WASHINGTON — In a strongly worded letter Wednesday, Rep. John LaFalce told the Federal Reserve Board to back off a proposal that would severely limit the merchant banking powers provided in the Gramm-Leach-Bliley Act of 1999.

“There is no provision in the [law] which requires or authorizes new rules providing specific levels of capital for merchant banking activities,” the House Banking Committee’s top Democrat wrote Fed Governor Laurence H. Meyer.

Rep. LaFalce said the Fed’s proposed capital rules ignore efforts by financial institutions to manage risk internally. The Fed has proposed requiring a capital charge of half the amount invested for all merchant banking activities.

The New York Democrat also ripped into the Fed’s interim merchant banking rules, saying they are “reportedly already having an adverse impact on the private equity industry.” The interim rules, released in March, impose a $6 billion cap on merchant banking and generally limit investments to 10 years.

“The aggregate investment limit could inhibit many securities firms with merchant banking portfolios above or near the limit from affiliating with banks,” he wrote. “As you know, very few nonbank financial firms have become financial holding companies.”

The letter is the latest in a series of attacks on the capital proposal and the interim rule by lawmakers from both political parties, as well as by industry leaders.

A Fed spokesman refused to comment on what impact, if any, the negative feedback is having but said final rules are expected before yearend.

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