WASHINGTON -- Rep. John Dingell told the comptroller of the currency this week that recently proposed rule changes that would expand national banks' securities powers "raise significant questions of fact and law with troubling practical and public policy implications."
The Michigan congressman, who will relinquish the chairmanship of the House Energy and Commerce Committee to become the panel's ranking Democrat next year, said in a letter released yesterday to comptroller of the currency Eugene Ludwig that the proposed rule change would conflict with federal securities and banking laws and improperly shelter the banking agency from public and congressional scrutiny.
Industry sources said the Nov. 29 proposal could significantly expand underwriting and dealing by national banks and operating subsidiaries in all types of securities, including municipal bonds.
The proposed action is the latest in a series of agency and court actions that have helped remove barriers between commercial and investment banking. The actions have elevated reform of the Glass-Steagall Act on the agenda of key lawmakers, including Rep. Jim Leach, R-Iowa, the incoming chairman of the House Banking Committee.
The 1933 act, which was passed to separate the two types of banking, generally lets banks underwrite general obligation bons but not municipal revenue bonds.
In his letter to Ludwig, Dingell said that for three decades the Office of the Comptroller of the Currency has allowed national banks to set up or acquire operating subsidiaries on a case-by-case basis to engage in activities directly related to banks.
The proposed revision would create an expedited procedure to allow banks and subsidiaries to engage in activities deemed "low risk" by the comptroller's office. "This proposal appears to create a regulatory scheme that is analogous to the Federal Reserve Board's Regulation Y 'laundry list' of activities that are permissible for bank holding company affiliates," Dingell said.
"In addition, for the first time, the [comptroller's office] has proposed to allow bank subsidiaries to engage in activities that may be prohibited to, or restricted, when undertaken by banks," Dingell said.
Ludwig's agency "does not have explicit statutory authority to permit bank operating activities," Dingell said. Glass-Steagall does not let banks purchase shares in operating subsidiaries, he said.
In the letter and in a statement is-sued yesterday, Dingell also said that the proposed changes would mean the comptroller's office would no longer be subject to the Administrative Procedures Act and the Freedom of Information Act.
Dingell asked Ludwig to clarify his authority to carry out the rule change and to address a number of factual and legal issues. He said he will file a comment letter after he gets a response from the agency to his letter.
A Dingell aide said he could not comment on how much fight Dingell will put into bank securities issues in his new role as ranking Democrat, which carries with it a sharply reduced staff.