House Banking Committee Chairman Jim Leach on Wednesday criticized regulators' apparent willingness to bend the rules for the proposed Citicorp-Travelers Group merger.

"Regulators appear to be willing to allow a truck to be driven through provisions of the Bank Holding Company Act which were designed to allow the orderly divestiture of minor nonconforming activities in bank holding companies," the Iowa Republican told bankers in Des Moines.

Rep. Leach's comments were an implicit slap at the Federal Reserve Board, which has the authority to delay up to five years the merged company's mandatory divestiture of insurance underwriting and other businesses.

Critics have complained that Citicorp and Travelers plan to violate the spirit of the extensions by using the interim period to lobby Congress to pass financial reform legislation that would let holding companies own banks and underwrite insurance.

Reiterating his comments earlier this week, Rep. Leach said the proposed merger exposes the need for lawmakers to pass reform legislation in the face of activist courts and federal agencies. "To re-establish competitive equity in this regulator-driven market circumstance, congressional action is required."

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