Fed Plans New Bank-Affiliate Credit Rules

WASHINGTON - This spring the Federal Reserve Board will propose new limits on the volume and pricing of credit banks extend to affiliates, Fed Governor Laurence H. Meyer said Thursday.The Gramm-Leach-Bliley Act of 1999 tore down the barriers between banking, securities, and insurance companies, but it also required the Fed to regulate the movement of funds within diversified financial firms.

The Federal Reserve Act, in sections 23A and 23B, already restricts lending from banks to their affiliates and requires transactions to carry market prices and be collateralized.

"The falling of firewalls has elevated the importance of sections 23A and 23B of the Federal Reserve Act," Mr. Meyer said in a speech sponsored by the American Bar Association. The new law "extended these provisions to the fund flows between banks and their own financial subsidiaries and even in some respects between holding companies and the financial subsidiaries of banks."

The new financial reform law also requires the Fed to decide whether 23A and 23B limits should apply to derivative transactions between a bank and its affiliates and intraday credit extensions such as payment and settlement transactions, Mr. Meyer said.

"We will also be collecting quarterly data from all subsidiary banks of bank holding companies to track the bank credit flows to affiliates and subsidiaries covered by these revised regulations," he said.

The Fed has until May 2001 to finalize these rules.

In his speech, Mr. Meyer posed an array of questions regulators are tackling as they attempt to write rules implementing other provisions of Gramm-Leach-Bliley. For a full text of his remarks, see http://www.federalreserve.gov/BoardDocs/Speeches/2000/20000203.htm.

- Barbara A. Rehm


Senate Gives Greenspan Four More Years

WASHINGTON - The Senate voted 89 to 4 on Thursday to confirm Alan Greenspan to a fourth four-year term as Federal Reserve Board chairman.American Banker mistakenly reported that Mr. Greenspan had been confirmed Wednesday. The Senate debated the nomination that day but did not vote until Thursday.

President Clinton nominated Mr. Greenspan on Jan. 4 to remain at the Fed after his current term expires in June. The popular central bank chief was initially appointed in 1987 by President Reagan and reappointed by President Bush.

"As long as there are people like Alan Greenspan who are willing to serve, I think America is in good shape," Senate Banking Committee Chairman Phil Gramm said Thursday. "He ably served Presidents Reagan, Bush, and Clinton, and I am pleased that he will be at the helm of monetary policy for the next president."

Four Democrats voted against Mr. Greenspan's confirmation: Byron L. Dorgan of North Dakota; Tom Harkin of Iowa; Harry Reid of Nevada; and Paul D. Wellstone of Minnesota.

- Dean Anason

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