While it should come as little surprise, Greenspan pulls no punches in saying that US banks are prepared for interest rates to rise. Likewise, the banking system will not be destabilized once the Fed begins tightening monetary policy. Greenspan says banks have managed their growing mortgage loan portfolios well since the Fed began lowering interest rates in January 2001. Greenspan expects merger and acquisition activity to flourish. As with interest rate sensitivity, Greenspan does not see subversive forces at play in the M&A arena. Greenspan has long advocated deregulation. He notes that while some recent very large transactions have been entered, roughly 90% of bank mergers have involved a target with less than $1 bln in assets, and three- quarters have involved an acquiree with assets of less than $250 mln. Greenspan is testifying before the Senate Banking Committee today and will return to Capitol Hill Wednesday for testimony before the Joint Economic Committee of the Congress. Today"s prepared remarks omit direct reference to monetary policy or the near-term direction of the economy. He will be taking questions, however, and he will be more effusive on the economy and policy tomorrow.