WASHINGTON -- Federal authorities have warned the House Energy and Commerce Committee not to adopt legislation backed by Rep. Edward Markey, D-Mass., to step up oversight and regulation of the goernment securities market.

The regulators, in a letter received last week by the committee's chairman, John Dingell, D-Mich., and made public yesterday, said the Markey bill could add to government borrowing costs and disrupt the market.

Rep. Markey chairs the telecommunications and finance subcommittee which approved the bill in May after months of negotiations with industry representatives and federal officials. Rep. Dingell's committee is scheduled to review the bill today and is expected to approve it, clearing the way for a vote by the full House.

"This bill would grant new regulatory authority, with its potential costs, that simply is not warranted by the problems that have surfaced in the government securities market," the letter says. It was signed by Treasury Undersecretary Jerome Powell, Federal Reserve Vice Chairman David Mullins, and Federal Reserve Bank of New York President E. Gerald Corrigan.

"It is the view of our agencies that H.R. 3927, as a whole, would not in fact represent an improvement in the functioning of this vital market," the officials warn.

"Instead, this legislation would open the door to unnecessary regulation that could reduce the efficiency and liquidity of the government securities market and increase the burden on the taxpayer of financing the public debt."

The letter emphasizes the reforms already put in place in the government securities market by the Treasury, the Fed, and the Securties and Exchange Commission since the Salomon Brothers Inc. trading abuses came to light last year.

The regulators say they oppose giving new authority to the SEC and want to keep to federal controls with Treasury, "to ensure consistent and uniform oversight of both bank and non-bank government securities brokers and dealers."

Record-keeping provisions in the Markey bill would be "cumbersome and duplicative" given the existing Treasury rules now in place, the regulators say. Under the bill, the SEC would have the authority to prescribe rules for law enforcement purposes.

Price transparency provisions in the bill are also unnecessary, given the efforts by provate industry to disseminate such information already, the letter says. The government securities industry takes the same position, citing GOVPX and other private information services that provide price data from interdealer brokers.

Government securities firms prefer the Senate-passed version of the legislation, which would reauthorize the Government Securities Act.

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