[Congressional Record Volume 144, Number 137 (Monday, October 5, 1998)]
[Senate]
[Pages S11437-S11442]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      THE FINANCIAL SERVICES MODERNIZATION BILL--MOTION TO PROCEED

  Mr. D'AMATO. Mr. President, first of all, let me commend my 
colleagues for the overwhelming vote on H.R. 10, the financial services 
modernization bill, which passed 93 to 0, in terms of moving forward. 
It was a motion to proceed to consider. I know it wasn't on the bill 
itself, and I know that there are some Members who do not agree and 
some who oppose very strongly various provisions of the bill. That is 
understandable, because it is a major piece of legislation.
  I thank the majority and the minority leaders for their support and 
for their help in getting this bill to this point, facilitating it, and 
the members of the Banking Committee and the ranking member, Senator 
Sarbanes of Maryland, who have worked in the most constructive of 
manners, putting the interests and needs of the financial services 
community of this great Nation of ours--the capital formation system 
that is so important--putting those interests and needs first.
  I have to tell you that this is not a partisan matter, that the 
Senate has addressed this in the uniquely bipartisan way that reflects 
very, very credibly upon this institution, again, recognizing the fact 
that Members certainly cannot agree with all of the provisions that may 
be contained in this very comprehensive bill.
  Mr. President, the need for legislation to modernize the financial 
services industry is obvious. The existing legal framework has been for 
some time fundamentally outdated, and this body itself has recognized 
the existing laws are part of the statutory framework built largely in 
the 1930s and they just do not fit the realities of today's financial 
marketplace.

[[Page S11438]]

  Congress has been attempting to pass legislation to modernize this 
system for almost 25 years. The only barrier to success now is the 
Senate of the United States. We really are at a historic moment.
  Let me cite the views of Paul Volcker, a former Chairman of the 
Federal Reserve, to place our deliberations in some kind of historical 
perspective. No one can say it is turf as it relates to Mr. Volcker and 
what his position may or a may not be. He says:

       Over the long years of debate, it typically has been the 
     U.S. Senate that has been in the vanguard in seeking reform, 
     and it was the House that could not reach satisfactory 
     consensus. Now, after extended hearings and debate, with 
     strong leadership support, a coherent and responsible bill 
     has emerged from that body. This month the Senate has a 
     unique opportunity to complete the process, ending years of 
     frustration for the markets and for Congress alike. At issue 
     is not just the matter of American banking legislation and 
     certainly not a narrow political calculation of what 
     parochial industry position is most completely satisfied. 
     This is a time for the United States in much easier 
     circumstances to demonstrate that we are capable of enacting 
     ourselves the kind of reforms we press on others.

  Mr. President, how cogent these words and these observations are. 
Indeed, Mr. Volcker wrote this article and submitted it, and it has 
been carried in a number of news media across the country some weeks 
before the full extent of what is taking place in the world banking 
community and the financial services industry has been understood, 
before it has become even more important and paramount that the kinds 
of reforms that are so necessary and that many other countries have 
been avoiding are reforms that we ourselves must and should undertake, 
instead of having a piecemeal approach in a haphazard way, of whether 
the regulator at the Fed or the Treasury in terms of the Comptroller 
undertaking changes leaves us in a situation where I can truthfully say 
we have abdicated our responsibility. I hope that we will not lose this 
opportunity to discharge our responsibilities in a manner that will 
reflect credibly on this body and the Congress of the United States and 
on each and every Member.
  Mr. President, the fact is that this bill is a good bill. The fact is 
that we have been able to get together, for the first time, in an 
unprecedented fashion, a broad consensus for the need for financial 
modernization by the players themselves, by the people who are actually 
in this area. Virtually all of the financial services community has 
endorsed this legislation.
  Indeed, let me just list a number of those groups. The American 
Community Bankers. How often have we heard it said, ``Oh, the little 
bankers are opposed to this.'' Indeed, the American Community Bankers 
are in favor of this legislation. The American Bankers Association. Now 
we are talking about the larger banks. They have signed on. So from 
community bankers to large money center banks. The American Council of 
Life Insurance Companies. Imagine, when did we ever have the life 
insurance industry and the Congress working together with their banking 
contemporaries? There has been such fierce estrangement of the issues. 
The Financial Services Council, the Independent Bankers Association of 
America, the Independent Insurance Association. Now we are talking 
about those people who are out there selling and who heretofore have 
been adamantly opposed; we have them supporting this. The Investment 
Companies Institute, the securities industry, the Bond Market 
Association, the National Association of Multiple Insurance Companies, 
and most executives of major financial companies have been strongly 
supportive.
  Mr. President, no less than former Chairman of the Federal Reserve 
Board Volcker--and I read his remarks--is totally supportive because it 
is long overdue. Our present Chairman, Alan Greenspan, one of the 
world's most respected bankers, says this is a good bill and is 
supportive. The Securities and Exchange Commission and their Chairman, 
Arthur Levitt, are supportive of this bill.
  Yes, there is room for reasonable people to have differences over 
various aspects of this bill. I suggest to you that some of those 
differences can and should be debated, the time can be provided, and 
that we can vote on them, and let the will of the Congress decide and 
not let the clock of a late session be the enemy of progress. Let's not 
let the quest for perfection stop that which is an excellent bill. 
Let's not look for 100 percent when we can get 99 and be doing the 
business of the people.
  I am not going to argue the merits of some of those positions that my 
friends have--friends on my side of the aisle. Indeed, when it comes to 
various issues, reasonable people can disagree, but the question is, 
are we going to undertake our responsibilities in a manner which befits 
the great office and the prestige of U.S. Senators or are we going to 
say, no, unless I get it my way 100 percent, dot the i, cross the t, we 
are going to kill that which would otherwise advance the interests of 
all of our people, all of our citizens?
  I hope that we can move to a higher level. I am not prepared to, nor 
will I, debate the relative merits of the changes that some of my 
colleagues are suggesting are necessary to earn their support. Indeed, 
I am not going to defend those who may have used the present law in a 
manner never intended to gain their way, to gain financial advantage 
for themselves as opposed to their community. If and when that takes 
place, it is wrong. It should be stopped.
  But I suggest that if we look at the totality of this bill, to say 
that, unless we can deal with this particular abuse, we are not going 
to have financial reform, would be a mistake. I am not going to defend 
those who have used the law inappropriately, those who in essence 
violate the spirit, yes, and I think the actual law that exists today.
  Do I think that we could do better? Yes, if we had sufficient time. 
Do I think we could bring together and put together a coalition that 
could pass this bill if, indeed, we adopted some of the changes that my 
colleagues and friends might want to see? And I am talking specifically 
about the area of CRA, the Community Reinvestment Act. The answer is 
no; it would be the death of the bill.
  Now, Mr. President, I could understand my colleagues'--and I do 
understand--strong revulsion for the manner in which CRA may have been 
used in particular cases that they are conversant with, familiar with, 
and that they have put forth to this body. I understand that. But I do 
have difficulty understanding how and why at this time, when we can 
achieve such great progress in dealing with 90-plus percent of the 
problems that exist today, where we can make the kinds of fundamental 
changes that almost everyone agrees are necessary so that we can meet 
our obligations here at home and in the world of finances, we would 
sacrifice that gain because we can't get perfection at this point in 
time.
  Wouldn't it be better to improve the situation dramatically by 
passage of this bill notwithstanding that it may not deal with an area 
that is as contentious as CRA? I suggest to you that if we had a great 
and strong bill, a platform by which we could see that our financial 
services could operate without having to go to the regulator, to the 
nameless, faceless regulator day in and day out to get various 
exemptions that may favor one over another, that is not in the interest 
of this country.
  The piecemeal legislation, day in and day out, how do we better 
ourselves by that? What kind of an example do we set for the rest of 
the world when we say we can't even agree on a fundamental operation? 
Because we want perfection? Because we want to cure that deficiency 
that is there, that some have been evil in using and may be, in quoting 
the words of some of my friends, using to extort? I do not condone 
that, but you are not going to cure it here. And what we will be doing 
is killing an opportunity to make substantial progress. That is what we 
are doing. And you have to weight that up. Are you going to achieve 
substantial progress? And if you can make that cure, I will be with 
you. But you can't. Understand it.
  Now, if the managers of the bill said under no circumstances are we 
going to permit you to offer amendments, we want to go right to cloture 
to cut off your amendments and your right to offer amendments and your 
right to debate them and to let people hear what is taking place, then 
I could understand using every parliamentary procedure to stop this 
bill.
  That is not the case. This Senator would be willing to say, and I 
know because I have discussed it with the ranking member, Senator 
Sarbanes, we

[[Page S11439]]

would offer any reasonable time for Members of this body to offer 
amendments dealing with the problems that may exist in CRA, dealing 
with possible solutions, and having votes, whether they are up or down, 
without amendments, to see if we can't get a consensus. I don't believe 
you can. And if you can't get your position today, at least to give the 
people of the United States an opportunity to have a banking bill which 
people understand clearly and not one that is manipulated day in and 
day out by the various needs and exigencies of the financial services 
community so that they have to come pleading: ``Oh, well, will you let 
me sell insurance? Oh, well, will you let me do securities? Oh, well, 
can I do it in the bank or outside the bank? Oh, well, is this legal or 
is that legal?''
  While one group is receiving permission to do something, others are 
left behind. That is not the way for this country to be operating. It 
is wrong, and it is, indeed, an abrogation of our responsibility--an 
abrogation.
  I hope, even at this late hour, notwithstanding the deep feelings 
that my colleagues have, related to the abuses that have taken place, 
that they would say the greater picture is one of doing the most good 
for the most people. That is what we are talking about.
  This is an opportunity to do the most good--not for one industry over 
another but for our great country, and to see to it that there is a law 
that everyone sees clearly, where we reduce the necessity of having 
major financial institutions and parts of our industry being placed at 
competitive disadvantages because one gets a certain permission and 
another is left behind and then quickly must move to deal with that. 
That is not what competition in America can and should be about.
  I have heard my colleagues raise this argument. I have been critical, 
yes, of the regulators for what I thought was absolutely going beyond 
what Congress had ever given to them. But the courts have said, and I 
think they have done it on a practical basis, that if you, the 
Congress, do not stop them with legislation, or you do not pass 
legislation that sets the ground rules, why, it is obvious that is the 
manner in which the law should be administered.
  I do not think that is responsible. I really do not believe our 
forefathers ever thought or intended for us to operate in this manner, 
under these conditions. I certainly think that, looking at the world 
economic situation today, this does not create stability, if we fail to 
complete this. I say ``fail to complete'' because there are those who 
can run the clock out, run it out on our American citizens, because 
that is who is going to be deprived. Yes, all of our citizens.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I will be brief. I simply want to, first 
of all, commend the distinguished chairman of the committee for the 
very effective work I think he has done in bringing this to this point. 
I think it is important to understand we have not reached the bill yet. 
We are now actually postcloture on the motion to proceed to the bill. I 
do not think it is clear at this point yet exactly how many of these 
procedural hoops we will have to go through in order to finally get to 
the substance of the bill and in order, in the end, to have a vote up 
or down on the bill. I hope the leadership could commit to staying with 
this process as long as is necessary in order to reach that point, 
because I think there is overwhelming support for this legislation in 
this body--overwhelming support.
  I think the Financial Services Act of 1998, which has been brought 
out of the Senate Banking Committee, is a carefully balanced piece of 
legislation. It would finally respond to an issue we have been 
wrestling with for years and years. I say to the chairman of the 
committee, we have been dealing with this issue for a very, very long 
time, and finally we have brought it to the point where we have an 
opportunity, I think, to put into law important legislation for the 
operation of the financial services industry.
  This legislation would permit banks to affiliate with securities 
firms and insurance companies within a financial holding company 
structure, regulated by the Federal Reserve. The Banking Committee held 
four hearings in preparation for marking up this legislation after it 
passed the House. It passed the House by just one vote. We are 
informed, and I believe reliably informed, that the vote in the House 
on this legislation as is now being presented to the Senate would 
produce a very substantial majority. In other words, well above, 
clearly well above the vote that it obtained in just managing to get 
through the House and coming over to the Senate. The changes we have 
made have generally been met with favor on the other side of the 
Capitol.
  We heard from the administration, the financial regulators, the 
various industry groups, public interest and consumer groups, and in 
the end the bill was brought out of the Banking Committee on the 11th 
of September by a broad, bipartisan majority of 16 to 2. The 
legislation, as I indicated, is balanced. It would expand the range of 
permissible financial activities for commercial banks while preserving 
the safety and soundness of the financial system, providing adequate 
consumer protections, and expanding access to the financial system for 
all Americans.
  This bill has received unprecedented support across the entire range 
of the financial services industry. Just last Wednesday, the American 
Bankers Association, the Independent Bankers Association, the American 
Council of Life Insurance, the Independent Insurance Agents of America, 
the American Insurance Association, the Securities Industry 
Association, the Investment Company Institute and the Financial 
Services Council sent a joint letter to the two leaders--to Senators 
Lott and Daschle--saying:

       The Senate Banking Committee, through its actions on H.R. 
     10, the financial modernization bill, in its discussions with 
     a wide variety of parties including both Members of Congress 
     and representatives of the private sector, has now produced a 
     carefully negotiated product.

  They indicated their very strong support for the package which we are 
bringing to the Senate. Last Friday, the American Community Bankers, 
who represent the thrift industry, sent a letter to the two leaders 
expressing support of H.R. 10, and stating:

       ACB supports the bill as a generally constructive measure.

  These letters obviously reflect a very broad consensus that has been 
put together around this bill. Obviously, it is my hope we will be able 
to move it through the Senate over the next few days and move it on 
towards enactment into law. It is interesting to note, since I have 
colleagues on the other side who are raising the CRA issue, that the 
industry groups affected by the CRA issue are in favor of this bill. 
The community groups, I have to tell you because I am very much aware 
of it, are opposed to this bill, because they think it is inadequate on 
CRA. You know, they are making that concern very clear.
  So I say to my colleagues on the other side who come along and they 
say, ``We are going to attack CRA,'' that the very people affected by 
it, the industry groups, say, ``We can live with this.'' The community 
groups are very unhappy with it. So we have that situation here.
  In addition, and I am going to talk later in more detail about the 
separation between banking and commerce, which I think is an important 
aspect of this bill and one that Paul Volcker wrote a very thoughtful 
op-ed piece about in the Washington Post, on September 10. Let me just 
quote that and then I will not develop that issue any further tonight:

       A convincing argument can be made for combinations of 
     banking, securities and insurance companies--under 
     appropriate regulatory and supervisory safeguards. What 
     cannot be defended is reshaping the financial services 
     industry by ad hoc regulatory decisions, manipulating or 
     manufacturing loopholes in plain contravention of the intent 
     of the unchanged law.
       The proposed legislation will maintain and strengthen 
     elements of financial regulation and oversight essential to 
     the overall stability of the system. Specifically, H.R. 10 
     would reinforce the long-standing policy of the United States 
     against the combination of banking and ``commerce,'' broadly 
     defined.

  As I indicated, I will come back to many other commentators who have 
stressed the importance of that aspect of this legislation, and I think 
one of its major accomplishments is to draw that line and draw a clear 
line and avoid this sort of fudging that has been taking place in this 
area.

[[Page S11440]]

  On the safety and soundness, let me say I think the regulatory 
structure put in place by this legislation is important and would 
permit the formation of financial holding companies. These financial 
holding companies would be able to engage in any activity that is 
determined to be financial in nature or incidental to such financial 
activities.
  Thus, the holding company could include a commercial bank, securities 
firm, mutual fund or insurance company. Each entity within the holding 
company would be regulated by its existing regulator. Thus, a 
commercial bank would be regulated by its bank regulator, whether that 
is the Comptroller of the Currency, the FDIC or the Federal Reserve. 
The securities firm and the mutual fund would be regulated by the SEC 
and by the appropriate State securities regulators, and the insurance 
company would be regulated by State insurance regulators, as is now the 
case. So you have functional regulation of each entity within the new 
financial holding company.
  In addition, the Federal Reserve would serve as the so-called 
umbrella regulator of the financial holding company. The Federal 
Reserve would have authority to set capital at the holding company 
level. It would have authority to conduct examinations and request 
reports from subsidiaries of the financial holding company if it 
determines they are necessary to assess a material risk to the bank 
holding company for its subsidiaries.
  I think this balance is an effective approach to protecting the 
safety and soundness of the financial system and most independent 
observers, with respect to safety and soundness questions, agree with 
that evaluation.
  There are also important consumer protections contained in the 
legislation with respect to the sale of uninsured financial products, 
and I am sure we will have a chance to develop those in some detail.
  Where we find ourselves procedurally is the next vote, obviously, 
will be on the actual motion to proceed to the bill. At that point, the 
bill would then be before us and open to amendment. I subscribe to the 
position put forward by the chairman of the committee that Members 
ought to have a chance to offer an amendment; we ought to have 
reasonable debate on them and then move to vote on them, one way or 
another, and work through the legislation in that fashion.
  It has been a long road to reach this point. I think it is important 
to try now to conclude deliberations on this important legislation in 
an orderly and rational fashion, and I think the approach the chairman 
has outlined certainly accommodates that.
  We hear stories or rumors that people are out to simply try to delay 
this as long as they can in order to, in effect, sink the legislation. 
I very much hope that doesn't happen. An awful lot of work has gone 
into bringing us to this point, as is reflected by the comments of the 
various parties who have been deeply interested and affected by this 
legislation. I, frankly, think the Congress now has an opportunity to 
finally come to grips with an issue--this issue is being dealt with on 
an ad hoc basis. No one thinks it should be done that way. No one. At 
least I don't think anyone. I don't want to speak for all of my 
colleagues, but that is true of all of the regulators, all of the 
commentators. They say the way to deal with this is to do it 
statutorily through enactment by the Congress. So we will just have to 
see as we move ahead whether we can come to closure on this important 
issue. I very much hope it will be possible to do so. Mr. President, I 
yield the floor.
  Mr. GRAMM addressed the Chair.
  The PRESIDING OFFICER (Mr. Enzi). The Senator from Texas.
  Mr. GRAMM. Mr. President, let me begin by congratulating the chairman 
of our committee, Senator D'Amato. I have had an opportunity to serve 
both in the House and in the Senate. I have worked with many great 
legislators in that process. But I have to say that the job Senator 
D'Amato has done in putting this bill together, in bringing together 
people with very different starting points to a unity among the variety 
of interests that are concerned about this bill, represents one of the 
most outstanding and, I think, one of the most miraculous legislative 
achievements that I have seen in my service in the House and the 
Senate. I congratulate him. I congratulate Senator Sarbanes, the 
ranking member, for his work.
  Certainly our colleagues are right when they say that all the 
interests are for this bill, but I think it is fair to say that Senator 
Shelby and I are not here today to represent any particular interest or 
even the collection of all interests. We are here today representing 
what we believe is a fundamental principle. Where I come from, when 
interest comes up against principle, then interest loses.
  We have a fundamental issue before us. I believe that perhaps the 
greatest national scandal in America is not the scandal that is being 
covered every day at the White House. It is a scandal where a law is 
being used in such a way as to extract bribes and kickbacks and in such 
a way as to mandate the transfer of literally hundreds of millions of 
dollars and to misallocate billions and tens of billions of dollars of 
credit. I believe that this represents something that should be 
stopped.
  Perhaps some word of explanation should be given. If the people who 
are being extorted, if the people who are being blackmailed are not 
objecting, why are we objecting? My response to this is to point out 
that when the mob was engaged in the protection racket, the little 
merchant who was afraid generally did not object. But we don't 
generally accept that in America anymore because there have been police 
officers and there have been prosecutors who did object on their 
behalf.
  Senator Shelby and I are here to object on behalf of bankers and 
small community banks that, in many cases, are afraid to object on 
their behalf.
  I have related to the Senate on many occasions, and we are going to 
have an opportunity to debate this at length, the abuses under the 
Community Reinvestment Act, or CRA. I want to make a couple of points 
related to it.
  No. 1, the so-called Community Reinvestment Act and the provisions 
contained in it was voted on only once in the Congress. It was voted on 
in 1977 in the Senate Banking Committee on a motion to strip the 
provision from a proposed housing bill, and that motion failed on a tie 
vote, 7 to 7, in 1977, which means for half of the Members to vote to 
strip the provision when the Republicans were in the minority, there 
had to be a bipartisan vote.
  So far as I have been able to find, that is the only vote that ever 
occurred on this provision of law.
  The logic of this provision, which came from the former chairman of 
the Banking Committee, Senator Proxmire, was to require banks to make 
loans in areas where they operated. The concern expressed at the time 
was that banks weren't serving their communities, and, therefore, the 
Government took upon itself to impose on the banks the necessity of 
lending in their local community.
  I am not going to debate tonight the wisdom or lack of wisdom of 
that, but as I have pointed out on many occasions, what has happened is 
that CRA has taken on a meaning that has nothing to do with lending.
  It has now become common practice in CRA for professional protest 
groups to protest a bank's ``community service record'' and, in turn, 
use the leverage of those protests to extract bribes, kickbacks, set-
asides in purchases and quotas in hiring and promotion, none of which 
has anything to do with CRA and the lending practices of banks in the 
communities they serve.
  All of this is made possible by the banking regulators in enforcing 
this law, who respond to the protests by holding up action which banks 
wish to undertake and often are under immense pressure to undertake 
once it has been announced. Professional groups here in Washington that 
you can hire will go to your community and protest against the bank, 
even dump garbage on the property, make all kinds of statements, claims 
and demands and, in turn, extract resources for themselves and for 
others. So strong is the growing resentment against this provision of 
the law, that when proponents of the provision sought to put it in the 
credit union bill, it was defeated on the floor of the Senate.
  When consideration on this bill began in the Senate Banking 
Committee, Senator Shelby and I, and others, offered an agreement which 
was--this is

[[Page S11441]]

a very contentious issue, so let us call a truce on it an leave it 
alone for now. I want to repeal this provision of law. I want to end 
this scandal. I want to stop this extortion. Others want to expand it, 
expand this provision of law.
  Knowing that we would never be able to compromise on this issue 
within the very limited time that we had to enact this important 
financial services legislation, I sought to come up with a solution. 
And the solution was to treat it as slavery was treated by Abraham 
Lincoln in his campaign in 1860. That was, where the evil existed, 
leave it alone, but do not expand it into new areas.
  On that basis, if we had left CRA out of this bill, we could have 
moved together, we could be at this moment united for this bill, and 
this bill, in my opinion, would be on the way to becoming law. But that 
is not what has happened.
  There has been great confusion about what is actually contained in 
the bill. So I want to take a few minutes and go over what is in 
current law and what this bill actually does.
  In current law, there are really only two provisions related to CRA. 
First, bank regulators consider how a bank has been meeting the local 
credit needs only when a bank applies to open a new bank, a branch or 
engage in a merger. Second, bank regulators may deny applications for 
these activities based on the record of the bank in community lending. 
That is the current law.
  Based on this, all over the country banks that have exemplary records 
in community lending and that have received the highest ratings on CRA 
are routinely shaken down every time they want to open a branch, every 
time they want to start a new bank, every time they want to engage in a 
merger. They end up having to make cash payments, kickbacks, establish 
quotas in hiring, and many other things, because the regulator simply 
holds up approval of the action, even though the bank may have a 
perfect record on CRA.
  In fact, we discussed on the floor the record of Bank of America. It 
was brought up by proponents as an exemplary bank in CRA. I pointed out 
how professional protest groups had said they were going to shut down 
the bank in California when it sought to merge with NationsBank if it 
did not make more concessions to them.
  Those are the abuses under the current law. But look what is added by 
this bill. When you listen to proponents of the bill, it is as if there 
are no CRA provisions of any significance in it. In fact, we just heard 
that the so-called community groups, whoever they are, that they did 
not get--what?--they did not get enough of what they wanted. I submit 
they never get enough of what they want nor will they ever get it until 
we redistribute wealth in America.
  Here are the provisions that are added:
  The first provision added, the third that would become a part of the 
law, is that officers and directors can be fined up to $1 million per 
day for CRA noncompliance--a totally new provision of law.
  The new fourth provision that is proposed: Banks can be fined up to 
$1 million a day for CRA noncompliance.
  The fifth provision: cease and desist authority for CRA 
noncompliance.
  Sixth provision: the Federal Reserve may place any restrictions on 
any banking activity for CRA noncompliance.
  Seventh provision: the Federal Reserve may place any restriction on 
any insurance activity for CRA noncompliance.
  Eighth provision: the Federal Reserve may place any restrictions on 
securities activities for CRA noncompliance.
  Ninth provision: the Federal Reserve may place any restriction on any 
other activity of the holding company for CRA noncompliance.
  Tenth provision: Any violation by any one bank in the holding company 
triggers the penalties that I have listed above against the entire 
company.
  The eleventh provision would place in law sanctions affecting 
insurance sales.
  The twelfth provision: CRA is applied to uninsured, wholesale 
financial institutions.
  If we have the abuse that we have under current law with two simple 
provisions that have no enforcement mechanism whatsoever against a 
bank, unless it is seeking to acquire a new bank, to merge, or to 
branch, can you imagine what will occur when the officers of a bank can 
be fined $1 million a day for noncompliance? Or can you imagine the 
perpetual shake down of a national, nationwide bank, with 1,000 
branches, when the entire company receive those penalties if one branch 
is found to be or accused to be out of compliance? So this is a very, 
very big issue.
  Here is where we are. We have rules in the Senate. And those rules 
were designed to protect the rights of the minority. And basically, my 
position, and Senator Shelby's position, is that the expansion of CRA 
by these provisions will greatly increase the opportunity for extortion 
and kickbacks and the imposition of coercive agreements, such as those 
whereby companies in the past have agreed to give protest groups a 
percentage of their profits, have agreed to hire protesters as advisors 
on dealing with these provisions of law--things that turn your stomach 
and that in any other area would call for prosecutors and would send 
the police out to do something about it.
  We are now condoning it by law with very weak enforcement provisions. 
If we have a $1 million-a-day fine, we are going to have an explosion 
of these kinds of activities.
  I have talked to Federal Reserve Board Chairman Alan Greenspan and I 
have talked to the Secretary of the Treasury about this whole problem 
area. And I have proposed yet another compromise. The easiest thing to 
do would be to leave CRA out of the bill. But I have recognized that 
the President has said that he would not support leaving it out. We 
have colleagues who would not support leaving it out. So here is the 
compromise that Senator Shelby and I want to propose as an alternative, 
as another option: Expand CRA to the new financial service holding 
companies so that the laws that apply now to other banking entities 
will apply in the same way to the new banking entities. But also add 
two provisions of law to check abuses.

  First, we want a simple, well-defined antiextortion, antikickback 
provision that focuses CRA on lending and not on cash payments, or 
quotas, or set-asides, or giving protesters a percentage of your 
profits for a certain number of years.
  Second, if a bank is in compliance with CRA in its last examination, 
then that compliance should mean something. It should remain in force 
until the next regularly scheduled exam. Then we could end the double-
jeopardy situation where the officers and directors are in a position 
where they can be extorted--even if they have a perfect CRA record--the 
moment they apply to open a new bank, to merge, or to open a new 
branch, even though they have an exemplary CRA record.
  If we could do these three changes--expand CRA to address the 
requests those who want to expand it, joined together with those two 
checks against abuse, one on bribery and extortion, and the other on 
eliminating double jeopardy--I believe we could have a bill.
  Let me make this clear. Obviously, many people are for this bill. All 
the interests are for this bill. But there is a strong principle at 
stake here, and I am not for this bill. Senator Shelby is not for this 
bill. We believe that using our rights under the rules of the Senate we 
can probably stop this bill. We will, if we can, stop this bill unless 
some accommodation is made on the effort to expand CRA. We will not let 
this bill go forward with these massive expansions in CRA power.
  We are in a position where one side is not willing to let the bill go 
forward with these massive expansions in CRA; the other side says they 
will kill the bill if these expansive provisions are taken out. So that 
is where we are.
  I want people to understand, if you are for this bill, don't waste 
your time calling Senator Shelby and me. We will not be moved. If you 
are for this bill, call those who are for expansion of CRA and ask them 
what is wrong with a simple expansion of CRA and a simple amendment 
dealing with bribery and extortion and a simple provision establishing 
that if a bank is in compliance, it is in compliance.
  I urge those that are for this bill to let their views be known on 
this issue. I understand some banks in this country are willing to go 
on paying these

[[Page S11442]]

bribes and keep quiet about it because there are other provisions of 
the bill they want. This is a wrong that is bigger than dollars and 
cents, and it needs to be stopped. I remind my colleagues that the 
clock is running and will run out, and this bill will die unless an 
accommodation is made on this issue.
  If you care about this bill, if you really believe that this bill is 
important--and I believe it is important, but I don't buy into the 
logic that we are not going to pass the bill early in the next session 
if we don't pass it here this week, but some people believe we won't--
what I am saying is for those who want the bill now, there is one thing 
you have to do to get this bill. You will have to do something about 
the expansive CRA provisions.
  Finally, let me say even if you fix CRA, the clock is running out, 
and if you are going to fix it, you better do it fast. That, I think, 
is the essence of our message.
  I yield the floor.
  The PRESIDING OFFICER. The Chair recognizes the Senator from Alabama.
  Mr. SHELBY. Mr. President, I will take just a minute tonight. I 
associate myself with Senator Gramm. We worked on this together in the 
Banking Committee and we will be working together on this for a long 
time. I will take a minute to inform the Senate of my objections to 
H.R. 10.
  I believe that members of the Senate have not had the proper time to 
study and debate this matter. Most do not even know what is in this 
bill. This is a very complicated bill. There are a lot of good things 
in it, but there are some things that Senator Gramm has raised and I 
will raise as the debate goes along that we need to debate and we need 
to take out of this bill. I believe Senators are just being told 
basically that this is a historical opportunity, you must pass H.R. 10.
  Think about it tonight. We make history in this Chamber, the U.S. 
Senate, every day. If we pass H.R. 10 just because everyone on Wall 
Street tells us to pass H.R. 10, this will, indeed, be a historical 
moment. But I don't believe that is going to happen, not with a lot of 
the provisions that are now in the bill.
  If H.R. 10 is so great, why is everyone reluctant to debate the bill? 
How come the members of the Senate Banking Committee were not permitted 
to read, study, or share the manager's amendment until the morning of 
the markup? Is that the way a Committee is supposed to function? What 
is hidden in this bill?
  I'll tell you one thing that is in this bill--so well hidden, not one 
of the bank trade associations--not the American Bankers Association, 
the Independent Bankers Association of America, America's Community 
Bankers, the Bankers Roundtable or even the Consumer Bankers 
Association knew the implications of the CRA expansion in this bill 
until Senator Gramm and I sent around a ``Dear Colleague'' about a week 
and a half ago. None of those associations realized that they were 
subjecting member bank officers and directors to million-dollar-a-day 
civil money penalties for CRA noncompliance.
  Why didn't the associations realize this? These associations are 
caught up in the rush to judgment. They have not given proper 
consideration to this bill, and neither have we.
  With less than a week to go in this Congress, H.R. 10 is being jammed 
through the Senate. The Senate is supposed to be the deliberative body.
  There are many good things in H.R. 10, Mr. President, but there are 
also many bad things in H.R. 10. Currently, community groups and even 
labor unions use CRA to protest the merger of financial institutions. 
Most of the time, the merging institutions are forced to pay off the 
protest groups just in order to consummate the merger. Make no mistake 
about it, this is legalized extortion, one that the U.S. government is 
aiding and abetting.
  The financial institutions who support this bill are used to paying 
off consumer groups. Nationsbank and BankAmerica have committed $350 
billion to CRA in order to merge. Citibank and Travelers Group have 
committed over $100 billion to CRA in order to merge. These large 
institutions are used to paying a toll every time they want to do 
business.
  That may be fine for Wall Street, but that is not fine for Main 
Street. Not every financial institution around the country has $350 
billion to buy off consumer groups and labor unions.
  Who do you think pays for this legalized extortion? I'll tell you 
who: all the paying customers in this country. Everybody is complaining 
about large institutions charging more and more fees at higher rates, 
ATM fees, late fees and the like. It takes a lot of fees to pay for a 
$350 billion CRA commitment.
  Senator Gramm and I have consistently stated our position since the 
Banking Committee first held a hearing on H.R. 10 several months ago. 
We will not seek to repeal, reduce or eliminate the CRA as it stands in 
its current form. However, we will not agree to expanding either the 
scope or the enforcement authority of CRA in H.R. 10.
  Now, some have insisted on expanding both the scope and enforcement 
authority of CRA in H.R. 10. In this bill, some even delink CRA from 
deposit insurance and subject bank affiliated wholesale financial 
institutions woofies to CRA. The interesting thing about this is the 
woofies do not take deposits of less than $100,000 and are not insured 
by the Federal Government.
  I guess, we could roll over like all the banks before us who have 
paid off the consumer groups. But, I for one, will not succumb to that 
kind of extortion, and I will fight this thing as long as it stays in 
the bill. Government mandated credit allocation is wrong. Legalized 
extortion is wrong.
  Last week, Senator Gramm said that this is a principled objection. It 
is. We will not be bought off by Wall Street. Wall Street does not have 
the best interest of Americans in mind in this bill. The only thing 
they understand is dollars and cents. The principle they understand is 
profit. The interest of Wall Street is not always the interest of Main 
Street.
  Here is a message for Wall Street in terms I hope they can 
understand: If you really want to pass financial modernization, in 
order to consummate mergers and make money off of every American by 
offering a vast array of services, go to those that are insisting on 
expanding CRA and ask them to work with Senator Gramm and myself in 
making H.R. 10 CRA neutral. Otherwise, I believe this bill will 
ultimately fail. There may be some late nights and strong words, but I, 
for one, am committed to ensuring this bill will not become law.
  The PRESIDING OFFICER. The Chair recognizes the Senator from 
Nebraska.


                      UNANIMOUS CONSENT AGREEMENTS

  Mr. HAGEL. Mr. President, on behalf of the leader, I ask unanimous 
consent that notwithstanding rule XXII, that the Senate proceed to vote 
on adoption on the motion to proceed at 10 o'clock a.m. on Wednesday. 
Before the Chair grants the consent, for the information of all 
Senators, immediately following the adoption of the motion to proceed 
to H.R. 10, the cloture vote with respect to S. 442 would occur under 
the provisions of rule XXII.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HAGEL. Mr. President, on behalf of the leader, I further ask 
consent that it be in order for the majority leader, after notification 
of the Democratic leader, to move to proceed to any available 
appropriations bills, conference reports, or resume the Internet bill 
prior to the 10 a.m. Wednesday vote, notwithstanding the invoking of 
cloture.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________