February 14, 1989
TO: BOARD OF GOVERNORS NO. 8-89
FEDERAL LEGISLATION COMMITTEE NO. 1-89
FEDERAL LEGISLATION MEMBERS NO. 2-89
RE: DODD "FINANCIAL MODERNIZATION AND SAFE BANK ACT"
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Senate Securities Subcommittee Chairman Christopher Dodd
(D-Conn) has introduced S.308, the "Financial Modernization and
Safe Bank Act." The bill parallels the Senate-passed Proxmire
bill of last session, but because of concerns about the regula-
tory and competitive results of the Proxmire bill, S.308 adds a
new title to the Proxmire bill. The new title provides for the
establishment of a "safe bank" as a requisite to the exercise by
a bank holding company of expanded securities or other powers.
S.308 proposes that a "safe bank" is one that invests its
deposits generally in U.S. Government and obligations guaranteed
by the U.S. Government. Dodd's bill is modeled from the work of
Robert Litan of the Brookings Institution and others. Chairman
Dodd considers the approach to be
"...a true two-way street--one which
would not only permit safe banks into
other businesses but would also permit
nonbanking businesses to enter the banking
business if they agreed to convert the
bank to a safe bank--it would permit the
maximum amount of competition."
A copy of Chairman Dodd's Congressional Record statement is
attached. If you have any questions, please do not hesitate to
call.
Julie Domenick Doerr
Vice President-Legislative Affairs
Attachment