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Greenspan backs bank reform
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February 11, 1999: 11:50 a.m. ET
Fed chief urges enactment of banking modernization act, said markets demand it
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NEW YORK (CNNfn) - Federal Reserve board Chairman Alan Greenspan Thursday told lawmakers on Capitol Hill that legislative barriers to banking efficiency must be removed and urged Congress to pass the banking modernization bill.
"The markets are demanding that we change outdated statutory limitations that stand in the way of more efficiently and effectively delivering financial services to the public," he said.
Testifying before the Congressional Financial Institutions and Consumer Credit Subcommittee, Greenspan reaffirmed his support for HR 10, or the Financial Services Modernization Act. The legislation, resurrected from last year's Congress, would allow one-stop shopping for a host of financial services.
The Act, coupled with revisions in the Glass-Steagall Act and the Bank Holding Company Act, would allow the markets to determine the best methods of integration of banking, insurance and securities activities.
Greenspan, who believes banks should diversify through holding companies, said the U.S. financial markets are at a "historic crossroads in financial services regulation," where efficiencies gleaned from new technology should not be hampered by onerous and outdated legislation.
"In the United States, our financial institutions have been required to take elaborate steps to develop and deliver new financial products and services in a manner that is consistent with our outdated laws," he said. "The costs of these efforts are becoming increasingly burdensome and serve no useful public purpose."
He further stated that, "Unless soon repealed, the archaic statutory barriers to efficiency could undermine the global dominance of American finance, as well as the continued competitiveness of our financial institutions and their ability to innovate and to provide the best and broadest possible services to U.S. consumers."
Lack of Congressional action, he said, would lead to a host of problems down the road, including "exploitation of loopholes and marginal interpretations of the law that courts feel obliged to sanction." 
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Federal Reserve Board
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