To the Editor:

It is amusing that Under Secretary (of the Treasury) Jerry Hawke continues to publicly lecture not only independent bankers but also the Federal Reserve on what financial restructuring legislation is good for them ("Banks Resist Thrift-Reform Legislation At Their Peril," Jan. 14).

As a former general counsel of the Fed, the under secretary well knows that the Fed is fully capable of deciding what is best for itself as it periodically parries unfriendly thrusts from the Treasury aimed at its present structure.

As regards community banks, the under secretary's concerns are touching, but in his vision of a new and vastly concentrated financial order (the idea of commercial banks and commercial firms owning one another doesn't even faze him), there would be a drastically diminished role for community banking.

It is also amusing that the under secretary takes on "banking and commerce hard-liners," which would include former Fed Chairman Volcker, to a degree Chairman Greenspan, but most certainly the ranking minority member of the Senate Banking Committee, Paul Sarbanes-the Treasury's designated point man in the Senate on banking issues.

If the "financial modernization package" is so good for banking, why does the Comptroller of the Currency have so many rightful problems with it? And if the under secretary includes thrifts when he uses the term "banking," recent public comments seem to indicate that the OTS also is not on board supporting legislation that the thrift industry vehemently opposes.

As the under secretary knows, the insurance lobby is very powerful in the upper reaches of the House of Representatives. A recent publication of the Independent Insurance Agents of America (IIAA) rails against various OCC actions giving new insurance powers to national banks (crop insurance sales being the latest).

It notes that the IIAA legislative team will continue to fight for the House financial modernization bill and the functional regulation of insurance (meaning continued state regulation).

The IIAA publication also notes that half the states have enacted legislation based on the model consumer safeguards bill crafted by the IIAA and that "unless the Comptroller of the Currency can be reined in, he will blow holes in those laws."

There is no evidence to date that the House of Representatives has any intention of passing pro-banking legislation, and if a bill clears the House, banking interests could be further set back in the Senate.

It is this handful of salt that makes the under secretary's policy advice to banking inedible.

Kenneth A. Guenther

Executive vice presidentIndependent Bankers Association of AmericaWashington, D.C.

Ken Guenther appears to have misconstrued the brief quotation from a recent talk I gave. I was neither lecturing community bankers nor setting forth a "vision" of a new financial order. I simply observed that for many of the relevant interest groups, including community bankers, a reasonable approach to financial modernization may be more desirable than the status quo. Treasury's proposal, for example, would have limited the ability of thrift holding companies to engage in nonfinancial activities, where today they have no limits.

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