WASHINGTON - The outgoing chairman of the House Energy and Commerce Committee last week strongly criticized a regulatory plan that could allow bank subsidiaries to underwrite securities.
Rep. John D. Dingell said plans by the Office of the Comptroller of the Currency to allow bank operating subsidiaries to offer products and services prohibited for their parent, "raise significant questions of fact and law with troubling practical and public policy implications."
The Michigan Democrat also questioned whether the agency's proposal to streamline banks' applications for new corporate activities would make the process too secretive.
Rep. Dingell argued that the OCC is barred from rulemakings that interpret the Glass-Steagall Act, the 1933 law that separated commercial banking from investment banking. In the past, the powerful Rep. Dingell has blocked efforts to repeal that law.
Incoming House Banking Committee Chairman Jim Leach, R-Iowa, has put consideration of Glass-Steagall reform on the top of his agenda for the 104th Congress.
The 12-page letter is a last-hurrah of sorts as Rep. Dingell's political clout will be significantly checked when Republicans take over Congress this week. He will be the ranking minority member of the panel, which has been renamed the Commerce Committee.
Still, Rep. Dingell's letter creates a ton of work for the Comptroller's lawyers because it challenges the agency's bedrock powers.
"The OCC does not have explicit statutory authority to permit bank operating subsidiaries," the letter claims.
Rep. Dingell demanded that the Comptroller explain where it gets this authority and noted, "Cases relied upon should be discussed in detail."
The OCC refused to comment on Rep. Dingell's letter. When the changes were proposed in November, Comptroller Eugene A. Ludwig said the streamlined application procedures would save banks money.
The congressman said the OCC's proposal involves "novel legal theories" and potentially "conflicts with the Federal Reserve Board's Regulation Y," which governs the activities of bank holding company subsidiaries.
"In many instances, bank subsidiaries would have considerably more freedom to engage in the listed activities than bank holding company affiliates," Rep. Dingell wrote.
Rep. Dingell asked the agency to respond to the 18 separate issues raised in his Dec. 27 letter by Jan. 13. He said he plans to file a comment letter on the OCC's proposal based in part on the agency's responses.