“Salomon Smith Barney’s practice of allocating hot IPO shares to banking clients is prompting Congress to consider expanding its current corporate-malfeasance probes to include the activities of other investment banks,” writes Tom Hamburger in today’s Wall Street Journal.

“In light of documents released this week detailing Salomon’s allocations of initial public offerings to top WorldCom Inc. executives, Democrats and Republicans on key congressional committees are calling for hearings to investigate actions taken by banks as they sought to woo business — and the role of stock analysts such as Salomon’s Jack Grubman in the decision-making. Officials at Citigroup Inc.’s Salomon unit have said they did nothing wrong, and that their IPO-allocation policies conformed to industry norms.”

“Rep. John LaFalce (D., N.Y.), the ranking member of the House Financial Services Committee, said he intends to formally ask that the committee ‘take a comprehensive look at the many investment banking issues’ that have arisen this year, including this week’s Salomon disclosures.”

“Among the areas he plans to focus on are the role of analysts in investment banking generally, and their involvement in stock allocations in particular. ‘There are a good many practices that are atrocious but not illegal,’ he said.”

“While it is unlikely any legislation will be approved this year, the demands for overhaul may be carried into the fall congressional election campaign.”

” ‘My guess is that Salomon is not alone,’ said Sen. Peter Fitzgerald (R., Ill.), ranking member of the consumer-affairs subcommittee that has been investigating the impact of the corporate-governance scandal on ordinary investors. ‘We need to put a spotlight on this kind of cronyism and educate the public about potential problems in the securities industry.’ “