WASHINGTON - The Comptroller's office is quietly trying to reverse the conventional wisdom about bank securities underwriting.

The agency is circulating a report that asserts underwriting done directly by a bank subsidiary is no more risky than underwriting accomplished through a unit of a bank holding company.

But the Comptroller faces long odds.

The Federal Reserve Board - which regulates holding companies - has already convinced many in Congress that bank securities operations ought to be housed in holding company subsidiaries.

The tussle comes down to a fight over turf, and so far the Fed is winning.

The leading bill to repeal the Glass-Steagall Act would require banks to conduct securities activities through a holding company.

Banks could live with this setup but would prefer the flexibility to choose between a subsidiary of the bank and the holding company, according to Richard Whiting, general counsel at the Bankers Roundtable.

The Comptroller's report, written by agency economist Gary Whalen, concludes that there is no evidence that letting banks into the securities business will increase their risk of failure.

"Losses on standard types of loans are responsible for the lion's share of all bank failures in both the U.S. and foreign countries where banks are permitted to engage in more exotic, presumably riskier activities," contends Mr. Whalen, who is the agency's deputy director of bank research.

The paper does not go so far as to recommend that the United States adopt the no-restrictions universal banking model favored by most Western European countries. But it argues that there are no apparent advantages to keeping banks and their nonbanking affiliates at arm's length within a holding company structure.

"The review of the research on the likely impacts of expanded activities on bank risk suggests that the additional insulation and possibly greater expense associated with holding company subsidiaries may be unnecessary," Mr. Whalen writes. "Some claim that contagion is less likely in a holding company model, but there is no evidence to support this claim."

Konrad Alt, senior deputy comptroller for economic analysis and public affairs, said Mr. Whalen's paper is meant to respond to concerns raised in some quarters about the Comptroller's proposed "Part 5" rule, which would set up an administrative process for allowing expanded bank activities through bank operating subsidiaries.

"We take safety and soundness very seriously," Mr. Alt said. "We feel it's very important to nail down our position on soundness concerns as they relate to banking subsidiaries."

The Part 5 public comment period ended in January, but the Comptroller's office still hasn't issued a final rule. The delay, said industry consultant Bert Ely, may mean the agency is "sitting on the thing" to avoid locking horns with Congress while the Glass-Steagall debate is under way. But if this year's Glass-Steagall repeal effort fizzles, the Comptroller's office will be ready with Part 5 - its own version of banking law reform.

Mr. Alt said the paper is due for some revisions and will be ready for wide distribution within a few weeks. But Mr. Ely said Comptroller Eugene Ludwig is already calling bankers to drum up the paper's arguments.

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