Federal Reserve Recommends Legislative Repeal of Merchant Banking Authority and Exemptions for ILCs and Grandfathered Thrifts
The Federal Reserve has issued a set of sweeping and surprising recommendations to Congress that, if enacted, would dramatically limit the authority of banking institutions subject to the Bank Holding Company Act of 1956 to engage in certain non-banking activities and investments. The Federal Reserve also proposed eliminating the current exemptions for owners of industrial loan companies and “grandfathered” thrifts. The recommendations were contained in a report issued yesterday to Congress and the Financial Stability Oversight Council.
Although the prospects for legislative passage are low, at least in the near term, the recommendations (and related commentary) constitute a significant public statement of the Federal Reserve’s views on longstanding statutory authorities that it has administered.