Business Notes FINANCE

Four years after the market crash of 1929, Congress passed the Glass-Steagall Act, barring banks from dealing in stocks and other securities. At the time economists believed losses from stock trading helped cause the widespread bank failures of the early 1930s. So it is surprising that Wisconsin Democrat William Proxmire, chairman of the Senate Banking Committee, is pushing to let banks deal in securities again despite the Oct. 19 market collapse and its stirring of memories of 1929.

Last week Federal Reserve Chairman Alan Greenspan added his considerable backing to the Proxmire proposal, which would permit commercial banks to establish separate units for trading securities. Greenspan told Congress that financial and technological innovations have hurt the competitiveness of commercial banks. For example, large companies that once relied on banks for credit are now much more likely to raise money by issuing securities through investment houses. Greenspan argued that commercial banks will be stronger if they are given the freedom to compete with Wall Street. Said he: "The events since Oct. 19 have not altered our view that it is necessary to proceed to modernize our financial system, and that it is possible to do so in a way that will maintain the safety and soundness of depository institutions."