Federal Reserve Board Chairman Alan Greenspan on Tuesday praised major parts of the House Commerce Committee's financial reform plan.
In a letter to Rep. Michael Oxley, chairman of House Commerce's finance and hazardous materials subcommittee, Mr. Greenspan endorsed a committee proposal limiting bank operating subsidiaries to activities already permitted to national banks. He also praised a proposal to prohibit banks from merging with nonfinancial firms.
"I should like to convey our strong support for those components and for the overall thrust of the legislation," he said.
Mr. Greenspan had previously complained that legislation passed by the Banking Committee in June would pose new risks to the federal safety net by allowing a limited mixing of banking and commerce and authorizing broad powers for operating subsidiaries.
Mr. Greenspan also urged lawmakers to press ahead with financial reform this year.
"In the absence of congressional action there will be continuing erosion of the supervisory framework for financial services with destabilizing and potentially damaging effects on our financial system," he said.