In merchant banking, an increasingly important but risky activity on Wall Street, securities firms both arrange corporate takeovers or buyouts and invest their own capital in them.

For the three institutions handled tonight, which are in Texas, Illinois and Florida, the agency arranged takeovers by nearby banking or savings companies.

The Economy Government may need to restrain investment banks that arrange corporate takeovers from speculating in the related stocks, according to Senator Proxmire.

Ms. De-Laurey worked for E. Scott Mead, a telecommunications banker who helped arrange large takeovers.

There is no more fashionable pursuit on Wall Street today than merchant banking, in which investment banks not only help to arrange takeovers or leveraged buyouts, but also invest their own money in the deals.

All three companies said profits were hurt by the drop in fees from arranging large corporate takeovers and other financings and by the absence of interest payments from Brazil.

Mr. Miller helped develop Merrill Lynch's merchant banking activities, in which the firm helped to arrange and finance takeovers and buyouts.

It gathered $1.8 million more after the bonds were issued for its work in arranging takeovers and the divestiture of the auto parts operation.

Income from arranging and financing corporate takeovers, for example, in which Bankers Trust is a leader, declined sharply in late 1990.

A study of the risk arbitrage business suggests the Government may need to prohibit investment banking firms that arrange corporate takeovers from speculating in takeover stocks, Senator William Proxmire said yesterday.