WASHINGTON - House Banking Committee Chairman Jim Leach on Monday reiterated his criticism of the comptroller of the currency for letting three national banks hold commercial stock for hedging equity derivative swaps.
Speaking in New York at a conference on international financial issues sponsored by Deloitte Touche Tohmatsu, the Iowa Republican again voiced his concerns that the agency was secretly trying to sidestep the longtime ban on bank investments in commercial enterprises - a ban that was reinforced by last year's financial reform law.
"The comptroller has stretched the legal interpretation" of banking law, Rep. Leach said.
The controversy came to light Friday when Rep. Leach sent Comptroller John D. Hawke Jr. a strongly worded letter criticizing the comptroller's directive to examiners and asking for all related agency documents by Monday evening.
The agency responded late Friday with a 16-page letter detailing its legal rationale for granting approval.
It argued that the decision involves a handful of banks, which may hold equity securities only to hedge risk in an equities derivative contract and not for investment purposes.
"The equity hedging activity is not prohibited by" the National Bank Act of 1933, Mr. Hawke wrote. "A national bank may engage in activities if the activities are part of, or incidental to, the business of banking."
It remained unclear Monday whether the agency would provide more documents, including a July memo to examiners on the subject, and whether Rep. Leach would demand more.
