Securities firms, unlike commercial banks, have strong objections to the regulators' final version of their interim rule for merchant banking, issued January 10. Twenty days later the Securities Industry Association wrote to the regulators that the final rule falls far short of providing the "two-way street" envisaged by Gramm-Leach-Bliley to allow investment bankers into commercial banking.
Instead, the letter to the Federal Reserve and the Treasury Department said, "These rules will deter securities firms from becoming financial holding companies and will limit affiliations between securities firms and banking companies." SIA said safety and soundness could be addressed with "rules that are far less restrictive and complicated than what has been adopted."
The brokerage industry trade group urged the Fed and the Bush Treasury to take another look at the final rule in the light of the intentions of GLBA. A Fed spokesman said he had no comment on that request.
But the Fed official did scotch a rumor that ran around Washington last week, that maybe the regulators would delay the merchant banking final rule for 60 days in deference to a Bush White House memorandum asking that no regulations go to the Federal Register and take effect during the next two months.