A small but influential group of bipartisan senators has introduced legislation to reinstitute barriers between banking and non-traditional activities, effectively seeking to repeal the financial holding company (FHC) structure authorized in the 1999 Gramm-Leach-Bliley Act. The bill in fact would go considerably further, also reaching beyond the Volcker Amendment to Dodd-Frank to bar even those proprietary-trading and hedge-fund/private-equity activities and to overturn years of decisions by the OCC allowing national banks to engage in non-traditional activities now deemed within the “business of banking.” The bill would also go further than the Lincoln Amendment to Dodd-Frank by flatly barring most swaps and related activities in insured depositories, regardless of whether or not these are needed for hedging purposes (with hedging apparently possible in the newly-restricted activities also proscribed for bank holding companies). By virtue of its broad definition of “banking,” the bill would also eliminate an array of longstanding unitary thrift holding companies and non-bank banks by redefining “deposit” to extend activity restrictions to parent companies and affiliates of most insured depositories.
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