NASD Warns Banks on Tying Loans to Hiring

The NASD said banks increasingly are using loans to strong-arm companies into hiring them for investment-banking business and warned its members that the practice is illegal.

The NASD, formerly the National Assn. of Securities Dealers, oversees firms such as Goldman Sachs Group Inc., which have complained to regulators about banks tying loans to underwriting or advisory work because it has cost them business. The NASD also regulates the securities arms of commercial lenders such as J.P. Morgan Chase & Co.

Rep. John Dingell (D-Mich.) of the House Energy and Commerce Committee in July said he was investigating the practice and asked regulators to demonstrate what they were doing to prevent it.