St. Germain Seeks to Tie Bank Expansion, Service

WASHINGTON —  The chairman of the House Banking Committee suggested Wednesday that expanded securities powers for banks should be linked with measures ensuring better service to consumers.

“The banking industry, in its clamor to expand powers, needs to assure consumers that new activities do not siphon off resources from areas already woefully shortchanged,” Rep. Fernand J. St Germain, (D-R.I.), said.

He was referring to the fear, expressed by consumer group leaders at a subcommittee hearing, that enforcement of rules spurring banks to serve low-income people will suffer if federal bank regulators are forced to devote more attention to banks’ new activities.

Proponents of allowing banking organizations to underwrite securities say it would increase the safety of the entire banking system by boosting bank profits.

But, St Germain said, “It is Alice-in-Wonderland economics to think that profits--if any, from securities and other subsidiaries--will be plowed back into urban neighborhoods unless we attach some specific conditions.”