WASHINGTON -- Recent scandals in the banking and securities industry indicate that "now is not the time to experiment with new banking risks," the chairman of a key House panel said Friday.

Launching a hearing on pending financial reform proposals, Rep. Edward J. Markey, D-Mass., said lawmakers should "keep in mind that in 1933, Congress rejected the idea of mixing banking and securities activities because it found the potential abuses to be so subtle as not to be recognized."

Rep. Markey, chairman of the House Energy and Commerce Committee's telecommunications and finance subcommittee, said repealing the Glass-Steagall Act's restrictions on investment and commercial banking affiliations, without erecting "impermeable firewalls," would "foster financial abuses."

Rep. Markey's panel is scheduled to begin voting today on amendments to legislation approved earlier in the year by the House Banking Committee. Once completed, the subcommittee version is expected to repeal Glass-Steagall, but with stringent safeguards to ensure that the risks of the securities activities do not translate into losses for insured commercial banks.

Critics fret that those safeguards will be so strict as to eliminate any incentive for banking firms to forge alliances with securities firms.

Paul A. Volcker, former chairman of the Federal Reserve Board, expressed just those concerns in his testimony before the panel Friday. But he conceded the difficulty of determining how far to go in crafting firewalls, which essentially are prohibitions on certain transactions between a bank and a securities affiliate.

He said the dilemma facing lawmakers is that impermeable barriers reduce the attractiveness of investment and commercial banking combinations, while "permeable" firewalls provide room for financial mischief.

When pressed, Mr. Volcker said reasonable firewalls include prohibitions or restrictions on bank loans to securities affiliates or their customers, but added that a more difficult question is whether banks and their securities affiliates should be allowed to share a common name or operate out of the same building.

While Mr. Volcker expressed discomfort with spelling out what a firewall should be, U.S. District Court Judge Stanley Sporkin questioned their ultimate effectiveness.

"I think you can have firewalls," said Judge Sporkin, a former director of the Securities and Exchange Commission's enforcement division. "But you have to be prepared for having all these people come in and finding ways around them. Once you start defining things, you provide people with a Northwest Passage around the law."

Rep. John D. Dingell, the Michigan Democrat who serves as chairman of the Energy and Commerce Committee, said firewalls are important because they provide the basis for legal action against rule breakers.

Though Judge Sporkin declined to take a firm position on current legislative proposals because of the possibility that related issues might reach his courtroom, he appeared to question the wisdom of dismantling Glass-Steagall.

"You can always go back and be a Monday morning quarterback," he said. "But I would kind of think that Congress could not have been all that wrong" when it separated investment and commercial banking activities. "It's easy to say that because the legislation has worked so well for 50 years that we don't need it anymore."

Though Mr. Volcker expressed his continued support for Glass-Steagall repeal, he also reiterated his opposition to allowing commercial firms to own banks. He said such a move -- contained in the House Banking Committee bill but expected to be stripped by Rep. Markey's subcommittee -- would create the potential for costly conflicts of interest.

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