WASHINGTON -- Nations-Bank vice chairman Timothy P. Hartman urged Congress to repeal the Glass-Steagall Act, but ran into opposition from the securities industry.
"Commercial banks are relegated to the least profitable end of investment banking and lose customers to less restricted domestic and foreign competitors," Mr. Hartman said in testimony before the Senate Banking subcommittee on securities.
But Stephen Freidman, chairman of Goldman Sachs & Co., said his firm should not have to compete against institutions backed in part by the , federal government.
"We're not afraid of competition," he said. "What we are uncomfortable with is competing with people whose funding is backed by the full faith and credit of the federal government and who are considered too big to fail."
Mr. Freidman argued that the Glass-Steagall Act has "contributed to the growth and vitality of the American capital markets," and said commercial banking "requires a different type of regulation than the securities business."
Despite Mr. Hartman's plea for Glass-Steagall repeal, he made it clear that Nations-Bank's top priority is interstate branching.
Mr. Hartman argued that interstate branching would save bank holding companies $5 billion a year.
The two men appeared at a hearing intended to help the banking committee develop its agenda for the coming year.
Among other things, subcommittee chairman Christopher J. Dodd, D-Conn., said the panel will have to soon consider legislation reauthorizing the securities and Exchange Commission.
James S. Riepe, managing director of T. Rowe Price, the big mutual fund company, said the panel should give the SEC a significant increase in funding, primarily to deal with the boom in mutual funds.
Over the past decade, the number of mutual fund companies has increased 133% and assets under management have grown 344%, he said. In contrast, the SEC's investment management division has grown by only 74%.
Mr. Riepe also urged the panel to repeal the securities law exemption for bank collective trust funds which are open to individuals in pension plans.
The original rationale for the exemption, he said, is that pension funds were the province of sophisticated investors.
"Today, 401(k) plans let employees make the decisions," he said. "They are entitled to the same degree of protection as when they invest in mutual funds."