(Senate - November 04, 1999)

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[Pages S13871-S13881]
From the Congressional Record Online through the Government Publishing Office []


  The PRESIDING OFFICER. The Senate will now resume consideration of 
the conference report to accompany S. 900 which the clerk will report.
  The bill clerk read as follows:

       Conference report to accompany S. 900, the Financial 
     Services Modernization Act of 1990.

  The PRESIDING OFFICER. The Senator from Minnesota is recognized.
  Mr. WELLSTONE. I thank the Chair.
  Mr. President, before I start, since my remarks will be critical and 
hard hitting, and, I believe, will marshal considerable evidence for my 
point of view about this financial modernization act--and I rise to 
speak in strong opposition to S. 900--I congratulate Senator Gramm for 
his political skill. I do not mean this in a cynical way. Cynicism is 
not my style; it is not the way I approach public service. He has been 
very skillful in his work, and as a Senator, I pay my respects to his 
considerable ability.
  I rise in strong opposition to S. 900, the Financial Services 
Modernization Act of 1999. S. 900 would aggravate a trend towards 
economic concentration that endangers not only our economy, but also 
our democracy.
  S. 900 would make it easier for banks, securities firms, and 
insurance companies to merge into gigantic new conglomerates that would 
dominate the U.S. financial industry and the U.S. economy.
  Mr. President, this is the wrong kind of modernization at the wrong 
time. Modernization of the existing confusing patchwork of laws, 
regulations, and regulatory authorities would be a good thing, but 
that's not what this legislation is about. S. 900 is really about 
accelerating the trend towards massive consolidation of the financial 
  This is the wrong kind of modernization because it fails to put in 
place adequate regulatory safeguards for these new financial giants the 
failure of which could jeopardize the entire economy. It's the wrong 
kind of modernization because taxpayers could be stuck with the bill if 
these conglomerates become ``too big to fail.''
  This is the wrong kind of modernization because it fails to protect 
consumers. It allows banks, insurance companies and brokerage houses to

[[Page S13872]]

share personal information about consumers' credit history, 
investments, health treatments, and buying habits. It weakens 
requirements for banks to invest in their own communities. It will 
result in higher fees for many customers and price gouging of the 
unwary. And it will squeeze credit for small businesses and rural 
  Most importantly, this is the wrong kind of modernization because it 
encourages the concentration of more and more economic power in the 
hands of fewer and fewer people. This concentration will wall off 
enormous areas of economic decision-making from any kind of democratic 
input or accountability.
  I don't think there's any doubt that S. 900 will set in motion a 
tidal wave of big-money mergers. That's the whole point of the bill, 
really. The Washington Post quotes industry officials as saying that 
``the point of reform is to make it as easy as possible for financial 
services companies to merge with one another and share customer names, 
addresses, and account data.''
  S. 900 will prompt other banks to start courting insurance and 
securities firms, and it will put increasing pressure on banks of every 
size to find new partners. According to the Post, ``Analysts say it's 
likely to set off a spate of mergers over the next few years . . . and 
will cause consolidation of much of the industry into a handful of 
financial conglomerates.''
  Fed Chairman Alan Greenspan has acknowledged that this kind of 
consolidation poses dangers for the stability of our financial system. 
In a speech on October 11, 1999, Mr. Greenspan said, ``We face the 
reality that the megabanks being formed by growth and consolidation are 
increasingly complex entities that create the potential for unusually 
large systemic risks in the national and international economy should 
they fail.''
  Last week Jeffrey Garten, an investment banker who served as Under 
Secretary of Commerce in the Clinton administration, issued a similar 
warning on the opinion page of the New York Times. ``Megabanks like 
Citigroup or the new Bank of America have become too big to fail. Were 
they to falter, they could take the entire global financial system down 
with them.''
  The question we have to ask, then, is whether there's any danger that 
these financial goliaths could actually falter. Well, if we listen to 
Alan Greenspan, maybe there is. In an October 14 speech, the Fed 
Chairman warned that financial institutions may be underestimating the 
risk of a ``sharp reversal of confidence'' in the stock market. Mr. 
Greenspan was talking about not just a ``correction'' or a ``bubble'' 
in the market, but a much deeper loss of confidence like the one that 
occurred last year after Russia defaulted on part of its debt. The 
result could be ``panic reactions'' that cause financial markets to 
``seize up.''
  Something doesn't add up here. If Alan Greenspan is right that we 
need to be on guard against a ``sharp reversal of confidence'' that 
could cause financial markets to ``seize up''; and if the Fed Chairman 
is right that financial consolidation creates the potential for 
unusually large ``systemic risks'' should these conglomerates fail; and 
if Jeffrey Garten is right that their failure could bring the entire 
global financial system tumbling down; then it doesn't seem to make a 
whole lot of sense to increase those systemic risks by fostering even 
more concentration. Yet that is precisely what S. 900 does.

  The problem with S. 900 is that its regulatory reach does not match 
the size of the new conglomerates. S. 900 does set up firewalls to 
protect banks from failures of their insurance and securities 
affiliates. But even Alan Greenspan has admitted that these firewalls 
would be weak. Earlier this year, economists Robert Auerbach and James 
Galbraith warned that ``the firewalls may be little more than placing 
potted plants between the desks of huge holding companies.''
  And as the Chairwoman of the FDIC has testified, ``In times of 
stress, firewalls tend to weaken.'' Regulators will have little desire 
to stop violations of these firewalls if they think a holding company 
is ``too big to fail.'' In his New York Times article, former Under 
Secretary of Commerce Jeffrey Garten concluded, ``The seesaw of private 
and public power is seriously unbalanced.''
  We seem determined to unlearn the lessons from our past mistakes. 
Scores of banks failed in the Great Depression as a result of unsound 
banking practices, and their failure only deepened the crisis. Glass-
Steagall was intended to protect our financial system by insulating 
commercial banking from other forms of risk. It was one of several 
stabilizers designed to keep a similar tragedy from recurring. Now 
Congress is about to repeal that stabilizer without putting any 
comparable safeguard in its place.
  In a stinging attack on S. 900, conservative columnist William Safire 
wrote earlier this week,

       Global financiers are given the green light for ever-
     greater concentration of power. Few remember the reason for 
     those firewalls: to curtail the spread of the sort of panic 
     from one financial segment to another that helped lead to the 
     Great Depression. But today's lust for global giantism has 
     swept aside the voices of prudence.

  And what about the lessons of the Savings and Loan Crisis? The Garn-
St Germain Act of 1982 allowed thrifts to expand their services beyond 
basic home loans. Only seven years later taxpayers were tapped for a 
multibillion dollar bailout.
  I'm afraid we're running the same kind of risks with S. 900. These 
financial conglomerates may well be tempted to run greater risks, 
knowing that taxpayers will come to their rescue if things go bad. In a 
letter to me earlier this week, Professor Bob Auerbach of the LBJ 
School wrote, ``Taxpayers should be notified that [S. 900] 
substantially increases their risk on the $2.8 trillion in federally 
insured deposits for which they are liable.''
  And what about the lessons of the Asian crisis? Just recently, the 
financial press was crowing about the inadequacies of Asian banking 
systems. Now we're considering a bill that would make our banking 
system more like theirs. The much-maligned cozy relationships between 
Asian banks, brokers, insurance companies and commercial firms are 
precisely the kind of ``crony capitalism'' that S. 900 would promote.
  If we want to locate the causes of the Asian crisis, I think we have 
to look at the reckless liberalization of capital markets that led to 
unbalanced development and made these economies so vulnerable to 
investor panic in the first place. The IMF and other multilateral 
financial institutions failed to understand how dangerous and 
destabilizing financial deregulation can be without first putting 
appropriate safeguards in place.
  World Bank Chief Economist Joseph Stiglitz wrote last year about the 
Asian crisis: ``The rapid growth and large influx of foreign investment 
created economic strain. In addition, heavy foreign investment combined 
with weak financial regulation to allow lenders in many Southeast Asian 
countries to rapidly expand credit, often to risky borrowers, making 
the financial system more vulnerable. Inadequate oversight, not over-
regulation, caused these problems. Consequently, our emphasis should 
not be on deregulation, but on finding the right regulatory regime to 
reestablish stability and confidence.'' We claim to have learned our 
lessons from the crisis in Asia, but I'm not so sure we have.
  So why on Earth are we doing this? And why now? For whose benefit is 
this legislation being passed? Financial services firms argue that 
consolidation is necessary for their survival. They claim they need to 
be as large and diversified as foreign firms in order to compete in the 
global marketplace. But the U.S. financial industry is already dominant 
across the globe, and in recent years has been quite profitable. I see 
no crisis of competitiveness.
  Financial firms also argue that consolidation will produce 
efficiencies that can be passed on to consumers. But there is little 
evidence that big mergers translate into more efficiency or better 
service. In fact, studies by the Federal Reserve indicate just the 
opposite: there's no convincing evidence that mergers produce greater 
economic efficiencies. On the contrary, they often lead to higher 
banking fees and charges for small businesses, farmers, and other 
  A recent Fed study showed that bigger banks tend to charge higher 
fees for ATM machines and other services. Bigger banks offer fewer 
loans for small businesses, and other Fed studies have shown that the 
concentration of banking squeezes out community banking.

[[Page S13873]]

  In the long debate over passage of this legislation, there has been a 
lot of talk about the conflicting interests of bankers, insurance 
companies, and brokers. There has been a lot of talk about the 
jurisdictional battles between the Federal Reserve and the Office of 
the Comptroller of the Currency, the OCC. But there has been precious 
little discussion in this debate of the public interest.
  What about the interests of ordinary consumers? An earlier version of 
this legislation contained a provision to ensure that people with lower 
incomes have access to basic banking services. The problem is that 
banking services are increasingly beyond the reach of millions of 
Americans. According to U.S. PIRG, the average cost of a checking 
account is $217 per year, a major obstacle for opening up a bank 
account for lower-income families. These families have to rely, 
instead, on usurious check cashing operations and money order services. 
Nevertheless, this ``basic banking'' provision was stripped out of the 
  I don't see very much protection for consumers in S. 900, either. 
Banks that have always offered safe, federally insured deposits will 
have every incentive to lure their customers into riskier investments. 
Last year, for example, NationsBank paid $7 million to settle charges 
that it misled bank customers into investing in risky bonds through a 
securities affiliate that it set up with Morgan Stanley Dean Witter. S. 
900 makes nominal attempts to address these problems, but in the end I 
am afraid this legislation is an invitation to fraud and abuse.
  One of the most objectionable aspects of S. 900 is the absence of 
protection for consumer privacy. The conference report will allow the 
various affiliates of a financial conglomerate to share sensitive 
confidential information about their customers.
  William Safire writes:

       As for financial privacy, [S. 900] makes your bank account 
     everyone's business. Without your consent, the private 
     information you write on your mortgage application, with your 
     tax return attached, goes to your insurance company, which 
     already has your health information, and its snoops can also 
     see your investment behavior and what you have been buying 
     with your credit card. Under [S. 900], giant financial 
     conglomerates, using other surveillance to protect against 
     fraud, will know more about your money, your habits, your 
     assets, your disease, and your genetic makeup than your 
     spouse does, and probably more than you do.

  I will tell you something. It is a little disconcerting to read 
columns such as this about the real potential for abuse and serious 
invasion of citizens' privacy. We need to have much, much more 
discussion about the implications of this bill for citizens' privacy in 
Minnesota and all across the country.
  I am going to repeat the last part of this quote:

       Under S. 900, giant financial conglomerates, using other 
     surveillance to protect against fraud, will know more about 
     your money, your habits, your assets, your diseases, and your 
     genetic makeup than your spouse does, and probably more than 
     you do.

  Law Professor Joel Reidenberg of Fordham University concludes:

       This is an astounding loss of privacy for the American 

  I want to shout from the floor of the Senate that this is an 
astounding loss of privacy for American citizens.
  The impact of S. 900 on the Community Reinvestment Act, CRA, is 
another cause for real concern. When the Senate considered S. 900 
earlier this year, I argued that if we were serious about modernizing 
the financial sector of our country, we should be serious about 
modernizing CRA along with it. There have been few financial tools 
available to families and communities that have been as effective and 
have had as great an impact--positive impact--as CRA. An estimated $1 
trillion has been reinvested in our towns and cities, thanks to this 
CRA legislation.

  Under the S. 900 conference report, communities, consumers, and 
public interest organizations will see their opportunities for public 
comment limited. They will not have a chance to comment on mergers when 
banks that have received a satisfactory CRA rating are applying to 
become financial holding companies. To me, this looks more like a 
rollback than it does modernization.
  Finally, under the S. 900 conference report, smaller banks that 
receive a satisfactory CRA rating will be reviewed every 4 years 
instead of every 2. Smaller banks that receive an excellent CRA rating 
will be reviewed every 5 years. Since an estimated 97 percent of all 
small banks currently receive a satisfactory or better CRA rating, S. 
900 will essentially remove the majority of banks from the regular CRA 
review process. There are a number of reasons why banks must be 
reviewed by regulators, but it is only with regard to CRA that we are 
cutting back on the requirements for review.
  In reality, S. 900 reflects the same priority of interests as 
financial consolidation itself. It offers a little something for 
everybody in the financial services industry. It is a Santa's wish list 
for the big banks. It gives enough to securities firms and the 
insurance industry to keep them on board. But it basically has nothing 
to offer for low-income families, nothing for rural and minority 
communities, and very little for consumers.
  This should not be surprising. I don't think it is a mere coincidence 
that finance, insurance, and real estate spend more than any other 
industries on congressional campaigns and lobbying on Capitol Hill. 
This is a reformer's dream issue. There is no one-to-one correlation, 
of course; their influence is felt at a systemic level. And I have 
congratulated some of my colleagues on their political skill. But I do 
not think it is a coincidence that the finance, insurance, and real 
estate interests spend more than any other industries on congressional 
campaigns and on lobbying Capitol Hill. Last year, they shelled out 
more than $200 million on lobbying activities, according to the Center 
for Responsive Politics, and they have made more than $150 million in 
campaign contributions since 1996.
  As William Safire wrote on November 1:

       Generous financial lobbies have persuaded our leaders that 
     in enormous size there is strength.

  Generous lobbies have been making the same case in other industries 
as well, with equal success. Similar consolidation is occurring in 
agriculture, the media, entertainment, health care, airlines, 
telecommunications, you name it. Teddy Roosevelt, where are you when we 
need you? Who is going to take on these monopolies?
  Who is going to call for some serious antitrust action? When are we 
going to be on the side of people and consumers?
  In fact, we are witnessing the biggest wave of mergers and economic 
concentration since the late 1800s.
  There were 4,728 reportable mergers in 1998, compared to 3,087 in 
1993, 1,521 in 1991, and a mere 804 in 1980.
  As Joel Klein, head of the Justice Department's Antitrust Division, 
pointed out, the value of last year's mergers equals the combined value 
of all mergers from 1999 to 1996--put together.
  What is in store for us if we allow this trend to continue? Pretty 
soon we are going to have three financial service firms in this 
country, four airlines, two media conglomerates, and five energy 
  Huge financial conglomerates the size of Citigroup will truly be 
``too big to fail.'' Government officials and Members of the Congress 
will be prone to confuse Citigroup's interests with the public 
interest, if they don't already.
  What happens, for example, when one of these colossal conglomerates 
decides it might like to turn a profit by privatizing Social Security? 
Who is going to stand in their way? That is a trick question, of 
course, because we already face that dilemma today. But I contend that 
the economic concentration resulting from the passage of S. 900 would 
only make that problem worse.
  The bigger these financial conglomerates get, the more influence they 
have over public policy choices. The bigger they get, the more money 
they will have to spend on political campaigns. The bigger they get, 
the more lobbyists they will be able to amass on Capitol Hill. And the 
bigger they get, the more weight they will carry in the media.
  I am going to repeat that.
  The bigger these financial conglomerates get, the more influence they 
are going to have over public policy choices. The bigger they get, the 
more money they will have to spend on political campaigns. The bigger 
they get, the more lobbyists they will have to amass on Capitol Hill. 
And the bigger

[[Page S13874]]

they get, the more weight they will carry with the media.
  It is a vicious cycle. These financial conglomerates used their 
political clout to shape public policy that helped them grow so big in 
the first place. Now their overwhelming size makes it easier for them 
to dictate policies that will help them get even bigger. It is a 
vicious cycle.
  Jeffrey Garten's remarkable October 26th column in the New York Times 
called attention to this problem. ``Many megacompanies may be beyond 
the law,'' Garten said.

       Their deep pockets can buy teams of lawyers that can stymie 
     prosecutors for years. And if they lose in court, they can 
     afford to pay huge fines without damaging their operations.
       Moreover, no one should be surprised that mega-companies 
     navigate our scandalously porous campaign financing system to 
     influence tax policy, environmental standards, Social 
     Security financing, and other issues of national policy. Yes, 
     companies have always lobbied, but these huge corporations 
     often have more pull. Because there are fewer of them, their 
     influence can be more focused and, in some cases, the country 
     may be highly dependent on their survival.
       For example, corporate giants can have enormous leverage 
     when they focus on America's foreign and trade policy. 
     Defense contractors like Lockheed Martin, itself a result of 
     a merger of two big firms, were able to exert extraordinarily 
     powerful force to influence legislation that approved 
     enlarging NATO, a move that opened up new markets for 
     American weapons sales to Poland and the Czech Republic.
       Companies like Boeing, which not long ago acquired 
     McDonnell Douglas, have expanded their already formidable 
     influence on trade policy toward countries like China. Boeing 
     is now the only American commercial aircraft manufacturer.
       Corporations like Exxon-Mobil will negotiate with oil-
     producing countries almost as equals, conducting the most 
     powerful private diplomacy since the 19th century, when the 
     British East India Company wielded near-sovereign influence 
     in Asia.
       As long as the economy remains strong, the rise of 
     corporate power with inadequate public oversight will not be 
     high on the national agenda. But sooner or later--perhaps 
     starting with the next serious economic downturn--the United 
     States will have to confront one of the great challenges of 
     our times: How does a sovereign nation govern itself 
     effectively when politics are national and business is 
       When the answers start coming, they could be as radical and 
     as prolonged as the backlash against unbridled corporate 
     power that took place during the first 40 years of this 

  Indeed, we've been through this before. At the end of the 19th 
century, industrial concentration accelerated at an alarming pace. 
Various observers--including the columnist and author E.J. Dionne, 
former House Speaker Newt Gingrich, and the philosopher Michael 
Sandel--have noted the similarities between that era and our own.
  In the Gilded Age of the late 1800s and the Progressive Era of the 
early 1900s, the danger of concentrated economic power was widely 
recognized and hotly debated. And this speech on the floor of the 
Senate I give with a sense of history because I believe this will 
become a front-burner issue in America politics. Many Americans deeply 
believed that a free and democratic society could not prosper with such 
concentration of power and inequalities of wealth. As the great Supreme 
Court Justice Louis Brandeis said, ``We can have democracy in this 
country, or we can have wealth in the hands of a few. We can't have 

  The idea that concentrations of wealth, of economic power--which is 
exactly what S. 900 is all about--and of political power are unhealthy 
for our democracy is a theme that runs throughout American history, 
from Thomas Jefferson to Andrew Jackson to the Progressive Era to the 
New Deal. Thomas Jefferson and Andrew Jackson warned not only against 
concentration of political power, but also against concentration of 
economic power.
  We should not, Senators, let that debate die out. That is why I come 
to the floor of the Senate today. That debate is a vital part of our 
democratic--with a small ``d''--heritage. It is a heritage that teaches 
us that ordinary people should have more say about the economic 
decisions that affect their lives.
  Weakening CRA isn't going to give them that. No amount of anti-
government rhetoric is going to give them that. But enforcing some 
meaningful consumer protections certainly would. So would protecting 
the privacy of sensitive personal information. And so would putting a 
stop to mergers that crowd out community banking, squeeze credit for 
small businesses, and open the door to higher fees and more gouging of 
  A lot of banks don't like the CRA. A lot of financial service firms 
don't want to be bothered with regulations to protect individual 
privacy. They denounce them as ``big government'' and 
``overregulation.'' But for most people, which is the greater danger in 
these situations--concentration of political power in the Government, 
or concentration of economic power? I don't think it is a close call.
  When I go to the Town Talk Cafe in Willmar, MN, or any cafe in MN, 
and I talk and listen to people over a cup of coffee or two, I find 
people have what I describe as a healthy distrust of big government, a 
healthy distrust of overly centralized and overly bureaucratized public 
  I love it when people say, get us some capital, let us make things 
happen at the neighborhood and community level. I love the idea of 
homegrown economies. I prefer that small business people living in the 
community be the ones who make the capital investment decisions that 
determine whether or not our communities are going to do well, rather 
than some multinational financial services conglomerate folks halfway 
across the world or halfway across the country making the capital 
investment decisions that determine whether our communities live or 
die. I want the decisionmaking to be in the communities. I appreciate 
that focus on local development, on more self-reliant, self-sufficient 
people and more self-reliant, self-sufficient communities.
  The people in the Town Talk Cafe in Willmar, or any other cafe I have 
visited, also have a very healthy skepticism, distrust, and--I don't 
think this is too strong a term--dislike of the concentration that is 
taking place in the financial sector and other areas of the economy. 
They do not like the big insurance companies. They do not like these 
big telecommunication companies. They are still waiting, since the 
telecommunications bill passed in 1996 and all of the mergers and 
acquisitions since then, for cable rates to go down. They are still 
waiting for more diversity of viewpoints to be offered in the media. 
Farmers do not like the big meat packers. They don't like the big grain 
companies. People certainly don't like the big oil companies. With 
considerable justification, they certainly don't like the big banks. 
And with considerable justification they have reached the conclusion 
that too much of the legislation we pass in Congress works to the 
advantage of folks who have the capital, who have the wealth, who have 
the access, and who have the influence.
  And they've reached the conclusion that, as rural citizens or low-
income citizens or minority communities or family farmers or just 
regular plain ordinary citizens and consumers, they get the short end 
of the stick.
  S. 900 is legislation that goes in the direction of giving more power 
to the privileged few and giving ordinary citizens less say in the 
economic decisions that affect their lives. S. 900 is bad for 
consumers, it is bad for low-income families, it is bad for rural 
communities, it creates potentially enormous risks for the economy, and 
it exposes taxpayers--please remember the S debacle--to tremendous 
  I believe S. 900 is bad legislation that as a nation we will soon 
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  If no time is yielded, the time will be reduced from the time of all 
Senators proportionately.
  Mr. GRAMM. Mr. President, it is my understanding that Senator 
Wellstone has about 15 minutes remaining.
  The PRESIDING OFFICER. The Senator from Minnesota has 20 minutes 
  Mr. GRAMM. I have spoken to the Senator, and I ask unanimous consent 
that time be divided between Senator Sarbanes and myself.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. I yield the floor.
  Mr. JOHNSON addressed the Chair.
  The PRESIDING OFFICER. Who yields time to the Senator?
  Mr. JOHNSON. Mr. President, I yield myself 15 minutes or as much time 
as I may consume.

[[Page S13875]]

  The PRESIDING OFFICER. The Senator is recognized.

                         Privilege of the Floor

  Mr. JOHNSON. Mr. President, I ask unanimous consent fellows on my 
staff, Julie Roling and Erin Barry, be allowed the privilege of the 
floor during the remainder of this week.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. JOHNSON. Mr. President, when I first came to Congress in 1987, 
efforts at financial services modernization had already been undertaken 
and failed many times. Last year, we came as close as Congress has ever 
come to achieving this critical goal. This year, as a member of the 
conference committee, I am pleased to say, we will finally accomplish 
this historic goal.
  That we are here is a testament to the leadership of many, many 
participants. Much credit goes to Chairman Leach, who tirelessly 
shepared this bill over his five years as chairman of the House Banking 
Committee and chairman of this conference. Senator Gramm, chairman of 
the Senate Banking Committee relentlessly promoted his agenda, yet was 
willing to compromise on critical issues in a manner that resulted 
ultimately in bipartisan support of this bill.
  My ranking member on the Banking Committee, Senator Sarbanes, made 
invaluable contributions to the process. His tenaciousness, in depth 
understanding of the many highly complex issues, and ability to work 
within the caucus made this success possible. Of course, the ranking 
member on the House Banking Committee, Representative LaFalce, and our 
friends from the House Commerce Committee, Chairman Bliley and 
Representative Dingell, made critical contributions to this process as 
well. Finally, I would note the active involvement of two Secretaries 
of the Treasury, Bob Rubin and Larry Summers. Bob has moved on to other 
things, but the role he forged in this process has been seamlessly 
filled by Secretary Summers.
  There are many highlights to this bill. By eliminating the Glass-
Steagall restrictions, we free our financial services industry to 
maintain its place as the world leader. The benefits of one-stop 
shopping will make financial services more accessible to all Americans. 
These reasons alone are sufficient to support this legislation. There 
are several other provisions to this bill that merit discussion, and 
they strengthen this legislation. First, the unitary thrift loophole is 
closed. I am pleased to have offered this critical amendment which 
closes the loophole that permits a dangerous combination of banking and 
commerce. While we tear down firewalls within financial services, we 
strengthen them around financial services.
  Under current law, commercial firms can own and operate unitary 
thrifts. That is the only breach of the banking and commerce firewalls 
currently allowed under our financial services law. Of course, the 
Glass-Steagall repeal and other components of this legislation will 
open a range of financial activities to each other. However, the bill 
is carefully structured to prevent the mixing of banking and commerce. 
This single loophole remains where banking and commerce can mix. The 
conference report does not interfere with current ownership of thrifts. 
Any commercial firms that currently own a unitary thrift charter will 
be able to continue to own and operate their institutions without 
restriction. Their current status would be undisturbed.
  The only limitation this amendment would impose involves the 
transferability of that charter. The charter would not be transferable 
to another commercial entity. Any bank, insurance company or security 
firm that wanted to acquire the charter could do so. A new entity could 
be created to operate the thrift. Included in title IV of the bill 
before us are provisions prohibiting new unitary thrift holding company 
applications filed after May 4, 1999, and prohibiting transfer of 
existing unitaries to commercial firms. In the context of comprehensive 
financial modernization legislation, these provisions achieve the 
intent of this Congress to block the inappropriate mixing of banking 
and commerce, even in the limited scope authorized for the thrift 
industry for the past several decades. The provisions in title IV 
protect granfathered companies but do not allow existing unitary 
companies to be acquired by commercial firms. By adopting my amendment 
in this conference report, it is the intent of Congress that the thrift 
regulator strictly enforce this provision and related laws which 
carefully define which companies qualify as unitary holding companies 
and which companies are grandfathered in this legislation. Only the 
current, limited universe of legitimate unitaries should be allowed to 
exercise powers granted them in the Home Owners Loan Act, and transfer 
of unitaries to commercial firms will no longer threaten American 

  This provision will further the goals of financial modernization by 
leveling the playing field between banks and thrifts. It will also 
remove a dangerous threat to further weakening of the walls between 
banking and commerce. This bipartisan effort had the support of 
Secretary Summers and Chairman Greenspan. It overwhelmingly passed the 
full Senate. Representative Largent shepherded it through the House 
Commerce Subcommittee on Finance and Hazardous Material. Our joint 
efforts helped make this protection part of the conference report. We 
also improve the Federal Home Loan Bank System, creating greater access 
to wholesale capital markets for small banks and their customers. The 
improvements to the Home Loan Bank System will directly help South 
Dakota financial institutions and South Dakota consumers by making it 
easier for our institutions to join the Federal Home Loan Bank System. 
This portion of the bill recognizes the importance of small community 
banks and the role they plan in our towns and communities. With the 
massive shift of savings and investment to Wall Street and other 
nontraditional vehicles, small community banks are finding it more 
difficult to attract deposits at reasonable rates, and lack ready 
access to wholesale capital markets.
  This bill will give them that access by making it easier for small 
banks to join the Federal Home Loan Bank System. That system gives 
small banks greater access to cheaper funds through wholesale capital 
rates. That access, in turn, will lead to more loans at lower rates to 
our small businesses, ranchers and farmers. It makes running a farm or 
ranch, running a business, expanding a business, buying a car, sending 
children to college--all of these endeavors more affordable for all 
South Dakotans, for all Americans. By enabling more affordable loans, 
this provision will help infuse the rural economy with capital in 
particular. This section of financial services modernization 
legislation is critical to keeping our community banks competitive as 
we move to tear down traditional firewalls and create new financial 
services giants within the realm of the financial service industries.
  I want to briefly address the issue of financial privacy. With the 
explosive growth of the Internet, we are finding information can be 
accumulated and acquired with greater ease than previously imaginable. 
We must address this important consumer protection issue of financial 
privacy. I joined my colleagues, Senators Bryan and Shelby, in 
supporting an ``opt-out'' provision that would allow customers to 
prohibit their financial institutions from sharing their personal 
information. That effort failed and I am disappointed. We do add some 
new standards, including mandated disclosure of privacy policies and 
protection of certain critical information in the bill. I believe we 
can do better. I am pleased that we allow states to enact tougher 
privacy laws, establishing a minimum federal standard of financial 
privacy, but we can do better. Despite my disappointment, I am pleased 
we took the first steps in addressing financial privacy, and I believe 
Congress will revisit the privacy issue in the future.
  It is critical as we move toward repeal of depression-era limitations 
that we recognize the vital role of community banks in rural areas. 
This legislation successfully frees our dominant providers to compete 
globally while strengthening the role of our community banks directly 
responsive to our small towns. It is that successful balancing that 
prompted me to sign the conference report, and I urge my colleagues to 
join us in passing this historic legislation.
  I also want to take this opportunity to thank my staff, Paul Nash, 
for his tireless work on this legislation. His

[[Page S13876]]

dedication to this effort helped make the final product the balanced 
result which we will pass today.
  I yield back such time as may remain.
  The PRESIDING OFFICER. Who yields time?
  The distinguished Senator from Texas is recognized.
  Mr. GRAMM. Mr. President, I am very pleased to yield to Senator 
Hagel--why don't I yield him 10 minutes. If he needs more time, I will 
yield more.
  The PRESIDING OFFICER. The distinguished Senator from Nebraska is 
recognized for 10 minutes.
  Mr. HAGEL. Mr. President, I thank my colleague, the distinguished 
chairman of the Senate Banking Committee.
  I rise this morning in strong support of the conference report to 
accompany S. 900. This landmark legislation before the Senate today is 
especially important for the future, not only of our financial 
institutions' competitiveness and our consumer-based economy but for 
many reasons.
  I begin my remarks this morning by commending the chairman of the 
Senate Banking Committee, Senator Gramm, for his leadership and 
extraordinary efforts to complete this legislation, as well as our 
distinguished ranking member, Senator Sarbanes from Maryland. Both they 
and their staffs and all who worked so hard in accomplishing this 
rather remarkable feat deserve our thanks.
  I also recognize, as did my friend and colleague, the distinguished 
Senator from South Dakota, the House leadership involved in this 
effort, as well as our current distinguished Secretary of Treasury, 
Secretary Summers, and the former Secretary of the Treasury, Bob Rubin, 
for their leadership.
  This is truly a historic occasion. In 1933, the United States was 
mired in the Great Depression. The stock market had collapsed. Populist 
segments of society blamed that collapse on commercial banks' 
involvement in securities underwriting. Responding to this sentiment, 
Senator Carter Glass of Virginia helped push through legislation that 
created artificial barriers between banking and securities 
underwriting. Later, amendments included a separation of banking and 
insurance activities.
  One year later, in 1934, Senator Glass realized he had gone too far 
and tried to repeal parts of the Glass-Steagall Act, his own bill. 
Since 1934, many attempts have been made in Congress to repeal Glass-
Steagall. For a variety of reasons, these attempts have failed.
  This Congress is about to send the President a bill that accomplishes 
what we have failed to achieve over many years. However, it should be 
noted that we have also built on these many years of efforts.
  I am proud to have served on the conference committee for this 
legislation. This legislation will benefit consumers in two significant 
ways. First, it will lead to lower costs and higher savings for 
consumers by allowing competition among banks, securities firms, and 
insurance companies.
  In 1995, the Bureau of Economic Analysis estimated that if financial 
modernization were to reduce costs to consumers by only 1 percent, that 
would represent a savings of $3 billion a year to consumers. That is 
real money to real people.
  These savings would come from increased competition which, among 
others things, would provide incentives for firms to reduce fees.
  Second, this competition will strengthen our financial services firms 
which are integral to the health of the national and international 
  As is true with manufactured goods and commodities, exports of 
financial services have become increasingly important to the growth of 
our Nation's economy. This month, the U.S. and its trading partners 
will meet in Seattle to begin a new round of WTO negotiations. The 
financial services sector will again be a major topic of discussion 
during these talks. In fact, our Trade Representative, Ambassador 
Barshefsky, appeared before the Senate Banking Committee this week and 
talked in some detail about the financial services sector being top on 
the agenda for these WTO talks.

  It is important that Congress help tear down barriers to competition 
within our own domestic financial markets as we work with our allies 
and other nations to lower trade barriers in the international 
financial markets.
  I will now briefly address how this bill will affect small community 
  Earlier this year, Senator Bayh and I introduced legislation to 
modernize the Federal Home Loan Bank System. The major provisions of 
that legislation were included in this financial modernization 
conference report. These provisions will strengthen local community 
banks that are vital to the economic growth and viability of America's 
  The Federal Home Loan Bank provisions will ensure that in an era of 
banking megamergers, smaller banks are able to compete effectively and 
continue to serve their customers' needs.
  Community banks are finding that, for a variety of reasons, their 
funding sources are shrinking. This makes it more difficult to fund the 
loan demands of their communities. During the 1980s in my State of 
Nebraska, and especially in the case of the Presiding Officer's State 
of Kansas, all across America many community banks and thrifts closed. 
As local credit dried up, local economies stagnated. Small businesses, 
our greatest engines of job growth and innovation, were the first to 
feel the crunch.
  The Federal Home Loan Bank provisions in this legislation will 
strengthen community banks to help avoid a repeat of the 1980s. By 
broadening access to the Federal Home Loan Bank System, we will help 
ensure the viability of the community bank and thrift.
  This legislation will help keep credit flowing to small businesses, 
farmers, and potential homeowners, and help our local communities 
prosper as we enter the 21st century. This is especially important to 
my State of Nebraska where many rural communities depend upon the local 
bank or thrift for their credit needs.
  The conferees worked hard to craft legislation that responds to the 
needs of all financial institutions, including small financial 
  Another topic important to average Americans is financial privacy--
how customers control the flow of their private financial information.
  For the first time, this bill sets up a framework for protecting the 
privacy of customers' financial information. Customers will be able to 
prohibit the sharing of their financial information with outside 
parties. Financial institutions would be required to disclose their 
privacy policies to their customers on a timely basis. If customers do 
not believe adequate protections exist at their institution, they can 
take their business elsewhere.
  Some wanted stronger privacy protections. In my opinion, to have gone 
further at this time may well have invited the law of unintended 
consequences. I believe some of the privacy protections that were 
proposed and rejected during the conference would have been 
detrimental, not helpful, to financial institutions and their 
customers. Some of these limitations would have led to fewer products 
and services being offered to customers.

  I want to highlight a particular concern. The legislation contains a 
prohibition on the sharing of customer account numbers or credit card 
numbers with third parties for the purposes of marketing. This language 
could be a disadvantage to small banks and insurance agencies that 
partner with third parties to market new products to customers.
  Equally important, a customer should have the option to decide 
whether this information can be or should be shared. This legislation 
should not take away that choice.
  The report language clarifies that when regulations are written to 
implement S. 900, they may exempt the sharing of encrypted credit card 
numbers and account numbers only where the financial institution has 
received express permission from the customer.
  As vice chairman of the Banking Committee's Financial Institution 
Subcommittee, I intend to conduct oversight during the rulemaking 
process implementing this legislation.
  The regulators should exercise this exemption authority. The 
conferees did not intend to hurt legitimate business practices that 
safeguard customer information.
  I end by again expressing my strong support for this conference 
report. This

[[Page S13877]]

legislation, a well-balanced approach to financial services 
modernization, is long overdue. It does not pick winners and losers. It 
provides important consumer protections while expanding the choices 
available to consumers.
  The conferees worked hard to craft a bill that will guide our 
financial services industries into the next century. This is a bill of 
which we can be proud, and I again congratulate Chairman Gramm, Senator 
Sarbanes, and all who provided leadership and hard work to accomplish 
this rather significant effort.
  I urge my colleagues to support the financial modernization 
conference report.
  I yield the floor.
  Mr. GRAMM. Will the Senator yield to me for just a moment?
  Mr. HAGEL. Yes.
  Mr. GRAMM. I thank our dear colleague from Nebraska for his 
leadership on this bill. We have dramatically changed the Federal Home 
Loan Bank system in this bill, and no one has had more to do with that 
dramatic change than the Senator from Nebraska. I personally thank him 
for the leadership he provided on that and many other issues in this 
  Mr. HAGEL. Mr. President, I am grateful for the chairman's generous 
comments. After the Texas A and Nebraska game on Saturday, I may 
never hear another generous comment from him.
  The PRESIDING OFFICER. Who yields time?
  With no Senator yielding time, time will be taken from the time 
reserved by all Senators who have reserved time on a proportionate 
  Mr. GRAMM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Mr. President, I begin by thanking Senator Allard for his 
leadership on this bill, for his strong support, in committee, on the 
floor, and in conference. I think we have a good, strong bill that is 
what it is advertised as being, that is a bill which promotes 
competition and benefits consumers, in large part because of the 
support Senator Allard provided throughout the process and the 
leadership he provided.
  I yield 10 minutes to him at this time.
  The PRESIDING OFFICER. The distinguished Senator from Colorado is 
recognized for 10 minutes.
  Mr. ALLARD. I thank the Chair.
  Mr. President, I thank the chairman for his very gracious remarks. It 
has been a pleasure to work with him on this particular issue. He is 
extremely knowledgeable, and it is because of his knowledge and 
persistence on this particular issue that I think we will pass such a 
good bill. I compliment the chairman in a public manner for the 
yeoman's work he has done and the great leadership he has shown on this 
particular issue. It has been a particular pleasure for me to be able 
to serve with him on the conference committee.
  In regard to the conference report that is before the Senate, I think 
its provisions will be good for consumers and good for businesses. In 
regard to the consumers, it provides increased competition in financial 
services. That is good. It will increase choice for consumers. There is 
more convenience for consumers, and it will lower prices. Specific 
provisions in the bill also give consumers more information to better 
enable them to make educated choices.
  The conference report, as I mentioned, is also good for business. It 
rewrites the outdated laws that have governed the financial services 
industry since the Depression. Gramm-Leach-Bliley eliminates the 
barriers between banks, insurance companies, security firms, and other 
financial institutions. This will increase efficiency, reduce costs, 
and increase innovation. American financial institutions will be better 
able to compete internationally under the new structures contained in 
the conference report.
  Through the passage of this bill, Congress will rightly reclaim the 
authority to govern the structure of the financial services industry. 
For a number of years, various regulators have been easing the 
statutory restrictions between banking and commerce through regulation. 
By passing a comprehensive bill addressing the appropriate relationship 
among banking, insurance, and securities, Congress will ensure that the 
entire financial services industry is updated in a safe--and I would 
add that safe is very important to me and other members of the 
committee --and a consistent manner as compared to a patchwork of 
  Congress has struggled for many years with the best way in which to 
update the laws governing the financial services industry. One reason 
we are finally poised to modernize the financial services laws is the 
spirit of compromise and inclusiveness embodied in the conference 
report. Chairman Gramm, and others, made a particular effort to listen 
to the concerns of the many industries involved and worked closely with 
the administration. The conference report does a good job of balancing 
the many interests involved.
  I will now talk briefly about the structure within the bill.
  The structure of the new financial services regime is based on a 
compromise between the Federal Reserve and Treasury. Bank holding 
companies will be able to engage in activities that are financial in 
nature, including insurance and securities underwriting and merchant 
banking. Well capitalized and well maintained national banks and 
insured State banks will be able to engage in certain financial 
activities. Provisions will be enacted to ensure that the new 
activities are undertaken in a prudent manner.

  The Federal Reserve is established as the umbrella regulator with 
strong functional regulation in all areas. This will allow consistent 
oversight by the Fed, while also allowing the individual regulators to 
exercise their expertise in the day-to-day operations of the affiliates 
that they traditionally regulate. The bill respects the rights of 
States through strong functional regulation and maintenance of non-
discriminatory State laws.
  Unitary thrifts prior to May 4, 1999, are grandfathered in under this 
bill. Existing unitary thrift companies may only be sold to financial 
  Privacy is important to many consumers, and the conference report 
takes important steps to protect the privacy of Americans. Financial 
institutions must disclose to the consumer their privacy policy 
regarding the sharing of non-public personal information with both 
affiliates and third parties. The disclosure will take place when a 
consumer initially opens an account and annually thereafter. This is an 
important tool for consumers to make an informed decision as to which 
financial institutions they wish to patronize. Just as some consumers 
choose a bank based on the hours they are open or the branch locations, 
those consumers for whom privacy is a key issue can make an informed 
decision based on a bank's privacy policy.
  Financial institutions cannot share account numbers or access 
numbers, except as required for consumer reporting agencies, for 
example, credit bureaus. Consumers will receive an opportunity to opt-
out of information sharing programs. This means that generally 
consumers can prohibit a bank from sharing their non-public personal 
information with non-affiliated third parties. If any State law or 
regulation provides greater consumer privacy protections, then it shall 
remain in effect for that state. This is an important provision.
  Changes to the Federal Home Loan Bank system will update their 
capital structure and expand access for small banks. This will be 
particularly beneficial to the many small banks in Colorado and other 
  One of the most controversial aspects of the bill has been the 
Community Reinvestment Act, or CRA. The bill clearly does not repeal 
any part of the existing CRA law, in fact it explicitly states that 
fact in the conference report.
  The sunshine provision will finally bring some oversight to CRA 
agreements. For the first time ever, CRA agreements will be made 
public. The parties to the CRA agreement will also have to disclose 
annually what happened to the cash and other resources that were part 
of the CRA agreement. Congress decided that community reinvestment was 
a priority when it passed the initial CRA laws. This provision takes 
the next logical step and ensures that the cash and resources received 
by a nongovernmental person or entity are in fact used for community 
  The Gramm-Leach-Bliley bill makes several modifications to the CRA 
examination schedule in order to provide

[[Page S13878]]

regulatory relief for small banks. It is important to note, though, 
that the banks must still meet the same CRA standards--this only 
changes the examination schedule. A small bank that received an 
outstanding rating in its last CRA exam will not receive another CRA 
exam for five years. A small bank that received a satisfactory rating 
will not receive another CRA exam for four years. This relief is 
important for small banks, as the cost of regulatory compliance is 
disproportionately high for them. The relatively high cost to small 
banks for CRA compliance actually leaves them with fewer resources to 
invest in their communities. The examination schedule also makes sense 
because it will allow CRA compliance officers to focus time and 
resources on those banks with compliance problems, rather than the 
banks that are already doing a good job.
  The conference report also contains a provision important for small 
banks--a GAO study on changes to the S Corporation rules for small 
banks. Subchapter S corporations do not pay corporate income taxes--
earnings are passed through to the shareholders where income taxes are 
paid, eliminating the double taxation of corporations. Congress 
previously made small banks eligible for S Corporation status, however, 
many of the current rules make it difficult for them to qualify. I 
strongly support efforts to change the laws so that small banks are 
better able to qualify for S Corporation status. I am hopeful that this 
GAO study will highlight the need for such changes.
  I will continue to push for those changes in future Congresses. I 
have introduced legislation in that regard. This is not under the 
jurisdiction of the Banking Committee, but the Finance Committee. I 
think it will be a key part in allowing small banks to move forward 
with their modernization efforts, in addition to this particular bill.
  I stand in strong support of this conference report. I stand in 
support of the bill. I think it is going to be a key piece of 
legislation passed in this particular Congress.
  I thank the chairman for allowing me to participate in the process as 
much as he did. I congratulate him on a job well done and encourage 
Members of the Senate to vote for this conference report.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRAMM. Mr. President, I thank Senator Allard for his leadership 
and his kind remarks.
  In recognizing Senator Bunning, let me say that he has played a very 
big role in this bill. He, in another era and another profession, 
understood the meaning of hard ball, when it came time to throw the 
hard ball and to stand fast. We had many of those moments with this 
bill. As I noted yesterday, when the House, to satisfy almost any 
constituency, threw an amendment out to us that could have dramatically 
changed, complicated, or contradicted the basic logic of this bill, 
Senator Bunning stood like a rock in opposition to making those 
changes. With his help and leadership, we were successful. I yield 
Senator Bunning 10 minutes.
  The PRESIDING OFFICER. The distinguished Senator from Kentucky is 
recognized for 10 minutes.
  Mr. BUNNING. I thank Chairman Gramm.
  Mr. President, this is an historic occasion, and I am very happy to 
be a part of it. Today we are going to finally, at long last, pass 
financial modernization legislation that brings the financial industry 
into the 20th century and prepares it for the 21st century. When I 
first came to Congress nearly 13 years ago, this was one of the first 
major issues I worked on. I served on the Banking Committee in the 
House back then, and in 1988, we passed out of committee a financial 
modernization bill. But that bill never made it to the House floor. So 
it has been a long process getting to this point.
  There have been many times when I did not believe we would ever make 
it. But I am very happy to see this day come, and I am very proud to be 
a part of it. Those of us who served on this Conference Committee have 
labored to bring a good bill to the floor today-- a conference report 
that knocks down barriers, gives consumers more options and cheaper 
services, protects the little guys, and provides regulatory relief. We 
have achieved all these goals in this measure. There has never been a 
question about the need to modernize our depression-era financial laws. 
If we expect our financial industries to be able to compete in the 
world market in the next century, modernization of our laws is 
essential. I think everyone has recognized that all along. It was 
simply a question of finding a suitable blueprint for the modernization 
process that everyone could find acceptable, and I think we 
accomplished that with this measure. Admittedly, along the way this 
year, we had some big differences to work out. For instances, I was 
very happy the Federal Reserve and the Department of Treasury were able 
to work out a compromise on the Op-sub issue. I believe this compromise 
was essential to getting an agreement on the final bill and allowing us 
to finally repeal Glass-Steagall.
  We also wrestled long and hard on the Community Reinvestment Act 
provisions. In this bill today we bring much-needed sunshine to the CRA 
process and ensure that the money which banks are sending to groups for 
low-income housing development, goes for just that, low-income housing.
  We also give some much-needed regulatory relief to small banks on 
CRA. These banks are already involved in their communities. If they did 
not lend in their neighborhoods, they would not survive. With this 
provision, small bankers will spend less time doing Federal paper work 
and more time lending in their neighborhoods, both rural and urban. I 
would have liked to do more to reduce the CRA burden on small banks but 
we did the best we could. We were also able to ensure that we protected 
the small-town insurance salesmen and stockbrokers. We make sure that 
they have a level playing field and will be able to offer their 
customers more services at better prices. And we also dealt with a new 
issue that emerged in recent months--the issue of privacy. I know some 
of my colleagues believe this bill is inadequate as far as the 
provisions on financial privacy go.
  I certainly understand their concerns but this bill does give 
consumers federal privacy protection that they have not previously 
enjoyed. Under provisions of this bill, consumers will be able to opt-
out of disclosure of their financial information to third parties. This 
bill does not go as far as some would like,--but it is a start and it 
does recognize the importance of the privacy issue. Overall, I believe 
we came to an agreement on a balanced bill that creates a level playing 
field and enhances competition for the financial industries. It 
protects the safety and soundness of our financial institutions and 
gives consumers better products at lower prices.
  It is crucial that we do pass this measure as we prepare to enter the 
new millennium. In this new age of the global marketplace our financial 
firms must be able to compete. This bill will go a long way toward 
allowing them to compete, but not at the expense of our local bankers, 
brokers, agents, and customers. I urge my colleagues to vote for it--it 
is a good bill.
  Finally, I would like to commend Chairman Gramm and his fine staff 
for all of their hard work. We certainly would not have this bill 
without Chairman Gramm's tireless efforts. He and his staff spent 
countless hours completing this bill which I believe will be passed 
with overwhelming bipartisan support and will be signed by the 
  Chairman Gramm did an outstanding job, and I thank everybody else on 
the conference committee and in the Senate. I urge support of this bill 
and its passage today.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Allard). The Senator from Texas is 
  Mr. GRAMM. Mr. President, I thank Senator Bunning for his kind 
comments. I will soon yield to Senator Enzi. I thank him for his 
leadership, for all he did in helping us put together a good bill to 
begin with, for the work he did in understanding the bill and what we 
were trying to achieve.
  I have always believed that conviction is born of knowledge. It is 
hard to be committed to something that you don't understand. I think 
one of the reasons we held together so well in getting this bill 
through committee and to

[[Page S13879]]

the floor--through conference and finally here today, as we reach the 
goal line--is all of those endless meetings we had in January and 
February to talk about what it was we wanted to do and why it was 
important. If there is any person who didn't miss a single one of those 
meetings, it is Mike Enzi. Mike Enzi is a real doer. When you have a 
hard job to do, you want to give it to him. I like giving him jobs 
because he always does them.
  I yield the Senator from Wyoming 10 minutes.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized.
  Mr. ENZI. Mr. President, I thank the chairman for his extra kind 
  I do rise to speak in favor of the conference report that accompanies 
S. 900, the Financial Services Modernization Act of 1999, which is also 
called the Gramm-Leach-Bliley Act. I think there is good reason for it 
being so titled. Senator Gramm has certainly taken the lead on this. He 
is one of the most focused individuals I have ever run into in my 
lifetime. When it comes to working a problem, he has a tremendous 
memory of not only the things he has been involved in but the things he 
has read and studied up on for it, and he can recall those almost 
instantaneously. He has provided tremendous leadership. I am convinced 
that without that leadership we would not be at this point on this 
  The senior Senator from Texas, the chairman of the Banking Committee, 
certainly deserves that first spot for his name at the successful 
completion of this bill. Some of that credit, of course, has to go to 
his very capable staff as well. He did line up some experts who had 
some tremendous capabilities, knowledge, background, and ability to 
express themselves, to explain to others, and the ability to sell the 
program to each of the staffs who were involved in it, too. Without 
their dedication and involvement, and the hours they spent on it also, 
we would not be at this point.
  Of course, we have been through the conference process. I have been 
in the Senate 3 years now, and this has been the most complete 
conference process that I have seen. Part of the reason for that is 
probably because of the makeup of that conference. The bill on the 
House side was assigned to two committees, and those committees had a 
deep desire to be involved in the process. So we went through the House 
having, first, 42 conferees, plus the entire Senate Banking Committee; 
and then there was an imbalance that had to be corrected. I thank the 
House for correcting that. They did that by appointing four more people 
to the conference. So we wound up with 66 people on the conference. I 
came from the Wyoming State Legislature, and our whole House in Wyoming 
doesn't have that many people in it. When they do a conference 
committee, it is much smaller. Small committees get more done. So it 
was an incredibly huge, impossible task.

  Again, with the leadership of the chairman, Senator Gramm, there was 
some definite action taken that broke the deadlock of daily, deadly, 
external, lengthy comment sessions that didn't resolve anything. After 
a few days of that, he again took charge of the process and said we 
were going to get a small working group of three people, and we were 
going to put together a compromise bill. I particularly congratulate 
him for the compromise that was put in at that point. There were a lot 
of people who were nervous and tense about having the three Republican 
chairmen involved get together and put together a compromise. There was 
worry about how much compromise there would be. I think everybody was 
pleasantly surprised at the way it came out of that rewrite, and that 
rewrite turned out to be a tremendous key to the process. Without that, 
we would never be at this point.
  I have to say this is the first time in over 20 years that the House 
and the Senate passed a bill in the same session. So it is the first 
real opportunity that there has been to conference it. Then we had this 
huge conference committee. The deadlock on that committee was broken by 
the chairman taking the focus and arranging this group and being 
extremely careful to include the different views in it, and then having 
a process where we could debate from that standpoint, taking things out 
and putting things back in; and, again, there were more committee 
meetings, more amendments suggested, more decisions made than I have 
ever seen in a conference committee.
  I also have to compliment the chairman because I remember sometimes 
where he was negotiating some critical additional amendments to this 
thing, and he would leave the room and go work with people to get some 
changes or to explain why changes should not be made. That is a very 
important part of the process, too, because we were still working on a 
critical amendment in the committee. He would be able to come back in 
from that external negotiation, step right in, and debate the reasons 
we needed to deal with or shouldn't deal with the issue that was still 
on the table. It is an incredible challenge. He did it extremely well. 
He kept the debate focused and moving forward so that we are at a point 
where we have this conference report.

  I am pleased that the White House made the comments publicly about 
this bill and where it is because it shows their understanding of the 
process and the dedication that was put into the bill as well.
  I congratulate Senator Sarbanes. He has a very quiet negotiating 
style, a very unique one. It forces people to do maybe a little bit 
more than what they would have done if they really understood where he 
was coming from. He has played a critical role in this bill as well. I 
appreciate all the effort he has put into it.
  We are at a point now where we have this conference report. I am 
convinced that it will be overwhelmingly adopted. I appreciate all the 
people who have put time and effort into it.
  This bill breaks down the barriers between banks, insurance, and 
securities firms. It allows them to affiliate and engage in each 
other's activities.
  It is fitting that our financial system be allowed to modernize as we 
enter the next century.
  As I mentioned, for over 20 years Congress has attempted to repeal 
these statutory barriers. These barriers have only limited the ability 
of financial institutions to offer a variety of services that their 
customers demand. Financial services modernization will allow one-stop 
shopping for consumers wanting a variety of financial services--
banking, insurance, and securities--a sort of shopping mall for 
financial needs. This will increase efficiency and increase competition 
which translates into more choices and lower prices for American 
  This isn't a big deregulation. This is an opportunity for people to 
compete evenly on the playing field.
  Some opposed to the bill have said they don't believe it goes far 
enough to ensure the privacy of a person's individual financial 
information. I have to say this bill will provide the strongest privacy 
protection ever for Americans. It requires the financial institution to 
clearly disclose their privacy policies. The disclosure will guarantee 
customers the ability to see clearly the privacy policies of the 
institutions allowing them to take their business to another financial 
institution if they don't approve of the way that they could be or have 
been treated. It allows the market to adapt to the demands of the 
consumers instead of the market adapting to government regulations.
  The market allows for changes in consumer preferences and behavior, 
while rigid government regulations can easily cause unintended 
  I have to say that in every committee in the Senate in which we are 
involved, privacy is the big issue now. We are debating that in every 
one of them. I am on the health subcommittee of Health, Education, 
Labor, and Pensions. We have been trying to resolve the privacy issues 
  It is amazing how complicated and difficult that can be. There are 
things we as consumers anticipate others working in that business or in 
a business that we think is part of the business will know about us to 
expedite the work that we are expecting.
  Consumer choice is the key. The privacy provisions in this bill also 
require that any bank that is considering sharing your information with 
an outside company--a third party--allows you the ability to say no to 
that activity. This opt-out provision also gives the consumer power and 
  I want to tell you, this bill benefits the small community financial 
institutions. Coming from Wyoming, I have a

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particular interest in that. We have small community financial 
institutions that are the heart of our financial industry. It protects 
them just as it benefits the large financial institutions. It grants 
small banks the same expanded authority granted to the larger 
institutions. It requires the Federal banking agencies to use plain 
language. This will be one of the biggest things in the bill in their 
rulemaking used to implement the bill.
  This plain language provision was included to ensure that small banks 
will not have to hire several lawyers to interpret the new rules 
resulting from this legislation.
  The Gramm-Leach-Bliley Act allows small banks to access advances from 
the Federal Home Loan Bank System. These advances could be used for 
small business and small farm lending, in addition to housing. This 
will enable small banks to serve their communities comprehensively and 
provides them the liquidity they need to remain competitive. Another 
priority of small banks that has been included in the report is the 
prohibition on the chartering of new unitary thrifts for commercial 
firms. The bill even prohibits commercial firms that do not currently 
control a thrift from buying an existing thrift. Additionally, S. 900 
provides further regulatory relief of the Community Reinvestment Act of 
1977 for small banks. Those small banks under $250 million in assets 
with an outstanding CRA rating will be examined for compliance only 
every 5 years, while those with a satisfactory rating will be examined 
every four years. Most agree that CRA is more of a paperwork burden for 
small banks than it is for large banks. I believe that small banks and 
thrifts, by their very nature, must be responsive to the needs of the 
entire communities they serve or they will not remain in business. That 
is the sole source of their customers.
  I am also pleased that the bill does not dismantle the dual banking 
system--the Federal system--that has served us so well over the years. 
This competitive regulatory system has many times created innovations 
which were later allowed by the national banking regulators. Under the 
dual banking system, state legislatures determine the powers allowed to 
their state institutions. These powers are tailored to meet the 
economic needs of the states. An empowered state banking system is 
elemental to state economic development. Included in the bill is a 
clarification that the FDIC's authority and the State bank regulator's 
authority with respect to operating subsidiary powers is not rolled 
  I recognize that this report is a collection of compromises. These 
compromises have not been easily achieved. Some of these compromises 
relate to the Community Reinvestment Act of 1977 (CRA). I do have 
concerns about this compromise on CRA. However, I am more willing to 
accept what I consider an expansion of CRA since the sunshine provision 
has been included. Since some groups are using the name of a federal 
law, the Community Reinvestment Act, to receive monies from insured 
financial institutions, it is only appropriate that the Congress is 
able to see how that law is being used. In sum, I believe this an 
acceptable compromise at this time.
  I am pleased to support this conference report and congratulate all 
who have participated in it and encourage my other colleagues to do the 
  I yield the floor.
  I reserve the remainder of any time.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, I thank Chairman Gramm, Senator Sarbanes, 
Chairman Leach, Representative Bliley, and all of my colleagues who 
have worked so long and hard on this legislation, with particular 
thanks to Senators Dodd and Edwards who worked with us in the late 
night hours to come up with a compromise that eventually helped get 
this bill passed.
  Mr. President, this is a historic moment. We have been working 
towards it for 18 years. It has taken 18 years for Congress to pass 
this bill.
  When I first came to Congress, the issue was a narrow one: revenue 
bonds. Could banks underwrite revenue bonds? With technological change 
and globalization, the issue has expanded far beyond revenue bonds to 
an issue where the future of America's dominance as the financial 
center of the world is at stake.
  This bill is vital for the future of our country. If we don't pass 
this bill, we could find London or Frankfurt or, years down the road, 
Shanghai becoming the financial capital of the world. That has grave 
implications for all of America where financial services is one of the 
areas where jobs are growing the most quickly, where our technology is 
way ahead of everyone else, where our capital dominates the world. It 
would be a shame if, because Congress had been unable to act, all those 
advantages were frittered away, as they well could be, in a global 
world by our failure to realize the problems our existing antiquated 
laws cause.
  There are many reasons for this bill. First and foremost is to ensure 
that U.S. financial firms remain competitive. As their international 
competitors, U.S. firms will be able to offer financial services to 
complement their business models. Had we not done this, 3 years from 
now, with new technology, we could find major U.S. companies leaving 
the United States and locating in other countries that had laws 
allowing these things.
  I don't know what the marketplace will yield. Will people want to buy 
all their financial services from one company? Will it be online or 
with individuals? We don't know. We do know that to close off one 
avenue of competition is the death knell for the future of a country in 
that area--in this case, financial services. It is essential we pass 
this bill.
  The first issue is jobs, plain and simple, hundreds of thousands--
yes, millions--of high-paying jobs. I need not tell the Senate how 
important this bill has been to the financial capital of the world, New 
  Second, it is important to consumers. The years have shown the more 
competition, the better. This bill allows more competition by allowing 
many more firms to compete over similar product lines. When a bank 
decides to go into the securities industry or a securities firm decides 
to sell insurance, they are looking for a competitive edge. They may 
well find it, they may not. However, the ability to have more 
competition--which this bill creates--is vital to consumers. This is a 
proconsumer bill. It is proconsumer for the same reason our system has 
predominated over all the others--competition.

  Jobs are an important reason for this bill; consumer interests and 
competition are an important reason for this bill.
  Third, we have to keep up with changing markets. When Glass-Steagall 
was passed, commercial banks dominated the financial landscape with 57 
percent of all financial assets. Today they have less than 25 percent. 
To look at the world through that antiquated spyglass and say we must 
keep commercial banks from other areas because they may dominate is to 
look at a world that is 50 years old. Many argue commercial banks are 
among the weakest competitors when they are put against not only 
securities firms and electronic firms but mutual funds and pension 
funds. The third issue: We have to move this bill to keep up with 
changing markets.
  Finally, we had to do it because otherwise the regulators were going 
topsy-turvy. We all know it does not make good policy to have 
individual regulatory decisions make policy. That has been what has 
happened. Because of the necessities of technology and globalization, 
because of the changes in financial markets, individual companies were 
going to the regulators and asking for special permission to do A, B, 
and C, and regulators were granting it. Now we have an overall fabric. 
We have a law that will treat all companies equally, that will allow 
businesses, either new or existing, to plan for the future, and will 
create a level playing field.
  There are many reasons to pass this bill. My goal, which I stated at 
the outset, was to modernize financial services but not take one step 
backward on CRA. We have done that. The CRA provisions in the bill do 
not move things forward, but they do not take a single step backward. 
In fact, as I have argued to the groups in my State, they will benefit 
from this legislation because their leverage in the CRA process has 
always been when there are new mergers or new products that a bank

[[Page S13881]]

decides to add. This is going to increase 10, 20 times. Every time the 
groups are interested in CRA--one of the most successful banking laws 
we have passed--they will have that leverage. Instead of two or three 
opportunities a year, they will probably have two or three a month. I 
argue CRA groups are going to be so busy with all the new mergers and 
all the new services that they may not have time to keep up.
  We accomplished a great deal. I thank the Senator from Maryland as 
well as the administration for making sure we did not take a single 
step backward on CRA.
  Sunshine provisions are in the bill. It is very hard to argue against 
them. If I am for sunshine for business and for political people, 
including myself, how can we not be for sunshine even for groups we 
support and believe in? I have no problem with the sunshine provision.
  We succeeded in CRA. We also succeeded in helping the consumer in 
terms of protections.
  Regarding ATM fees, I am proud banks will be required to disclose any 
and all charges for using an ATM before a customer makes a decision to 
withdraw funds. I fought for years for this provision, first in the 
House with Representative Roukema, and now in the Senate. It is in the 
bill. In addition, there are privacy protections in the bill.

  Does the bill go as far as I wish on privacy? No. But privacy is a 
large and complicated issue. We don't know what the balance ought to be 
between the ability of businesses to share information and the right of 
the consumer to protect his or her information. In the Senate, we did 
not have a single hearing on privacy. To restructure all of privacy 
with huge numbers of unknown consequences on this bill made no sense. 
My goal, again, was, can we move forward? We have. Not as far as I 
prefer or many prefer but certainly not enough to sink a bill that has 
so many necessities.
  Finally, safety and soundness. The one thing that has dominated my 
thinking in this area is that we not repeat an S crisis, and we not 
allow insured deposits to be used for risky activities. I am proud to 
say the compromise between Treasury and the Federal Reserve in the 
structure of the bill makes sure that when insured dollars are used for 
anything that might be slightly risky, the capital requirements and 
firewalls will make virtually certain we will not repeat the kind of 
S crisis we have had in the past.
  In conclusion, this is a historic day. It is a historic day for my 
State of New York, which I am proud to say is the financial capital of 
the world and, with this bill, has a much greater likelihood of 
remaining so. It is a historic day for modernizing one of the most 
important industries in America where we are technologically and 
entrepreneurially ahead of the rest of the world. This will help 
maintain our lead. And it is a historic day for those who have argued 
that we need to keep CRA strong and keep consumer protections in the 
  From Glass-Steagall to Gramm-Leach, from the Great Depression to the 
Golden Age, from isolationist to internationalist, from underdogs to 
champions, this bill is an American success story for our economy, for 
our financial institutions, for our communities and consumers, and for 
my State of New York. I was proud to have played a role with so many 
others in ensuring its passage.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I commend the Senator from New York for 
his statement. I underscore the positive and constructive role he 
played with respect to this legislation throughout, and thank him for 
his contribution to this effort.
  Mr. GRAMM. Mr. President, we have already started assembling for the 
swearing in. I suggest we move off the bill now for that purpose.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LOTT. Mr. President, I observe the absence of a quorum, but we 
will proceed momentarily.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. LOTT. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The VICE PRESIDENT. Without objection, it is so ordered.