WASHINGTON, May 25— Strongly disagreeing with a new Congressional study, the chairman of the Federal Reserve Board, Alan Greenspan, said today there was "negligible" risk that the rapidly growing market for financial derivatives might someday require a taxpayer bailout.
In testimony before a House subcommittee, Mr. Greenspan and other senior financial regulators said there was no need for new legislation to supervise derivatives.
Derivatives are highly profitable products offered by banks and brokerage firms to corporations and investors. They are contracts with cash values that are tied to, or "derived" from, the price of financial assets like stocks, bonds, commodities or currencies. Variety of Uses
Most often, derivatives are used by companies as a form of financial insurance; they can, for example, help protect against a decline in the dollar's value that would raise the cost of a company's imports. Derivatives can also be used by investors as a substitute for owning securities.
Several large companies recently reported losses from unusual derivative transactions that combined normal hedging of risks with speculative bets on interest rates.
Last week, the General Accounting Office, an arm of Congress, released a study that called for vastly expanded regulation of the dealers and users of derivatives. In particular, the G.A.O. called for much closer supervision of the derivatives activities of brokerage firms and insurance companies, which are not regulated as tightly as federally insured banks. Fears of a Bailout
The G.A.O. said that because derivatives activity was concentrated in a few big banks and brokerage firms, there was an increased possibility of a market crisis leading to a taxpayer-financed bailout that might have to be extended even to uninsured brokerage firms.
Mr. Greenspan challenged the G.A.O.'s assertion that the Government could be at financial risk. He noted that brokerage firms can borrow from the Federal Reserve's discount window in case of emergency but he emphasized that such loans are backed by collateral and, in his view, pose virtually no risk to the Government.
Moreover, Mr. Greenspan played down the risk of derivatives to commercial banks. "There is no presumption that the major thrust of derivatives activities is any riskier, indeed it may very well be less risky, than commercial lending," he said.
Mr. Greenspan argued repeatedly that additional Government regulation was not necessary because of "private regulation" by investors, credit rating agencies and others that insist on financial soundness in those with whom they do business. Safeguards Are Seen
"The G.A.O. report's concern that there are gaps in derivatives regulation is true only in the narrow sense that Government regulations or regulators are not in all cases involved," Mr. Greenspan said. "In a more important sense, today's markets and firms, especially those firms that deal in derivatives, are heavily regulated by private counterparties who, for self-protection, insist that dealers maintain adequate capital and liquidity."
Arthur Levitt Jr., the chairman of the Securities and Exchange Commission, said the agency did not need additional powers to oversee the derivatives activities of affiliates of the brokerage firms it regulated. Still, under intense questioning from Representative Edward J. Markey of Massachusetts, the chairman of the Telecommunications and Finance subcommittee, Mr. Levitt said the S.E.C. did not have the legal authority to compel these derivative dealers to submit to examination by regulators.
"If they wish to deny us information, they could do so," he said, although he noted that the agency had found no evidence of unsafe derivatives activities at brokerage firms.
Mr. Markey said he was worried that the S.E.C. was dependent on voluntary cooperation by the brokers. "Securities and insurance regulators have to rely on the kindness of strangers, like Blanche DuBois," he said, referring to the character in "A Streetcar Named Desire."
The regulators also rejected Mr. Markey's assertion that derivatives regulations should be made consistent for banks and brokerage firms. Variations Are Noted
"The markets are different," Mr. Levitt said. "The banking industry is protected by an insurance fund that guarantees its safety and soundness." Brokerage firms, by contrast, are regulated to prevent fraud and theft of securities from customer accounts, but they are regularly allowed to fail, he said.
Mr. Markey said he hoped to introduce and have passed in this Congressional session legislation that would expand regulation of derivatives. That goal may be made more difficult by the actions of Representative John D. Dingell, the Michigan Democrat who is chairman of the full Energy and Commerce Committee. Mr. Dingell today released letters that he had sent to Mr. Levitt and Treasury Secretary Lloyd Bentsen asking for formal comments on the G.A.O.'s recommendations.
Because Mr. Dingell gave the regulators 45 days for their reports, financial industry lobbyists suggested that the move would delay consideration of a derivatives bill until next year.
Mr. Markey said he would hold more hearings on derivatives, perhaps with testimony from some of the companies that have lost money using them. Learning Lessons
In today's hearing, Mr. Greenspan also argued that legislation was less needed now because in the last few years regulators had learned more about derivatives and how to press dealers to manage their risks better. "As far as the Federal Reserve Board is concerned, we feel we are ahead of the curve on this issue," he said.
Eugene A. Ludwig, the Comptroller of the Currency and the regulator of national banks, said that the 8 to 10 banks with the biggest derivatives activity were complying with new Government standards on risk management of derivatives. Still, there are 362 national banks involved with derivatives, and Mr. Ludwig said examiners had found defects in the procedures of some of the smaller ones.
Photo: For financial institutions, derivatives transactions "may very well be less risky" than commercial lending, Alan Greenspan, the chairman of the Federal Reserve, told a Congressional panel yesterday. (Associated Press) (pg. D6)
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