WASHINGTON — A complete review of merchant banking regulations will be Rep. Richard Baker’s first order of business as chairman of the House Financial Services Committee’s most expansive subcommittee, the Louisiana Republican said Thursday.

In a news conference announcing the agenda and timeline for his panel, which has jurisdiction over capital markets, insurance, securities, and government-sponsored enterprises, Rep. Baker said he will hold hearings as soon as possible on the Federal Reserve Board’s proposed capital requirements for merchant banking activities and on a recent rule issued jointly by the Fed and the Treasury Department that sets other limits on equity investments.

He said he plans to examine whether the capital proposal would provide the banking industry enough flexibility and would mesh with proposals to revamp international capital standards. He said he also will check whether a ban on cross-marketing agreements with the companies in which banking companies invest would put them at a competitive disadvantage against security brokers and other firms.

Next on his agenda is legislation to strengthen the regulation of the mortgage giants Fannie Mae and Freddie Mac and the Federal Home Loan Banks, which he said he hopes to introduce next month and have enacted this year or early next year.

He said he needs to meet with congressional leaders, Fed Chairman Alan Greenspan, Treasury Secretary Paul O’Neill, Senate Banking Committee Chairman Phil Gramm, and Fannie and Freddie representatives before finalizing the details.

Rep. Baker previously has proposed creating an agency with the combined responsibilities of the Office of Federal Housing Enterprise Oversight, some GSE jurisdiction of the Department of Housing and Urban Development, and the Federal Housing Finance Board. He has also proposed eliminating Fannie and Freddie’s government lines of credit, which critics say are unfair subsidies.

The new GSE bill will address “whether the regulator should have sufficient independence, resources, and authority to adequately monitor two of the country’s largest financial companies” and “whether the markets, homebuyers, taxpayers, and the GSEs themselves would see their interests best served by the creation of a regulator in whom we can all feel secure,” Rep. Baker said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.