WASHINGTON -- Rep. Henry Gonzalez wants a House Banking Committee panel to approve a derivatives bill early next month that calls for comprehensive federal standards for bank derivatives activities.

Gonzalez, the Texas Democrat who chairs the House Banking Committee, made the plea for action by the panel in an Aug. 17 letter to RepStephen Neal, D-NC., the chairman of the committee,s subcommittee on financial institutions supervision, regulation, and deposit insurance.

The bill -- HR 4503, the Derivatives Safety and Soundness Supervision Act of 1994 -- was introduced in May by Gonzalez and Rep. Jim Leach, the top Republican on the banking committee. Neal co-sponsored the legislation.

The bill calls for federal regulators to establish uniform capital, accounting, disclosure, sales practice, and examinations standards for the derivatives activities of banks, government-sponsored agencies, and federal credit unions.

Under the bill, a bank would be deemed to be operating in an "unsafe and unsound manner" if it did not conduct its derivatives activities according to a written plan based on prudent standards or if its directors were not aware of the risks of those derivatives activities.

Bank regulators testified at a subcommittee hearing last month that the bill is unnecessary because it would not provide them with any new regulatory authority.

But derivatives market participants, testifying against the bill at the hearing, warned that it would create new standards that would increase the costs and reduce the availability of derivatives products.

Gonzalez said in a written statement released yesterday that "there is a clear and present need to legislate in this area" based on the hearings held by the committee and subcommittee as well as a General Accounting Office report on derivatives that was issued in May.

The GAO report called for Congress to enact legislation to close "gaps" in the regulation of derivatives.

"The Congress cannot afford to let the regulators, who in the last decade have made enormous miscalculations about the safety of certain bank activities, take a laissez-faire attitude toward derivatives," Gonzalez said.

"The well-being of the deposit insurance fund and our financial system is at stake, and we must act soon," he said.

Gonzalez's push for derivatives legislation for banks comes as Rep. John Dingell, DMich., has held back from supporting legislation to regulate the derivatives affiliates Of securities firrr, s, which currently are not federally regulated.

Dingell, who chairs the House Energy and Commerce COmmittee, had said at a Securities Industry Association meeting earlier this year that he thought derivatives legislation was needed.

But he did not support a bill introduced by Rep. Edward Markey, D-Mass., the chairman of the committee's telecommunications and finance subcommittee, that would subject securities firms' derivatives affiliates to Securities and Exchange Commission regulation.

Instead, Dingell endorsed a proposal made by the association and the SEC under which they would work together to come up with a plan for standards that could be voluntarily met by the derivatives affiliates.

Dingell recently asked the association and SEC to submit that plan to the committee by Nov. 1. He warned them that he will have to consider derivatives legislation next year if the plan does not contain meaningful and timely "reforms."

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