[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some time fundamentally outdated, and this body itself has recognized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
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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.
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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
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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.
____________________