Acting Comptroller Urges Close Look at Financial Modernization Bill

WASHINGTON, D.C. — Acting Comptroller of the Currency Julie L. Williams told bankers today that the industry's future was at stake in the debate over financial modernization legislation and urged them to take a close look at the bill pending in the Senate.

"It's imperative that we take the time to fully understand the implications of financial modernization and get it right," she said in a speech to the Tennessee Bankers Association. "Whatever we do will be yours to live with well into the next century."

In her speech, Ms. Williams took exception to recent comments from the Federal Reserve suggesting that the deposit insurance fund would be placed at risk if bank subsidiaries were allowed to conduct the same range of activities as holding company affiliates.

"I respectfully disagree — and so does the FDIC, which has the primary responsibility for the safety of those funds," she said.

Ms. Williams also warned that the banking industry would suffer if a provision in the bill eliminating judicial deference for the OCC is passed. Traditionally, the courts have deferred to the judgment of regulators on matters within their jurisdiction unless their decisions can be shown to be unreasonable.

Ms. Williams said the issue raised by that section of the bill is one of great practical importance to bankers. "It means you will have less certainty — -and more litigation — about whether activities are permissible for banks," if that provision is enacted into law, she said. "You will have less protection against discriminatory state regulation that targets banks' insurance activities."

Moreover, Ms. Williams added, "down the road, there will be safe and sound new activities — new products and services — that you would like to provide to your customers — that you won't be able to provide, even though, today, under current law, the OCC might find them to be permissible."

In addition, Ms. Williams told the banker group that HR 10 does not provide for a separation between banking and commerce, as some of its supporters have claimed.

"Whether these two lines of business should be kept apart is a separate and complex question," she said. "But if you believe in separation, be aware of the fact that, despite what its proponents say, H.R. 10 actually provides many new opportunities for firms to commingle banking and commerce."

"I do think America needs financial modernization legislation soon," Ms. Williams said. "But we must have legislation that truly advances the needs of consumers and communities and that gives banks of all sizes an even chance to compete and succeed."

"In my judgment, H.R. 10 is not that legislation," she added.

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