Dingell Slams Bank Bill, Calls Citicorp |Insolvent'
In an attempt to derail the Bush administration's plan to grant banks additional powers, Rep. John Dingell attacked Citicorp on Wednesday, labeling the nation's largest banking company "technically insolvent."
Citicorp officials in New York responded almost immediately, characterizing Rep. Dingell's comments as "irresponsible and untrue." Citicorp pointed out that it has $18 billion in Tier I and Tier II capital, making for a capital-to-assets ratio of 8.16%.
Also quick to rebut Rep. Dingell's claim was L. William Seidman, chairman of the Federal Deposit Insurance Corp. Talking with reporters late Wednesday, Mr. Seidman said Citicorp was not insolvent "under any standard."
Rep. Dingell has been a vocal opponent of the Bush banking reform bill, in part because it would grant banks additional powers, including the right to underwrite securities and to run mutual funds. Rep. Dingell's lambasting of Citicorp, which came during a session of a House Energy and Commerce Committee panel, was apparently designed to convince fellow members of Congress that Citicorp and other banks should not be allowed new powers.
In particular, Rep. Dingell blasted Citicorp for losing money in the brokerage business oversease.
Sen. Jake Garn, R-Utah, took issue with Rep. Dingell, saying he didn't agree that Citicorp was technically insolvent. He added, "Even if it were true, it's dangerous to make comments like that. Public officials should not be in the position of creating runs on banks."
Despite such criticism, Dennis Fitzgibbons, a spokesman for Rep. Dingell contacted late Wednesday, said the congressman stood by his remarks. Asked whether the statement could shake confidence in the banking system, the spokesman replied, "Instability is not caused by a statement from a member of Congress. The instability exists already in the banking system."
Rep. Dingell didn't say Citicorp was bankrupt, the spokesman asserted: "He said on paper they are insolvent."
Mr. Fitzgibbons said Rep. Dingell believes Citicorp's liabilities exceed its assets. The lawmaker derived this opinion from "publicly available information, from news accounts," the spokesman said.
Rep. Dingell's criticisms were seen as part of his long-running turf battle with the House Banking Committee, which recently passed a modified version of the administration's reform bill. As chairman of the House Energy and Commerce Committee, Rep. Dingell has jurisdiction over the securities industry, and that industry would face intensified competition if banks are allowed to enter the brokerage business.
Rep. Dingell, D-Mich., regularly points out that his father during the Great Depression helped craft the Glass-Steagall Act, which currently bars banks from entering the securities business.
During Wednesday's hearing, Rep. Dingell also took a shot at the administration's plan for creation of diversified financial companies.
Questioning Treasury Secretary Nicholas Brady, Rep. Dingell asked what would happen if Bank of New England, Drexel Burnham Lambert and First Executive Corp. had been allowed to combine into a single entity. He then asked whether Citicorp would be able make those types of acquisitions.
Brady Defends Bill
Mr. Brady said such a combination could not occur because Bank of New England did not have enough capital to expand under terms of the administration's banking bill. "I don't think [Citicorp] would qualify either," he added.
Rep. Dingell responded that banking regulators cannot be trusted to know which institutions are well capitalized and which aren't.
As part of his slam at Citicorp, Rep. Dingell questioned whether the banking company was living off the "largesse" of the Federal Reserve Board by borrowing heavily at the Fed's discount window.
In a statement, Citicorp responded that it last borrowed from the discount window in January and has "used it only twice in the last 12 months, for one day each."
"The suggestion that any bank's infrequent, or even routine, use of the Federal Reserve discount window can be considered |largesse' is absurd," the statement said.
PHOTO : Rep. John Dingell New maneuver in turf battle