Rep. John D. Dingell is turning up the heat on banks' mutual fund activities.

The powerful chairman of the House Energy and Commerce Committee last week ordered the General Accounting Office to investigate how the banking industry is approaching the funds business.

The probe could set the stage for tighter government control over one of the industry's most promising new businesses.

"With the growth of bank related mutual fund activity, questions have arisen about the adequacy of current laws and regulations," the Michigan Democrat wrote in a letter to Comptroller General Charles A. Bowsher, who heads the GAO.

$200 Billion Business

Rep. Dingell estimated that banks now sell 10% to 15% of all mutual funds and manage nearly $200 billion of mutual fund assets.

Few believe that the congressman, whose committee has jurisdiction over mutual funds under the Investment Company Act of 1940, can push through legislation this year.

But a Dingell request for a GAO study "generally means he plans to act" by proposing legislation once he has the study for ammunition, said an aide to one Republican member of the Commerce and Energy Committee.

Sweeping Inquiry Sought

Rep. Dingell, who previously aired his concerns about banks' funds businesses in letters to bank and securities regulators, asked Mr. Bowsher for a sweeping inquiry.

Among the concerns to be addressed:

* Whether bank customers receive appropriate warnings that the funds they buy from banks are uninsured.

* Whether bank-affiliated funds are less closely monitored and therefore riskier to consumers than non-affiliated funds.

* Whether existing safeguards prevent banks from loading funds with stock in companies that borrow from them.

An Optimistic View

While banking industry representatives said an inquiry is unnecessary because bank and securities regulators already closely supervise banks' mutual fund operations, at least one observer took an optimistic view.

"I do feel a GAO report could be useful in assuring Congress that bank mutual-fund activities are being appropriately regulated," said Melanie Fein, a partner at the law firm of Arnold & Porter who specializes in bank securities activities.

She noted that a 1990 GAO report on securities underwriting by bank subsidiaries generally supported the bank position.

Sarah A. Miller, senior counsel at the American Bankers Association, said the inquiry was unnecessary since the "overwhelming majority" of banks have taken appropriate measures" to apprise consumers of the risks posed by the uninsured investment products sold there. The ABA itself has warned that consumers need to be so informed, she pointed out.

She downplayed Rep. Dingell's concern that bank-affiliated funds are riskier than others.

The congressman's fear that monitoring of such funds may be inadequate stems from a provision of the 1940 act that excludes banks from the Securities and Exchange Commission registration requirements.

A Reason to Cooperate

But Ms. Miller said that because banks can ill afford to alienate the SEC, they are providing the agency with the information it needs to evaluate their mutual funds.

She also said that existing firewalls between the lending and purchasing divisions of banks already prevent conflicts of interest when a borrower's stock is purchased by a bank's mutual fund managers.

Observers said that regardless of the GAO study's findings, Rep. Dingell would probably wait for a recommendation by the SEC before proposing an amendment to the 1940 act.

Any mutual fund bill would also have to pass muster with the House Banking Committee.

A staff member said the subject of mutual funds has not been raised before that panel. She added that members already have a full plate of issues to deal with this session.

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