The Securities Industry Association Tuesday enthusiastically endorsed the financial reform bill the House is expected to vote on next week.
"We think this is excellent legislation and we strongly support it," said Steve Judge, the group's chief lobbyist.
Mr. Judge conceded that his members desperately need legislation that would let securities and insurance companies buy banks.
"If this bill isn't passed, we will see an acceleration of the current trends and banks may soon control the securities industry," he said at a briefing for reporters.
The SIA also endorsed barring banks from conducting securities or insurance underwriting in direct operating subsidiaries. Under the legislation, those activities would have to be conducted in separately capitalized holding company units.
"Banks would have little ability to fund their securities businesses with the low-cost deposits they attract thanks to federal insurance," he said.
Mr. Judge also praised a provision that would limit the Federal Reserve Board's power to interfere with nonbank subsidiaries of bank holding companies.
Under the legislation, the Fed would set capital requirements for holding companies, but would be prohibited from imposing capital demands on their securities affiliates. The Fed also would be prohibited from examining a nonbank subsidiary unless the central bank had reason to believe the unit posed a material risk to an affiliated depository institution.
"These are very reasonable limits on the Fed," Mr. Judge said.
While Fed Chairman Alan Greenspan endorsed the legislation March 17, bankers have complained that the provision would allow securities firms and insurance companies that buy depository institutions to escape the intense scrutiny the Fed gives traditional bank holding companies.
Mr. Judge charged that the banking industry is simply trying to lock in its competitive advantages by opposing the bill and said all sides must compromise.
"There are parts of the bill would we prefer to see left out as well," he said. For example, the SIA would rather see banks barred from even selling securities or insurance from an operating subsidiary. Also, the group opposes commercial revenue restrictions on holding companies that acquire banks.
"We don't think there should be any limit on the commercial activities of holding companies," he said.
To keep the bill on track, however, the SIA is not lobbying for change. "We aren't pushing for any amendments," Mr. Judge said.