ruling that the business of banking is not limited to providing services listed in previous statutes.

"The Comptroller therefore has discretion to authorize activities beyond those specifically enumerated," the court ruled.

The agency refrained from saying which new activities it will allow for bank subsidiaries. However, if the rule is finalized, bank subsidiaries are expected to apply for permission to engage in a variety of new activities, such as underwriting securities, offering personal financial planning advice, operating data processing businesses, selling insurance products, and securitizing mortgages.

Karen Shaw, president of ISD/Shaw Inc., a Washington consulting group, said the OCC's letter "confirms the Comptroller's position to adopt a very competitive, pro-powers point of view." The reply to Rep. Dingell shows the agency's "determination to expand the national bank charter to the greatest degree possible."

In the letter, Mr. Ludwig made clear that the OCC is not limiting its consideration of new activities to those the Federal Reserve Board allows for the bank holding company subsidiaries it regulates.

"While there is considerable overlap in the activities that the board has found permissible for bank holding companies and those permissible for national banks, there will be instances where the activities . . . may vary in practice," the agency wrote.

While the national bank regulator has proposed a framework under which bank affiliates may ask permission to engage in these new activities, it has stopped far short of saying which new powers it will grant.

However, Mr.Ludwig assured Rep. Dingell that for each new activity the agency "anticipates receiving and considering input from all interested parties before making any final determination on the permissibility of such an activity."

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