WASHINGTON — THE Bush administration Tuesday proposed the most fundamental banking reforms since the Great Depression. The proposals aim to revitalize the banking industry and make it competitive internationally by giving banks broad new powers, including the right to expand nationwide.
``We are trying to do something that strengthens the American banking system, provides more services to the consumer, and makes sure we do something about the situation where the top US banks number 27 in the world,'' Mr. Brady said.
The Treasury plan would remove barriers between banking and commerce and permit industrial companies as well as securities and insurance firms to own banks. Banks would be allowed to compete directly with Wall Street securities firms, to get a slice of the lucrative market in underwriting stocks and bonds. Depression-era banking laws barred commercial banks from the stock market.
The proposal would prevent a single depositor from receiving insurance coverage in multiple accounts at a single institution.
And in an effort to streamline regulation, the plan would reduce to two from four the number of regulators who now oversee banks. The Federal Reserve would supervise all state-chartered banks and holding companies. And a new federal banking agency, under the Treasury, would supervise all national banks and holding companies. The Federal Deposit Insurance Corporation would focus on insurance and the resolution of failed institutions.
Many in Congress blame rapid deregulation for the savings-and-loans crisis, and have been quick to criticize the plan for giving banks new freedoms before imposing stricter supervisory reforms.
``The administration makes a mistake in proposing new and risky activities for banks before the supervisory and insurance reforms are in place and working,'' said Rep. Henry Gonzalez (D) of Texas, chairman of the House Banking Committee.
Michigan Democrat Donald Riegle, chairman of the Senate Banking Committee, said that boosting the bank deposit insurance fund and stronger bank supervision were more urgent priorities than deregulation.
The industry's problems stem largely from real estate loans that turned sour with the collapse in land values as the economy slid into recession.