Picking up where he left off last year, Treasury Under Secretary John D. Hawke Jr. recently made a pitch for legislation to revamp the nation's financial laws. Speaking Jan. 8 in San Francisco to the Association of American Law Schools, Mr. Hawke said the banking industry will regret its opposition to financial reform.

Here are excerpts of Mr. Hawke's comments.

It's become increasingly clear that if there is no legislation in the current Congress, thrifts and the diversified financial services firms that own or want to acquire thrifts will be the big winners. And banks will be losers. Banking organizations will be denied the broad new authority to expand the scope of their financial acts that seems to be taken for granted in the legislative process so far.

Instead, banking organizations, if there is no legislation, will have to make do with the limited ability they have to sell insurance and securities under present law, and with whatever may emanate from the Comptroller of the Currency's so-called Part 5 initiative (the operating subsidiary rule). The full potential for Part 5 won't be known for a number of years, until the inevitable litigation is resolved.

In the meantime, the thrift charter will increasingly be turned to by insurance and securities firms that will recognize its utility as a point of entry into the insured depository institutions business. The more invested in the thrift charter the diversified companies become, the more difficult it will be in succeeding Congresses to achieve the kind of legislation that we've proposed, because interests will have shifted.

Paradoxically, the biggest losers are likely to be those that have been most hostile to financial modernization legislation: independent bankers, the banking and commerce hard-liners, and the Federal Reserve itself, which may find the financial services industry has passed it by in favor of entering the banking business through the means of the thrift charter.

If there is no legislation, the banks are going to end up being the big losers.

From a competitive point of view, there is a certain smugness in the banking industry: "Why do we need legislation? After all, we can do some securities activities, we can sell some insurance." I think that's very short-sighted, because the securities and insurance firms can get into the depository institutions business by acquiring thrifts.

The federal thrift charter is fabulous. It can branch any place in the country. It has better preemption rights with respect to state laws than even national banks.

For anybody doing a nationwide consumer finance type business, a federally chartered thrift is ideal. There is going to be a big movement- you're already beginning to see it-to the ownership of thrifts.

In the absence of rational legislation, the thrift charter will become the charter of choice. And banks will be left struggling with what they've got.

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