[Congressional Record Volume 144, Number 139 (Wednesday, October 7, 1998)]
[Senate]
[Pages S11647-S11648]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         THE FINANCIAL SERVICES ACT OF 1998--MOTION TO PROCEED

  Ms. MIKULSKI. Mr. President, I will vote against the motion to 
proceed on H.R. 10, the Financial Services Act of 1998. I oppose this 
legislation because it is inappropriate to bring down the protective 
firewalls in U.S. financial services while a firestorm is sweeping 
global financial institutions. Mr. President, this is the wrong time to 
be relaxing our protective financial services regulations.
  I understand the intellectual argument to reform our financial 
services. In fact, I do not dispute it. There is no doubt that the U.S. 
needs to be competitive in the global marketplace. I would suggest to 
my colleagues, though, that changes in the global economic picture make 
this bill unwise. The global economic situation is vastly different now 
than when this bill was being drafted.
  There are a number of what I call ``yellow flashing lights'' or 
warning signals that now is not the right time to enact this 
legislation. Let me mention a few. Former Secretary of State Henry 
Kissinger recently stated in the Washington Post that no government and 
virtually no economist predicted this global economic crisis, 
understood its extent or anticipated its staying power.
  Now the United States Senate is going to rearrange the national 
financial landscape? We need to modernize the United States to go 
global? I think we need to pause and ask what does going global mean 
and do we want to go there at this time? In this current global 
environment of national financial collapses, IMF bailouts and hedge 
funds rescue packages have become daily occurrences. These are the 
``yellow flashing lights'' and I believe we must proceed with caution 
to avoid rash and irrevocable changes when the savings of hard working 
families and the viability of our communities could be put in serious 
jeopardy.
  Frankly, I am also concerned that the bill before us is the result of 
last-minute deal making. The issues here are too important for hasty 
decision-making. The decisions this bill makes affect the financial 
security of average Americans who are working and saving to provide for 
their families, U.S. financial institutions, the American economy and 
the global financial marketplace.
  These are not trivial issues. We are being asked to establish a 
legislative framework for the financial services industry for decades 
to come. These are irrevocable decisions.
  As changes were made to accommodate this interest or that interest, I 
am concerned that we have lost sight of the overall impact of the bill 
before us. I am concerned that we do not know enough about what's in 
the bill at this juncture, and what it will mean for our economic 
security. In the haste to get the job done before the Congress adjourns 
for the year, I have serious and deep reservations that changes have 
been made that have not been well thought out or thought through. If 
enacted, we will end up with unintended, but nevertheless, negative 
consequences because we rushed to the finish line.
  Advocates of this legislation always mention the free market. They 
believe that buyers and sellers acting in their own self-interests will 
produce winners and losers, and bring about the best and most efficient 
outcome for banking customers. But look at what the free market has 
brought us lately-- a global financial meltdown and hedge funds that 
are ``too big to fail''. As Kissinger suggested, indiscriminate 
globalism has generated a world-wide assault on the concept of free 
financial markets. In the United States, where we used to boast about 
our well functioning capital markets, we now bail out those investors 
who make foolish decisions.
  One need look no further than the Long-Term Capital debacle to see 
evidence that even the brightest minds on Wall Street, acting in the 
free market, sometimes make very poor decisions. The collapse of this 
high-flying hedge fund was a failure of proper supervision. As Kenneth 
Guenther explains in the Baltimore Sun, this raises serious questions 
about our regulatory structure: ``it doesn't make sense to have too-
big-to-fail institutions if the regulatory structure is not up to 
regulating them.  .  .  . if the regulators

[[Page S11648]]

have to make a choice between the safety of the financial system and 
the free market, the financial system will win. There is no free market 
and there never will be. It's the height of hypocrisy to talk about the 
free market in one breath and bail out Long-Term Capital . . . in the 
next breath.'' Mr. President, I oppose this legislation because in this 
environment, we need more oversight and enforcement in our financial 
services, not less.
  Beyond these concerns that this is not the right time to enact these 
sweeping changes buttressed by the follies of the free market, I have 
other, structural concerns with the proposed changes to our financial 
services laws.
  First, I am concerned that if we relax the laws about who can own and 
operate financial institutions, an unhealthy concentration of financial 
resources will be the inevitable result. The savings of the many will 
be controlled by the few. If we relax banking regulations in this 
country, Americans will know less about where their deposits are kept 
and about how they are being used.
  Marylanders used to have savings accounts with local banks where the 
teller knew their name and their family. We have already seen the trend 
toward mega-mergers, accompanied by higher fees, a decline in service, 
and the loss of neighborhood financial institutions. This bill 
accelerates that trend.
  With a globalization of financial resources, the local bank could be 
bought by a holding company based in Thailand. Instead of the friendly 
teller, consumers will be contacting a computer operator in a country 
half-way around the globe through an 800 number. Their account will be 
subject to financial risks that have nothing to do with their job, 
their community, or even the economy of the United States. I know 
impersonalized globalization is not what banking customers want when we 
talk about modernization of the financial services.
  Second, I am concerned that complex financial and insurance products 
will now be sold in a cluttered market by untrained individuals. 
Investment and insurance planning for families is a very important 
process, one of the most important decisions a family makes. It should 
be done with a professional who is certified and who is someone you can 
trust. By breaking down these firewalls and allowing various companies 
to offer insurance and complex investment products, we run the risk 
that consumers will be confused, defrauded, and treated like market 
segments and not individuals with unique needs and goals.
  Finally, I believe that any modernization of our financial services 
law should not just retain, but expand the important consumer 
protections and community investment policies currently in place.
  Consumers need protections and regulations to guarantee the safety of 
their deposits and the availability of basic banking services and 
credit to help their communities grow. If we have a Consumer Product 
Safety Commission to protect children from flammable sleepware, I 
believe we should also have a strong regulatory framework to protect 
consumers, not just investors, in the financial services marketplace.
  A strong regulatory framework will not be provided by the Federal 
Reserve, as is proposed in this legislation. I share the concerns of 
John Hawke, Undersecretary of the Treasury Department, that shifting 
the regulatory power from the Office of the Controller of the Currency 
to the Federal Reserve Board is a highly questionable regulatory 
protection. This would be like letting the bankers regulate themselves. 
The decision making of the Federal Reserve is directly linked to the 
banking industry that it would regulate. Bankers elect two thirds of 
the Federal Reserves directors. It is true that the Federal Reserve is 
independent of the administration, but it is not independent of the 
bankers and finance companies that it would regulate.
  Mr. President, I am not opposed to a necessary reform of our 
financial services laws. But this is not the legislation and this is 
not the time to do it. The U.S. stock market has had one of the worst 
quarters since 1990 and world leaders are currently strategizing about 
how to stanch the global economic crisis.
  The Congress will be back in 90 days. Hopefully, the world market 
will be calmer, it will be after the election, and we will be able to 
study the lessons learned from the financial events of the past three 
months. For all the hard work and all the negotiating and compromise, 
now is not the time to go forward and add more fuel to what is already 
a very troubling global financial firestorm.

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