Fed to Consider Broader Bank Brokerage Powers

The Federal Reserve said it will consider next month whether to let all banks make special offers of discount brokerage services to depositors--another breach of the wall separating the banking and securities businesses.

The Fed on Thursday granted First Union Corp. a limited exemption from so-called “anti-tying” provisions of federal banking law. The nation’s sixth-largest bank holding company got permission to offer discounts on commissions for brokerage services to customers who maintain a minimum balance in accounts at any of First Union’s branches throughout the Southeast.

“We want to offer one-place shopping for financial services,” said Dave Scanzoni, a spokesman for the Charlotte, N.C.-based banking company.

Banks have been permitted to offer discount brokerage services--buying and selling securities for customers without providing investment advice--for more than a decade. BankAmerica Corp. owned Charles Schwab Corp., the country’s biggest discount brokerage firm, from 1983 until 1987.

So far, banks have not been allowed to link brokerage and deposit services because of concerns that banks would coerce customers into buying both services.

If the Fed grants all banks the same powers it gave to First Union, it would mark the latest in a series of moves to dismantle the barriers between commercial banking, securities brokerage and investment banking that were established under the Depression-era Glass-Steagall Act. That could lead to increased competition between the banking industry and Wall Street.

But extending banks’ brokerage powers could meet resistance in Congress. Rep. John Dingell (D-Mich.), who chairs the House Energy and Commerce Committee, has said bank customers may be unaware that some investments purchased through their bank are not federally insured, as savings deposits are.

The Fed’s vote was 6 to 0 in favor of the First Union application. Fed Gov. Wayne Angell was absent from the session and did not vote.