[Congressional Record Volume 141, Number 22 (Friday, February 3, 1995)]
[Extensions of Remarks]
[Pages E268-E269]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


               THE DEPOSITORY INSTITUTION AFFILIATION ACT

                                 ______


                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                        Friday, February 3, 1995
  Mr. LaFALCE. Mr. Speaker, today I am happy to join my distinguished 
colleague, Congressman Baker of Louisiana, in introducing the 
Depository Institution Affiliation Act of 1995.
  We are on the brink of a new century. Yet the laws which govern the 
financial services system which must meet the demands of that century 
are antiquated. They reflect a world in which only banks offered bank 
services; major corporations relied primarily on banks for their 
financing; consumer needs were simply and easily segregated into 
discrete products offered by distinct industries; and U.S. banks were 
easily preeminent at home and abroad.
  That world no longer exists. Technology and product innovation have 
blurred the lines between various financial products and the businesses 
of the companies which provide them. Increasingly, individual and 
corporate customers have their financial needs met through new 
financial products provided outside the traditional U.S. banking 
system. Strong competition from foreign banks, which operate within 
legal structures which recognize rather than ignore new market 
dynamics, pose a serious competitive challenge to U.S. institutions in 
both foreign markets and our own.
  As policymakers have failed to address these issues and U.S. law has 
remained static, the banking system has attempted to respond to new 
consumer demands and market developments through ad hoc regulatory 
adjustments and strained and unduly complex efforts by the banks to 
devise products and structures which might allow them to meet new 
demand within the limitations current law permits. The result has been 
a system that is excessively costly, complex, and inefficient. It 
undercuts our international competitiveness, limits consumer choice and 
convenience, and ultimately suppresses economic growth.
  This cannot continue. In a competitive global marketplace, we can no 
longer afford to be indifferent to something as critical as the 
financial system which underpins our economy.
  In 1991, I had the privilege of chairing a Banking Committee Task 
Force on the International Competitiveness of U.S. Financial 
Institutions. After an exhaustive analysis of the condition of U.S. 
banks and the challenges they faced, that task force concluded it was 
absolutely incumbent upon policymakers to undertake a fundamental and 
comprehensive reassessment of the major laws and the regulatory 
structure which underpin the U.S. banking system. Four years have 
passed and, while there has been some progress--most notably last 
year's interstate legislation--and much effort, the structure of our 
financial system has remained substantially unchanged and U.S. banks 
still face the same problems and constraints.
  We can no longer respond to the serious problems our outdated 
financial services system imposes by peripheral change. The task force 
had a much broader vision of what needed to be done, and the bill we 
are introducing today responds to that vision. While this bill may not 
be perfect, it will facilitate a 
[[Page E269]] badly needed debate addressing the basic structural 
problems that result from the outdated activities and affiliation 
restrictions in current law. I would expect there will be changes as 
the process moves forward. In particular, I look forward to working 
closely with my colleague, Mr. Baker, to address our mutual concern 
that the bill ensure that a restructured system will provide 
international banks comparable treatment to our domestic institutions, 
so we can in turn ensure that our own firms are equally fairly treated 
abroad.
  Our objective in this legislation is to create a structure for the 
U.S. financial services system that will allow U.S. companies to 
provide consumers and businesses with the most cost-efficient and 
highest quality financial products, and to compete fairly in a global 
marketplace, while operating in a safe and sound manner. It is an 
objective we must achieve if we are to meet the challenges ahead. I 
urge that my colleagues offer their support to this important effort.


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