WASHINGTON - Two of the three leading candidates to succeed House Banking Committee Chairman Jim Leach said Tuesday that they would heed his call to investigate actions by the Office of the Comptroller of the Currency that Rep. Leach said improperly allowed four banks to hold equity positions in public companies.
Reps. Marge Roukema, R-N.J., and Richard Baker, R-La., made their comments after Rep. Leach released evidence Monday that he said showed the OCC had overstepped its authority by "secretly" giving four national banks permission this summer to directly hold stock in other companies. Rep. Leach said the decisions violated the ban on the mixing of financial and commercial activities.
Rep. Leach, a Republican from Iowa, had asked the independent inspector general of the Treasury Department, of which the OCC is an agency, and the General Accounting Office, the investigative arm of Congress, to examine the basis for the OCC's decision and any potential illegality.
Reps. Roukema and Baker, along with House Commerce finance subcommittee Chairman Michael Oxley, R-Ohio, are the leading contenders for the chairmanship that Rep. Leach must give up next year because of Republican Party term limits.
Of the two advocates of an investigation, Rep. Roukema appeared the more forceful.
"I will do whatever is necessary to make sure the law is enforced; we should follow through" on an anticipated report to come out of a probe by the GAO and the Treasury inspector general, Rep. Roukema said.
She added: "These transactions are not legal under the law . We have to be very careful to keep the firewalls between holding companies and their affiliates in place to avoid conflicts of interest and this kind of mixture between banking and commerce."
Rep. Roukema said Tuesday that the Federal Reserve notifying Rep. Leach about the OCC approving the stock-holding practice raises the stakes. "I am particularly concerned about this," she said, "because I know what we went through" to draft the Gramm-Leach-Bliley Act of 1999 to restrict investment banking activities to holding company units supervised by the Fed rather than national banks overseen by the OCC.
Rep. Baker will pursue "an aggressive oversight agenda, if he has the opportunity to serve as the full committee chairman," his spokesman said. "He would expect to fully examine Chairman Leach's concerns" and seek to ensure that financial institutions overseen by the OCC are not gaining a government-aided competitive advantage, he said.
The commitment is important, given skepticism already being expressed that the next chairman will match Rep. Leach's level of intensity on the issue.
"I think Jim Leach has a bee in his bonnet over this. The others don't appear to be as concerned," said a Washington banking lawyer who did not want to be identified. "Clearly the issue will be diminished by Leach's no longer being the chairman next year."
Indeed, Rep. Baker's spokes-man said that the legislator "has concerns, but I wouldn't say they rise to the level of Mr. Leach's, because he doesn't have all the information." However, he added, "once he's been able to conduct a more complete examination, he would make a decision as to what kind of action he would take."
Rep. Leach will not exactly be gone from the scene. He will probably remain a member of the House Banking Committee and active on the issue.
"He's a senior member of the House of Representatives with a great deal of credibility on these issues," his spokesman said. "He's not the only member who is concerned about the banking and commerce issue."
Others say that no matter who is in charge, if the facts show impropriety the issue will not fade.
"If the investigation alleges misconduct, it will be significant, regardless of who is chairman," said Karen Petrou, head of the banking policy consulting firm ISD/Shaw. "Roukema has been a very strong critic of the OCC," she said, "and it is conceivable" that Maryland's Paul S. Sarbanes, the top Democrat on the Senate Banking Committee, "would take it."
Ms. Petrou also noted that "any House Banking chairman would likely defer to Rep. Leach" on the issue.
Rep. Oxley's office would not comment on the House Banking report or investigation. Rep. Oxley could become House Banking chairman under a plan that is gaining legs to transfer House Commerce jurisdiction over financial institutions to an expanded House Banking Committee. Under that scenario, Reps. Roukema or Baker could be named head of an expanded financial services subcommittee.