WASHINGTON -- Alan Blinder, the likely new vice chairman of the Federal Reserve, believes the central bank should charge bank, holding companies for supervisory examinations.
He also believes the Fed should use undercover testers to investigate whether banks are discriminating against minorities.
A Different Perspective
Those positions, outlined in a set of written responses to questions posed by the Senate Banking Committee, make it clear that Mr. Blinder will bring a different perspective to the Federal Reserve. On those issues and others, Mr. Blinder differs from current board sentiment.
His responses to Senate inquiries provide the most detailed explanation yet of where he stands on bank regulatory matters. Until now, he has deferred detailed discussion of them, saying he wanted to get a better handle on them first.
Mr. Blinder, who is a member of President Clinton's Council of Economic Advisors, told Congress:
* He has "mixed feelings" about whether banks should be given broader insurance and securities powers, but on balance is "mildly supportive of insurance brokerage for banks and repeal of Glass-Steagall."
* The Fed's current supervision of banks' use of derivatives is probably effective, but "improvements can no doubt be made," especially in the area of disclosure and assessment of market risk.
* Any regulatory consolidation should preserve "a significant independent role for the Federal Reserve in bank supervision."
* The banking agencies should delay testing for banks' disclosure of the risks of mutual funds, until they can discern whether their recent warnings have been effective.
* The agencies' Community Re investment Act proposal is an improvement over existing rules, but he needs to "think further" about the merits of the proposed market share test.
As part of CRA reform, regulators "should be willing to consider the idea of expanding data collection" for business and consumer loans to include race and gender.
Easy Confirmation Seen
Mr. Blinder breezed through a nomination hearing last week, and the Senate Banking Committee is expected to vote on it next Tuesday.
While he is expected to be handily confirmed by the full Senate, he was still noncommital in much of the 23-page written response, which addressed many issues on which lawmakers, administration officials,and the Fed have taken divergent stands.
Many of Mr. Blinder's statements on traditional bank regulatory issues - like bank powers -- were more tentative than the strong statements made by Fed Chairman Alan Greenspan and other members of the board.
But his comments on the more social elements of regulation generated the strongest response from industry participants.
This is the area where the administration's approach to banking regulation diverges most starkly from the Fed's. Mr. Blinder's comments suggest that he may try to steer the board closer to the administration's position.
"One might have expected that as the Clinton administration begins to name its board, there would be greater sympathy for those [social] issues," said industry consultant Karen Shaw.
Kenneth Guenther, executive vice president of the Independent Bankers Association of America, said he believes Mr. Blinder will "join Greenspan down the road and become more supportive of the repeal of Glass-Steagall." But on fairlending and community rein-- vestment issues, he was more tentative.
"Based on his carefully drawn responses, the IBAA is confident that the Fed vice chairman will not blindly follow Chairman Riegle off the deep end into racial and color coding of small-business loans," he said.
Privacy Implications
"We urge the vice chairman-designate to consider the privacy implications of these proposals and also caution that it is a small step from racial and gender coding to religious coding," he added. "Such. requirements could lead our society down a dangerous path inimical to civil and religious rights."
And while Mr. Blinder endorsed the use of testers to combat lending discrimination - a position repeatedly opposed by the Fed - his reluctance to similarly test mutual-fund disclosure won him industry praise.
"Blinder most certainly does not have the knee-jerk bias -- that testers are the answer to every wrong - prevalent in some bank regulatory circles," Mr. Guenther said.
