Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 5, 1991 TAG: 9102050503
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
If adopted by Congress intact, the package would propel fundamental and irrevocable changes in financial services industries touching nearly every American who borrows or saves.
Longstanding laws barring commercial and industrial companies from owning banks would crumble, as would the division of banking from the insurance and securities industries.
And, for the first time since the establishment of federal deposit insurance in 1934, government guarantees to bank customers would shrink rather than expand.
The administration also would lift restrictions on interstate banking dating from the 1920s, allowing giants like Citicorp and Bank of America to establish branches to compete with local institutions.
The core of the proposal, a 550-page study prepared by the Treasury Department, was being released today, although most of its provisions have been known for weeks.
Today's study focuses on long-term changes. Specific proposals for curing banking's most pressing short-term problem, the weakness of the Federal Deposit Insurance Corp., have been postponed.
The fund has been depleted by more than 800 failures over the past four years, and banking trade groups are discussing ways to replenish it without turning to the taxpayers.
Advocates of the Bush plan say it is long overdue. Innovations in the delivery of financial services have cut banks off from some of their best customers. Wealthy depositors open money market accounts with brokerage houses. Large companies issue their own commercial paper rather than borrow from banks.
Opponents say it could lead to a dangerous concentration of financial power, depriving local communities of control of their financial institutions. They also fear conflicts of interest as commercial and financial firms merge and harm to retail customers, who may confuse uninsured securities offered by their banks with insured deposits.
The Treasury plan calls for the Federal Reserve to take over the FDIC's responsibilities for regulating banks. The Fed and the comptroller of the currency would share supervision of bank holding companies.
The rule changes are carefully crafted to minimize disruption to average depositors. The Treasury Department backed away from a proposal to limit depositors to $100,000 in insurance.
Instead, the administration will propose a milder version limiting insurance to $200,000 per institution: $100,000 for retirement accounts and $100,000 for other accounts.
by CNB