THE VIRGINIAN-PILOT 
              Copyright (c) 1995, Landmark Communications, Inc.

DATE: Sunday, March 5, 1995                  TAG: 9503040013
SECTION: COMMENTARY               PAGE: J4   EDITION: FINAL 
TYPE: Editorial 
                                             LENGTH: Short :   43 lines

GREENSPAN RECOMMENDS DEREGULATION BANK REFORM OVERDUE

Since 1933, the Glass-Steagall Act has restricted the ability of American banks to offer a wide array of financial services. It has made them less competitive and, ironically, less secure than they might otherwise have been. Now, that may be about to change.

Fed Chairman Alan Greenspan has endorsed a relaxation of the largely anachronistic regulations. A Republican Congress is likely to follow his lead. Most important, opposition to reform has dwindled.

For decades, Wall Street interests have fought any change for purely selfish motives, they didn't want banks competing on their turf. But in the new world of global financial markets, lines of demarcation that once made sense no longer do.

The distinctions between mutual-fund companies that offer checking, investment banks, commercial banks and insurance companies that sell mutual funds as annuities are blurred. Yet Glass-Steagall has permitted some financial companies to invade the turf of banks, while refusing to let banks compete freely.

Critics dither about the dangers of another S&L debacle or a rash of bankruptcies brought on by speculative excess, the fate that has befallen the British bank, Barings PLC. But those problems resulted from inadequate oversight, internally and eternally.

There's no question that banks shouldn't be permitted to gamble wildly with deposits covered by government insurance, for example. But that's a different regulatory question. Preventing banks from offering a full line of financial services won't prevent them from behaving foolishly. The two are unrelated.

In fact, banks will be weaker, not stronger, if they aren't able to diversify their risk, cut overhead through streamlined operations and offer products that their competitors are able to sell. Greenspan is right. It's time to reform banking laws intended for an earlier and simpler era. by CNB