May 17, 1991
TO: BOARD OF GOVERNORS NO. 34-91
RE: INSTITUTE TESTIMONY ON FINANCIAL SERVICES REFORM
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On May 16, the Institute testified before the Senate
Banking Committee on legislation to modernize the financial
services industry. The testimony primarily covered the
legislative proposal of the Bush Administration, the "Financial
Institutions Safety and Consumer Choice Act of 1991". (The
Institute also testified on this proposed legislation last month
before the Financial Institutions Subcommittee of the House
Banking Committee. See Memorandum to Board of Governors No. 26-
91, dated April 24, 1991.)
The Institute's testimony stressed the need to avoid
repealing the Glass-Steagall Act without simultaneously removing
the restrictions on ownership of banks by commercial firms, so
that all securities firms would be able to engage in banking.
The Institute stated that the Administration's bill, which would
permit commercial firms to acquire banks, represents the
preferable approach.
The Institute's testimony noted that the Administration's
bill also contains other important provisions, including allowing
nationwide banking, subjecting most securities activities,
including mutual fund activities, to SEC regulation and
substantially closing the loophole for bank common trust funds.
However, the Institute stated that the bill lacks needed
amendments to the Investment Company Act to guard against
potential abuses arising from bank sponsorship of mutual funds.
Copies of the Institute's written and oral testimony are
attached.
Craig S. Tyle
Associate General Counsel
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