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Rubin rips banking bill
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February 24, 1999: 12:36 p.m. ET
Calls Senate proposal 'unacceptable' and says administration will oppose it
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NEW YORK (CNNfn) - U.S. Treasury Secretary Robert Rubin voiced his opposition Wednesday to proposed legislation to modernize financial services.
In a prepared statement to the Senate Banking Committee, Rubin said the draft bill and its appendix of "undecided issues" contain "significant provisions that are unacceptable to the Administration and we would oppose the bill in its current form."
Rubin raised several concerns about the draft, including the prohibition on the use of subsidiaries by larger banks and the weakening of the Community Reinvestment Act, which is designed to encourage banks to serve credit-worthy borrowers in all communities.
"We believe that any bank seeking to conduct new financial activities should be required to achieve and maintain a satisfactory CRA record," Rubin said. "The draft bill fails to include this requirement."
Rubin said Treasury believes in revamping Depression-era banking laws, "if it is done right."
He said all banks should have the option of expanding into insurance and securities activities through subsidiaries rather than through the bank holding company affiliate structure.
Senate banking panel Chairman Phil Gramm released a draft reform bill last week that would allow only subsidiaries of banks with assets under $1 billion to expand into other financial services.
"With the safeguards we have proposed," Rubin said, "subsidiaries and affiliates are absolutely identical with respect to the ability of a bank to transfer any subsidy that may exist in the bank."
Gramm also has discussed allowing banks to branch out into nonfinancial businesses and commercial firms to enter banking, a provision Rubin said would concern Treasury under any circumstances.
"These concerns are heightened as we reflect on the financial crisis that has affected so many countries around the world over the past two years," Rubin said.
Rubin later described his exchanges with Gramm as a "good analytic discussion" about very important issues. 
-- from staff and wire reports.
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