Fed Thrift Role Is Abandoned By House Unit
WASHINGTON -- A special House task force reversed last week an earlier decision to give the Federal Reserve responsibility for supervising some savings and loan holding companies.
The task force, led by Rep. Doug Barnard, D-Ga., decided to acquiesce to the industry's view because members felt the still-recovering industry should not be subjected to additional shocks, said one staffer who participated in the discussions.
Nonbanks May Fall Under Fed
But the panel left open the possibility that commercial and industrial companies that buy banks might find themselves subject to the central bank's oversight, according to several staffers.
Under the proposal the Fed would be the primary supervisor for Diversified Holding Companies - a new entity that would be created by the Bush administration's banking bill - that own banks with assets of more than $10 billion.
Although the extent of the central bank's authority was not defined, some observers noted that big, unregulated companies such as General Motors Corp. might be loath to submit to any degree of Fed scrutiny.
Thrift lobbyists expressed relief that they were able to evade Fed jurisdiction in the proposal.
"The Fed has shown itself hostile to thrift holding company activities," said Lee Peckarsky, the chief congressional lobbyist for the National Council of Thrift Institutions. "They don't want savings and loan holding companies doing anything bank holding companies can't do."
System Called Effective
"The current system is working fine," added Patrick Forte, president of the Association of Financial Services Holding Companies, who criticized what he described as the Fed's "institutional hostility" to activities not permissible for bank holding companies.
Although the 1989 thrift bailout law stripped thrifts of many powers not permitted banks, it left some distinctions in place. For example, thrift holding companies can affiliate with commercial and industrial companies.
The Barnard task force decided to place all savings associations and national banks, along with their holding companies, under supervision of a new Treasury agency. State-chartered banks, including savings banks and their holding companies would go to the Federal Deposit Insurance Corp.
Holding companies owning banks above $10 billion would be supervised by the Fed.