BANKING & FINANCE - March 3, 1992

Breeden Urges Capital Charge on Bank’s Bonds: Securities and Exchange Commission Chairman Richard C. Breeden said financial rules are partly to blame for the credit crunch because they give banks an incentive to invest in government bonds rather than lend out money. Speaking to a small-business conference, Breeden suggested that banks have been plowing money into government bonds rather than lending the funds out because they do not have to set aside funds when they buy Treasury securities. He urged that the rules be changed so the banks would be forced to put funds aside in a “cushion� against their purchases of Treasury bonds--which are loans to the government--as they must to cover potential losses on loans to businesses.