[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Pages S4735-S4736]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of S. 900, which the clerk will report.
  The legislative assistant read as follows:

       A bill (S. 900) to enhance competition in the financial 
     services industry by providing a prudential framework for the 
     affiliation of banks, securities firms, insurance companies, 
     and other financial service providers, and for other 
     purposes.

  Pending:

       Sarbanes (for Daschle/Sarbanes) amendment No. 302, in the 
     nature of a substitute.

  The PRESIDING OFFICER. The time until 12 noon shall be divided 
between the Senator from Texas and the Senator from Maryland, with 23 
minutes for Senator Gramm and 17 minutes for Senator Sarbanes.
  The Senator from Texas.
  Mr. GRAMM. Mr. President, I yield 3 minutes to the distinguished 
Senator from Florida.
  The PRESIDING OFFICER. The Senator from Florida is recognized.
  Mr. MACK. I thank the Chair.
  Mr. President, I thank Senator Gramm for yielding me the time. I have 
a comment or two with respect to the process that we have gone through 
in putting this legislation together.
  I commend Senator Gramm. I can't think of a time in my now 17 years 
in the Congress where I have had a chairman of a committee that has 
spent as much time with the other members of the committee, walking 
through a particular piece of legislation, each aspect of it, making 
sure that each of us was prepared and educated on the various issues. 
There are some difficult issues that face us--the whole issue of CRA, 
unitary thrifts, the mixing of banking and commerce, the issue of 
operating subsidiaries versus affiliates, all of them complicated.
  I can remember not too many years ago when there was this sense in 
America that the model which should be followed was the Japanese 
banking system that people looked at and said, we ought to look at 
Japan, the dynamic economy they were producing in the late 1980s. I 
think about how much things have changed in those 10 years.
  Mr. SARBANES. Will the Senator yield on that point very briefly?
  Mr. MACK. I will be glad to yield for a moment.
  Mr. SARBANES. I remember people would say that the Japanese had all 
the largest banks in the world and they were saying, look. And now look 
at the situation.
  Mr. MACK. It is a dramatic change, and here we are. We have been 
talking about this legislation for all those years and we haven't made 
the modifications we needed to make. I hope we will be successful this 
time.
  I rise in support of the underlying bill and in opposition to the 
Sarbanes substitute. We all know that legislation to overhaul the bank 
regulatory structure is long overdue, and I join many of my colleagues 
in thanking the chairman for his hard work in writing this bill and 
bringing it to the floor.
  I will begin by quoting the words of the Senate Banking Committee 
report, which I believe presents a strong case for financial 
modernization. It states:

       The argument for legislation to rationalize our financial 
     structure is strong. Regulatory and court decisions have 
     eliminated many of the barriers between commercial and 
     investment banking. The barriers separating commercial banks 
     from investment banks have been perforated in both 
     directions. Finally, changes in the technology and practice 
     of financial intermediation have rendered the restrictions of 
     Glass-Steagall increasingly ineffective and obsolete.

  There is nothing particularly remarkable about that language, Mr. 
President. In fact, those same arguments will be made by many of my 
colleagues here today. But what is remarkable about the statement I 
just read is that it comes from a committee report on banking 
legislation in 1991. Just as I believed those words to be significant 8 
years ago, I believe them to be even more so today. Unfortunately, 
there was no overhaul of our banking system in 1991. And despite much 
hard work and a clear need for action, there has been none since. We 
are long overdue for this debate and I am pleased the Senate is 
addressing this important issue.
  Freedom and free enterprise have allowed our corporate and financial 
institutions to respond to changing times and to adapt to a changing 
financial environment. But this ability has reached its limits within 
the confines of present law. For our financial institutions to continue 
to grow, to compete, and to evolve, we must give them a new legislative 
climate in which to operate. That is the purpose of the bill before us 
today.
  Mr. President, our banking system is truly a model for the world. 
Emerging economies from Asia to Africa to Central Europe look to the 
United States for the blueprint and technical expertise to build an 
effective financial infrastructure. This is happening because we have 
found a remarkable balance between community banks and global 
institutions, between the regulators and the regulated, between the 
States and the Federal Government, and between ordinary people and the 
money they need to finance their hopes and dreams. In recent years, we 
have witnessed a wave of high-profile mergers, as institutions across 
the sectors hope to create ``synergy'' from offering a broad range of 
financial products to an expanding global customer base. For their 
part, many smaller, community-based institutions are using the new 
regulatory authorities to offer their customers one-stop shopping for 
individual financial needs--from ordinary retail banking to insurance 
products and securities instruments.
  All of this is very important to the continued financial well-being 
of our Nation and to the global competitiveness of our financial 
services industry. However, the expansions I speak of are not taking 
place with the approval of the Congress and are not occurring through 
any action on our part to change the law. Rather, these things are 
happening because--as the 1991 report mentioned--court decisions and 
the broadened interpretations of present law by the banking regulators 
have allowed them to take place in an ad hoc manner. In order to access 
the right to affiliate with other sectors, financial companies have to 
jump over increasingly complicated regulatory hurdles in order to adapt 
and survive. It is high time Congress weighed in on this important 
trend. It is high time we cleared the way for these affiliations and 
repealed the underlying web of Depression-era restrictions on our 
banking industry.
  That is what we accomplish in the bill before us today, Mr. 
President. This legislation allows companies to diversify holdings by 
lifting the prohibitions on affiliations among banks, insurance 
companies, and securities firms, thus allowing them to compete fully in 
a free-market environment. If Congress fails to act, we will once

[[Page S4736]]

again limit the potential of our financial sector and we will continue 
to impose needless and unnecessary regulatory burdens on individual 
financial institutions. The other body is moving with its own 
legislation. The Senate needs to act now to ensure that our financial 
sector is on solid footing for the new century.
  The bill before us repeals the Depression-era Glass-Steagall law 
prohibiting affiliations between commercial and investment banks. It 
allows banks and insurance companies to affiliate under the same 
corporate umbrella. It contains provisions outlining the appropriate 
regulation of bank sales of insurance, and it allows banks with assets 
of less than $1 billion to engage in a broader range of financial 
services through operating subsidiaries. Of course, Mr. President, the 
relationships between these entities are carefully constructed to 
ensure institutional safety and soundness and that the taxpayer-insured 
deposits of retail banking institutions are protected.

  The structure provided for in this legislation will end the ad hoc 
expansion and administration of our banking sector and provide the 
industry with a clear roadmap for the 21st century. In my view, it will 
lead to greater stability, enhanced safety and soundness, and improved 
choices for customers and consumers.
  So I urge my colleagues to support passage of this important bill and 
defeat the Sarbanes substitute.
  With that, I yield the floor.
  Mr. LOTT addressed the Chair.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. LOTT. What is the parliamentary situation?
  The PRESIDING OFFICER. The time is under the control of the Senator 
from Texas and the Senator from Maryland.
  Mr. LOTT. I yield myself time out of my leader time.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. LOTT. Mr. President, I will be brief because we have to get back 
to this Financial Services Modernization Act. I know the two managers 
managing this are working on it studiously, and we will be having votes 
later today. It looks to me as if we can make good progress.

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