WASHINGTON - House Speaker Newt Gingrich told a group of big-bank chief executives that they might be able to gain more securities powers through the Federal Reserve if legislation fails.
While some industry observers drew comfort from that statement, an aide to Rep. Jim Leach said they may be reading too much into the speaker's words.
They "are confusing politeness with compliance," said an aide to the House Banking Committee chairman.
Rep. Leach is the chief sponsor of legislation to repeal the Glass- Steagall Act, and any suggestion that Congress could leave the issue of securities powers to the Fed would undercut the banking committee chairman.
Aides to the Iowa Republican said the speaker remains committed to Rep. Leach's Glass-Steagall bill.
Meeting with Rep. Gingrich Wednesday were Edward L. Crutchfield of First Union, John B. McCoy of Banc One Corp., Douglas Warner of Morgan Guaranty, Thomas G. Lebrecque of Chase Manhattan, and David A. Coulter of Bank of America Corp.
At the meeting, Rep. Gingrich was asked if raising the limit on Section 20 underwriting limits would be an acceptable alternative to Rep. Leach's Glass-Steagall bill.
According to House Banking Committee staffers, Rep. Gingrich said raising the Section 20 limit is an option that could be considered if efforts to repeal Glass-Steagall fail.
Some bank lobbyists speculated that the speaker's comments indicated he was trying to distance himself from Rep. Leach's efforts. But House Banking staffers disagreed.
"The last thing Speaker Gingrich would do is take action that would undermine passage of Leach's bill," said one aide.
While Rep. Gingrich has no control over the Federal Reserve, many bankers believe the central bank is more than willing to take its cues from Congress on this issue.
Acting under Section 20 of the Glass-Steagall Act, the Fed has authorized banks to underwrite corporate debt and equities. However, revenue from those "nonpermissible" securities is limited to 10% of the income from the underwriting of permissible securities, such as municipal and Treasury bonds.
Though banks have repeatedly asked for the right to increase the underwriting cap, the Fed has resisted. "We think the Fed is correct to keep the limit at its current level," said the House Banking aide.
Federal Reserve Board Chairman Alan Greenspan last week praised Rep. Leach's Glass-Steagall repeal bill and said securities restrictions are crippling banks' ability to compete. He called the 10% restriction an "arbitrary numerical cap."