Clearly, the authorization of new activities in bank subsidiaries that are not now permitted either to banks or their affiliates would tend to accelerate the trend to reduce holding company activity, even if these activities were also permitted to holding company subsidiaries.
The subsidy inherent in the safety net would assure that result, extending the spread of the safety net and requiring that the Federal Reserve’s authority and ability to meet its responsibilities be shifted to a different paradigm. Such a result is reason enough for our concern about the spreading of the safety net subsidy.