WASHINGTON -- The House Banking Committee approved legislation yesterday to toughen federal regulation of the government securities market, but the panel included amendments at odds with a rival bill adopted by the House Energy and Commerce Committee.
It was unclear how the competing bills will be reconciled, and aides said they did not know if differences will be worked out before the House takes its recess Aug. 13.
A protracted dispute could delay a vote in the House and possibly kill the bill altogether, one congressional aide said. On the other hand, he added, the urgency of getting a bill approved before the recess serves as an incentive for House members to iron out their differences.
One key amendment approved by the Banking Committee, offered by Chairman Henry Gonzalez, D-Tex., would scale back the role of the Securities and Exchange Commission in regulating the government market.
Under the amendment, the SEC would not be able to write rules involving recordkeeping, fraud, internal controls, and price dissemination for banks and other depository institutions. In all four areas, if the SEC adopted rules for dealers under the agency's jurisdiction, federal bank regulators would be required to produce virtually identical rules for financial institutions under their jurisdiction.
Mr. Gonzalez emphasized that the amendment was needed to protect the committee's jurisdiction over the banking industry, which he felt was being undermined by the Energy and Commerce bill.
"Once again, the Energy and Commerce Committee is attempting to give the SEC regulatory authority over insured depository institutions," Mr. Gonzalez said in a statement. "This is contrary to longstanding arrangements and represents nothing less than an effort to fatten the jurisdiction of the Energy and Commerce Committee at the expense of the Banking Committee. This cannot be permitted."
Further complicating the situation is the potential jurisdictional dispute between the Ways and Means Committee and the Banking Committee. One House aide said Ways and Means is insisting that the banking panel acted against the rules in adopting amendments that involve Treasury auction procedures, an area that Ways and Means reserves for itself.
Supporters of government securities legislation are anxious to take a bill to the House for a vote so the measure can be reconciled with a Senate-passed bill. Industry supporters prefer the Senate bill, which does not contain recordkeeping and other provisions opposed by government dealers.
Earlier this week, Treasury Undersecretary Jerome Powell said, "no bill is better than a bad bill." Failure to get a new bill approved would leave dealers to operate under the current regulatory regime.
One item Mr. Gonzalez succeeded in getting adopted that is not in the energy panel's bill is an amendment that would allow the Treasury Department to bar or suspend dealers who violate auction rules.
Another provision would set federal guidelines prohibiting "any advantage, special treatment, or other benefit" in connection with the buying government securities. It was unclear what this measure would mean for primary dealers. These dealers buy government bonds directly for distribution to the secondary market and consult regularly with Federal Reserve and Treasury officials as members of the Treasury Borrowing Advisory Committee of the Public Securities Association.
Another change in the bill would require the PSA borrowing committee to release the minutes of its meetings within three days. The Treasury Department currently has a policy of releasing the minutes four weeks after each meeting, which typically precedes the quarterly refunding announcement.
The bill would also require the Treasury to set up an automated system for auctioning government securities by June 30, 1993, although Treasury officials have said they are on track to completing automation by the end of the year.
The bill does not alter the provision adopted by the Energy and Commerce Committee that would give the Treasury authority to require dealers to report large positions in the market.
The SEC would retain backup authority to impose price dissemination rules for dealers in its jurisdiction, and the National Association of Securities Dealers would be allowed to write sales practice rules for the government market.