BILLS WOULD BAR BANKS FROM INVADING PRIVACY

WASHINGTON -A proposal by banking regulators that banks keep closer tabs on
customers has become a national privacy issue, prompting a Texas lawmaker to
introduce legislation to block the rules.

The proposed regulations, called "Know Your Customer," would require
financial institutions to develop customer profiles, monitor accounts and
report any unusual activity, such as large deposits or withdrawals. They
were designed to spot the flow of illegal drug money or money laundering.

"These rules are more like `Spy on Your Neighbor' and I have not met anyone
who likes them," said Rep. Ron Paul, R-Surfside, who introduced a package of
three bills yesterday to provide "financial privacy."

"The subject is very dear to my heart, not just financial privacy but
privacy in general," Paul said at a news conference in his office.

Paul was the Libertarian Party's presidential candidate in 1988 - when he
was not in the House - and is an advocate of limited government.

"This to me is such an outrage," he said of the proposed rule.

Such diverse groups as the American Civil Liberties Union and the American
Bankers Association have criticized the proposal.

The Texas Bankers Association was an early critic of the proposal.

"It is very troubling," said John Heasley, general counsel of the bankers'
group. "How do you think customers are going to react? The potential for
invasion of privacy is huge."

Paul, a member of the House Banking Committee, introduced legislation that
would prohibit the agencies from issuing the rules; terminate the Bank
Secrecy Act, which gives the government investigative powers; and give
customers the right to files in a database developed by the Treasury and the
Internal Revenue Service.

Paul helped publicize the rules when they were proposed late last year and
has drawn national attention to the move by the banking agencies.

Steve Katsanos, spokesman for the Federal Deposit Insurance Corp., said the
agency has received more than 15,000 comments on the proposal. "Very few of
the comments have been supportive," Katsanos said.

The four agencies involved in the rule-making - the Federal Reserve System,
the Comptroller of the Currency, the Office of Thrift Supervision and the
FDIC - are now reviewing the comments, which are due by March 8.

There are signs that the regulators are re-thinking the approach.

Last week, FDIC Chairman Donna Tanoue said, "It's evident to me personally
that we're going to have to do something different than was proposed."