FED CHAIRMAN VOLCKER SAYS BANK PROPOSALS A WORRY The chairman of the Federal Reserve Board, Paul Volcker, has written to the chairman of the House Banking Committee to raise concerns about legislative proposals scheduled for consideration Wednesday. Volcker told committee chairman Fernand St. Germain a proposal to deny primary dealer status to firms from countries that do not grant U.S. firms equal access to their government debt markets might invite retaliation against U.S. firms abroad. He added, "even Japan, against whom this proposal seems to be particularly directed," has started opening its markets. In his letter, made available at the Treasury, Volcker also said a proposal to ease debt problems of developing countries by setting up a public facility to buy their debts owed to commercial banks, was a problem. "I believe that the prospect of debt relief would undermine the difficult internal efforts of the borrowing countries to achieve the structural reform that is needed regardless of the policies that are followed on servicing external debt," Volcker said. It might also cause private lenders to become reluctant to extend more credit to the borrowing countries, he said. Volcker said he endorsed comments by Treasury Secretary James Baker "about the inappropriateness of using public resources for purchasing private commercial bank debt, which we both see as an inherent aspect of the proposed international debt facility." He also said a proposal for establishing formal procedures for international negotiations on currency exchange rates "is unrealistic and could well have damaging effects." "For example, the bill's directive to intitiate negotiations in order to achieve a competitive exchange rate for the dollar -- a matter upon which there can be considerable difference among analysts -- runs the risk of building up potentially destabilizing market expectations," Volcker said. He recommended "we should not lock ourselves into formalized procedures for international negotiations" on exchange rates but instead use other, more flexible means like the recent mmeting in Paris between U.S. treasury and central bank representatives and those of major trade allies.