[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Pages S4736-S4788]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

  The Senate continued with the consideration of the bill.
  Mr. DASCHLE addressed the Chair.
  Mr. SARBANES. Mr. President, I yield such time as the minority leader 
may consume.
  The PRESIDING OFFICER. The Democratic leader.
  Mr. DASCHLE. Mr. President, I thank the distinguished ranking member, 
the Senator from Maryland. I thank him and the Democratic members of 
the Banking Committee for the tremendous leadership and patience that, 
in particular, Senator Sarbanes has demonstrated in getting us to this 
point.
  I also want to acknowledge the efforts of all my colleagues on the 
Senate Banking Committee, and especially the fellow Democrats of the 
Banking Committee, who have put so much effort and energy and diligence 
into bringing us to this very important debate, and ultimately this 
vote which we will shortly have.
  I might add, as I know the distinguished Senator from Maryland has 
already noted, that every Democratic member of the Senate Banking 
Committee is a cosponsor of the substitute we will be voting on 
shortly. Together, my colleagues on the committee have produced a 
proposal to give financial service companies new freedoms and new 
flexibility--without risking the financial well-being of our economy or 
of individuals. It is a balanced, responsible proposal--one the 
President can sign--and, on behalf of the entire Democratic caucus, I 
thank them for producing it.
  Let me be very clear, Mr. President. Senate Democrats support 
financial services modernization. We want to see a bill passed. There 
is no good reason that can't happen this year--in fact, this week.
  This should not be a partisan issue. Historically, it has not been 
one.
  Our substitute is based on last year's H.R. 10. The Senate Banking 
Committee passed H.R. 10 on a vote of 16 to 2--16 to 2. Republicans on 
the Senate Banking Committee supported H.R. 10 last year. So did 
virtually every major financial services industry group.
  In the House, the House Banking Committee passed a very similar bill 
this year. Again, the vote was overwhelmingly bipartisan--51 to 8.

[[Page S4737]]

  Until recently, Democrats and Republicans have agreed overwhelmingly 
that the path laid out in our substitute was the right path. That has 
all changed. Reform has suffered a major setback this year. In the 
Senate Banking Committee, the majority forced through a new, harshly 
partisan bill on a party line vote of 11 to 9. This new bill shattered 
the consensus that so many people worked so long and so hard to create.
  In place of the broad support enjoyed by H.R. 10, the committee bill 
is opposed now by every Democrat on the Banking Committee. It is also 
opposed by every civil rights group. It is opposed by community groups, 
community organizations, and local governmental officials.
  Instead of a clear path to enactment--which is what we would have had 
had we stayed with the bipartisan approach to H.R. 10--financial 
services reform is now on two tracks. There is the veto track. And make 
no mistake, S. 900 is on this track. It will be vetoed if the President 
receives it in its current form. Then there is the enactment track. 
That is the track our substitute and the bipartisan House Banking bill 
are on.
  We are not saying, ``It is our way, or no way.'' Neither side should 
ever issue such an ultimatum. That is not the way of the Senate. We 
have discussed with the majority leader our desire to find a bipartisan 
way to get the financial services modernization bill back on the 
enactment track. We have agreed to a floor procedure which will enable 
us to finish this bill in an expeditious manner.
  We do not want to delay this bill any longer. That has already 
happened. It has already been delayed. As I said, we want to pass 
financial services modernization this year, and perhaps even this week. 
So the choice for the Senate is clear. It is partisan brinkmanship, or 
bipartisan accomplishment.
  We stand ready on this side of the aisle to deliver a bill that the 
President can sign. He has cited four serious flaws in S. 900 which he 
has said will force him to veto the bill. Our substitute corrects all 
four flaws.
  First and foremost, our substitute does not gut CRA--the Community 
Reinvestment Act--as S. 900 does. The CRA has proven a huge success in 
expanding access to credit and investment in low- and moderate-income 
communities. Investment capital is the lifeblood of these communities. 
That capital must continue to be available to qualified borrowers in 
all communities. We cannot draw red lines around the American dream. 
Democrats will not support a bill that undermines the effectiveness of 
the CRA.
  The second major difference between our substitute and the underlying 
bill is the way the two proposals deal with the separation of banking 
and commerce.
  For nearly 70 years, since the collapse of the banking industry 
during the Great Depression, U.S. law has separated banking from other 
commercial activities. An army of experts--from Chairman Greenspan to 
Secretary Rubin to former Federal Reserve Chairman Paul Volcker--
believe that separation must be maintained.
  But you don't have to look in the history books to understand why 
mixing banking and other commercial activities is risky business. Look 
at the recent currency crisis that started in Asia and spread to some 
of our Latin American neighbors. If anything, the globalization of our 
economy makes a reasonable separation between banking and other 
commercial activities even more important now than it was when those 
laws were first enacted.
  Unfortunately, as the distinguished Senator from Maryland has 
observed, the underlying bill weakens the separation of banking and 
commerce in a number of ways. Our alternative does not. It reflects the 
careful compromises developed last year. It preserves the separation 
between banks and other commercial activities without in any way 
limiting the flexibility financial service companies need in today's 
economy. It strikes the right balance between opportunity and 
responsibility.
  Let me interject here that, should our substitute fail, my colleague 
from South Dakota, Senator Johnson, intends to offer a related 
amendment. It would close a loophole which commercial companies 
currently use to mix banking and commerce by acquiring existing unitary 
thrift holding companies. I will strongly support his effort.
  A third difference between our substitute and S. 900 has to do with 
consumer protection. H.R. 10--the bill the Banking Committee passed out 
last year with overwhelming support--included a number of consumer 
protections having to do with such things as risk disclosure and 
licensing of personnel. Those protections were essential for its 
passage last year. They remain essential to the American people. They 
have all been stripped out of the underlying bill--every one of them. 
They are all included in the Democratic alternative. They must be 
included in any financial services bill this Congress passes, or the 
President will veto it.

  There is a fourth way in which our bill differs from both the 
committee bill and from last year's bill. It involves what financial 
activities can take place in subsidiaries of banks, and under what 
conditions.
  As the legislative process has progressed, the Treasury Department 
has agreed to significant additional safeguards regarding the financial 
activities of banks' operating subsidiaries. Our alternative 
incorporates these safeguards. At the same time, it would permit banks 
to structure certain new activities in these so-called ``op-subs'' as 
they see fit. Again, it balances opportunity and responsibility.
  Mr. President, that is where we stand--the juncture of two tracks: 
The veto track, and the enactment track.
  S. 900--as it is currently written--will put us on the veto track. We 
know that:
  It undermines the Community Reinvestment Act.
  It breaches the separation of banking and commerce.
  It ignores consumer protection.
  And, it fails to strike a responsible balance on the question of bank 
operating subsidiaries.
  The failure to proceed on a bipartisan track has placed this bill at 
risk. Unless we negotiate with each other once again in good faith, I 
must say this bill will be vetoed.
  If that happens, it would represent a serious failure on the part of 
this Senate.
  More important, it would deprive American businesses, and the 
American people, of important tools and safeguards they need in this 
new global economy.
  We appeal to our colleagues: Let's get this bill back on track. Let's 
adopt this alternative. Let's pass financial services modernization. 
This year. This week. We can do it. I hope we will.
  Mr. GRAMM. Mr. President, I thank the distinguished Democrat leader 
for the effort he has made to get the Senate to this point. Obviously, 
when we have votes on contentious issues, ultimately Members come to 
the floor and vote. Somebody wins and somebody loses. I think on many 
of the votes we are going to have, neither of us knows what the outcome 
will be.
  We are beginning a process that will go through conference. We have a 
bill in the House that is very different. I think we all want to write 
a bill that the White House can sign.
  Yesterday, the President came out with six conditions for signing the 
bill, two of which your substitute does not comply with. Obviously, we 
are going to have to work with the White House on a continuing basis.
  I want to assure you, Mr. Leader, I will also sit down, roll up my 
sleeves, and try to work. Maybe we can't solve these problems, but if 
it is possible to solve them, I want to do it.
  I thank the Senator for his help.
  Mr. President, how much time remains on both sides?
  The PRESIDING OFFICER. The Senator from Texas has 11 minutes, and the 
Senator from Maryland has 7 minutes 24 seconds.
  Mr. GRAMM. I yield 5 minutes to the distinguished Senator from 
Wyoming.
  Mr. ENZI. Mr. President, I thank the chairman of the Banking 
Committee. I thank him for the time. I also thank him for the 
leadership and direction and focus he has had on this issue and his 
willingness to talk to others about the issues.
  I rise to oppose the substitute amendment offered by the ranking 
member of the Banking Committee. Most of the reasons for my opposition

[[Page S4738]]

lie within the great expansion of the Community Reinvestment Act, or 
CRA.
  For example, the amendment would allow the Federal banking agencies 
to take actions, including divestiture, forcing people to sell off 
parts of their business if an institution fails to maintain a 
satisfactory or better CRA rating. Currently, the enforcement action 
authorized for the banking agencies is the ability to deny the 
noncompliant banks' application to acquire another facility.
  The substitute would expand the reach of CRA to noninsured 
institutions or wholesale financial institutions, and they don't even 
deal with consumers. Previously it had been argued that banks and 
thrifts convey an economic benefit as a result of deposit insurance, 
and thus the CRA is justifiably imposed on those institutions. But now, 
for the first time, this amendment would expand CRA to the non-FDIC-
insured institutions.
  It would allow a Federal banking agency to take enforcement action, 
such as the cease and desist order, civil monetary penalties, or even 
criminal sanctions, all for not complying with the CRA. That is an 
expansion. These penalties could even be extended to an officer or 
director of the holding company or bank.
  In addition to extraordinary CRA expansion, I found several other 
problems with the substitute amendment. First, it reduces the authority 
of State insurance commissioners and creates the National Association 
of Registered Agents and Brokers, NARAB. The insurance agents in 
Wyoming oppose the NARAB provision because they believe it is the 
precursor to Federal regulation of insurance and Federal bureaucracy.
  The substitute amendment also reduces the ability of the bank to 
engage in trust and fiduciary activities. On the other hand, S. 900 
allows a bank to engage in traditional trust and fiduciary activities, 
just as they have done for so many years.

  Additionally, it is apparent that there is not consensus in the 
substitute bill, and it differs from the product of last year. I voted 
for H.R. 10 last year. I will not vote for this substitute. It is not 
the same bill. The most significant difference lies in the operating 
subsidiary provisions. Last year, H.R. 10 only passed the House by one 
vote. Just last week the House Commerce Committee held a hearing on 
H.R. 10, which is nearly identical to the substitute amendment, and the 
Members on both sides of the aisle were very critical of the bill.
  I strongly encourage my colleagues to oppose the substitute 
amendment. It does not represent a consensus, and it is certainly more 
burdensome and expansive on the affected industries. It is not the 
product of compromise.
  I yield back the remainder of my time.
  Mr. SARBANES. Mr. President, what is the parliamentary situation?
  The PRESIDING OFFICER. The Senator from Texas controls 7 minutes 37 
seconds, and the Senator from Maryland has 7 minutes 24 seconds.
  Mr. SARBANES. I thank the Chair.
  Mr. President, I rise in very strong support of the substitute 
amendment, which is the provisions contained in S. 753, introduced by 
Senator Daschle and all of the Democratic members of the Senate 
Banking, Housing, and Urban Affairs Committee.
  We have been at this for a long time--those on the committee and 
other Members who have been interested in the issue of financial 
services modernization. We have been seeking to find a way to pass a 
bill to protect safety and soundness, to protect consumers, to ensure 
that CRA not be undercut or eroded; and that permits financial service 
institutions within the realm of financial services, in effect, to 
enter into new arrangements in terms of affiliations and the activities 
they can conduct.
  This is something that has been urged on us. Those in the industry 
think it would be helpful to them. Some of this has been taking place 
without statute, but it is uncertain, unsure. It happens through 
regulation; it happens through court decision. I think most people 
think if we could arrive at a statutory framework in which to place 
these developments that that would be a desirable objective.
  That is why we introduced S. 753. That is why we are offering it as a 
substitute amendment to the committee bill. It essentially tracks the 
language of the bill that was reported last year on a vote of 16-2 from 
the committee with one exception with respect to operating 
subsidiaries. This substitute permits banks to conduct some activities 
in an operating subsidiary--not all of the activities they can now 
engage in--and that reflects, in part, an effort by Secretary Rubin to 
try to reach an accommodation to ensure that some of the concerns that 
were raised are addressed.
  There is a conflict, a difference of view here, a very strong 
difference of view here between Secretary Rubin and Chairman Greenspan, 
both of whom are saying to have a bill we have to have a good bill, and 
their definition of a good bill, each of them, is one that corresponds 
to their views, particularly on this important issue of the op-sub 
versus the affiliate, as far as carrying on activities.
  In this regard, I point out as we listen to Secretary Rubin that we 
are also listening, of course, to the possibilities of a Presidential 
veto. We can't get a bill into law without the President's signature--
that is obvious and clear--and the President has taken a very strong 
position on this legislation. In fact, he has sent a letter to the 
committee stating in the clearest possible terms that he would veto the 
committee bill if it was presented to him in its current form. That is 
when we began the markup in the committee. The committee has issued a 
statement of administration policy in which they say:

       Nevertheless, because of crucial flaws in the bill, the 
     President has stated that if the bill were presented to him 
     in its current form, he would veto it.

  We have had extended debate on the differences between the committee 
bill and the substitute amendment. Senator Gramm and I and others are 
participating in that. I am frank to say I thought the minority leader, 
Senator Daschle, just laid out a very clear, concise, extremely well-
stated position with respect to the differences between these 
approaches.
  We differ in banking and commerce. The substitute seeks to, in 
effect, reaffirm, make clearer, the division between banking and 
commerce. We differ, as I indicated, with respect to the operating 
subsidiary issue, which of course involves the sharp difference between 
the Secretary of the Treasury and the Chairman of the Federal Reserve. 
We differ very strongly on CRA. It is asserted that the substitute 
expands CRA. In fact, what the substitute seeks to do is to ensure that 
if banks move into securities and insurance, that those banks should 
have a satisfactory CRA rating before they can undertake such a merger 
or affiliation.
  It requires the banks to be in compliance with CRA. It in effect says 
that a bank with an unsatisfactory CRA rating is not going to be able 
to use this additional power now being given to them to move into 
securities and to move into insurance. At the moment, they do a limited 
amount of that activity. But if they are going to actually go into it 
in a full-scale way, which is what this legislation offers--which both 
pieces of legislation offer to the banks, we do not differ on that 
proposition; both as a part of the financial services modernization 
approach are prepared to permit that--but we feel very strongly that 
they should be in compliance, the banks should be in compliance with 
CRA, if they intend to do that.
  A number of very important groups in the community support the 
substitute. I will have printed in the Record letters from civil rights 
organizations--from Hispanic organizations, which have been very strong 
in perceiving that CRA has made a big, big difference in their 
community in terms of home ownership and in terms of investment, and 
that there has been very significant benefit for Native American 
organizations that report on what has happened on the Indian 
reservations, from farm and rural groups, and from over 200 mayors, all 
of whom prefer the substitute amendment.
  I ask unanimous consent those letters be printed in the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:


[[Page S4739]]


                                             Leadership Conference


                                               on Civil Rights

                                   Washington, DC, March 18, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         U.S. Senate, Washington, DC.
       Dear Senator Gramm: We are writing to express our deep 
     concern over your public mischaracterizations of the 
     Community Reinvestment Act (CRA), and over the treatment of 
     CRA in the Financial Services Modernization Act of 1999 as 
     reported out of the Senate Banking Committee on March 4.
       The Leadership Conference on Civil Rights is the nation's 
     oldest, largest, and most diverse coalition of organizations 
     committed to the protection of civil rights in the United 
     States. As leaders of the civil rights community, we take 
     strong issue with your description of CRA as a vehicle for 
     ``fraud and extortion'' \1\ and to your characterization of 
     CRA as ``perhaps the greatest national scandal in America.'' 
     \2\ To the contrary, we agree with President Clinton that the 
     Community Reinvestment Act is ``a law that has helped to 
     build homes, create jobs, and restore hope in communities 
     across America.'' \3\
---------------------------------------------------------------------------
     Footnotes at end of letter.
---------------------------------------------------------------------------
       CRA has proven to be an effective means of encouraging 
     federally insured financial institutions to extend prudent 
     and profitable loans in underserved urban and rural 
     communities. CRA has been credited with the dramatic increase 
     in homeownership rates among minority, and low- and moderate-
     income individuals. Since 1993, the number of home mortgage 
     loans extended to African-Americans has increased by 58%, to 
     Hispanics by 62%, and to low- and moderate-income borrowers 
     by 38%.\4\ CRA has similarly served as the impetus for 
     revitalizing distressed rural and urban communities through 
     small business and small farm lending and community 
     development investments.
       Data from federal bank regulators reveal that the CRA has 
     not been used arbitrarily to block or delay bank applications 
     to the regulators. Community groups and others rarely file 
     adverse comments to bank applications based on CRA. Less than 
     1% of bank applications have received adverse comments.\5\ 
     Moreover, assertions that banks provide commitments to 
     community groups and others because they are afraid that 
     regulators will deny or substantially delay the processing of 
     their application is not supported by the record. Bank 
     applications that receive adverse comments are denied only 1% 
     of the time.\6\ In addition, few applications are 
     substantially delayed due to an adverse CRA comment.
       Despite the strong record of CRA success and the lack of 
     evidence of abuse, the bill that was reported out of the 
     Senate Banking Committee seriously weakens CRA in three ways. 
     First, it does not require that all banks in a bank holding 
     company have a ``satisfactory'' CRA rating to exercise the 
     new powers provided by the legislation. This would 
     substantially roll back CRA by permitting banks that are not 
     meeting the credit needs of their communities to benefit from 
     the expanded powers to affiliate with securities and 
     insurance firms.
       Second, the bill would provide a ``safe harbor'' from 
     public comment on CRA performance for banks with a 
     ``satisfactory'' CRA rating. Under the bill, an institution 
     receiving at least a satisfactory CRA rating during the 
     previous 36-month period would be deemed in compliance with 
     CRA and immune from public comment unless individuals present 
     ``substantial verifiable information'' to the contrary 
     arising since the last examination. Since over 95% of banks 
     receive a satisfactory rating, the provision would 
     fundamentally undercut the right of community groups and 
     others to comment on a bank's CRA performance.\7\ Community 
     group participation in the CRA process has been critical to 
     the success of CRA. Public comment on other aspects of a 
     bank's performance, such as management or financial 
     resources, would not face similar limitations on the scope of 
     information that may be introduced nor be subject to the same 
     burden of proof.
       Third, the bill exempts banks with less than $100 million 
     in assets from CRA. This represents 63% of all banks.\8\ If 
     enacted the provision will have devastating consequences for 
     rural communities because small banks are often the only 
     source of credit in rural areas. Despite claims that small 
     banks by their nature serve the credit needs of local 
     communities, data from regulators reveal that these 
     institutions have disproportionately poor CRA records.
       We would note that the financial services bill reported out 
     of the House Banking Committee last week on a bipartisan vote 
     of 51-8 did not contain any of these shortcomings in regard 
     to CRA. This is in sharp contrast to the 11-9 party line vote 
     by which the Senate Banking Committee reported out its bill, 
     in significant measure because of the controversial CRA 
     provisions.
       Fair access to credit, which is the purpose of CRA, is a 
     critical civil rights issue. As the President has said, ``CRA 
     is working, and we must preserve its vitality as we write the 
     financial constitution for the 21st century.'' \9\ As 
     reported out of the Senate Banking Committee, the Financial 
     Services Act of 1999 would drastically weaken CRA. Unless 
     this shortcoming is addressed, we would urge strong 
     opposition to this legislation.
           Sincerely,
         Dr. Dorothy I. Height, Chairperson, Leadership Conference 
           on Civil Rights; Barbara Arnwine, Executive Director, 
           Lawyers' Committee for Civil Rights Under Law; Andrew 
           H. Mott, Executive Director, Center for Community 
           Change; Wade Henderson, Executive Director, Leadership 
           Conference on Civil Rights; Karen Narasaki, Executive 
           Director, National Asian Pacific American Legal 
           Consortium; JoAnn K. Chase, Executive Director, 
           National Congress of American Indians.
         Shanna L. Smith, Executive Director, National Fair 
           Housing Alliance; Hugh B. Price, President and Chief 
           Executive Officer, National Urban league; Hilary 
           Shelton, Washington Bureau Director, National 
           Association for the Advancement of Colored People; Raul 
           Yzaguirre, President, National Council of La Raza; 
           Manuel Mirabal, President and Chief Executive Officer, 
           National Puerto Rican Coalition, Inc.


                               footnotes

     \1\ Congressional Record, September 30, 1998.
     \2\ Congressional Record, October 5, 1998.
     \3\ Letter from President Clinton to Senator Phil Gramm, 
     March 2, 1999.
     \4\ Home Mortgage Disclosure Act data cited in Secretary 
     Robert Rubin's letter to Senator Phil Gramm, February 23, 
     1999.
     \5\ Comptroller of the Currency, Office of Thrift 
     Supervision, Federal Deposit Insurance Corporation, and 
     Federal Reserve Board.
     \6\ Id.
     \7\ Federal Financial Institutions Examination Council.
     \8\ Federal Deposit Insurance Corporation.
     \9\ See supra note 3.
                                  ____

                                                    April 8, 1999.
     Hon. Paul S. Sarbanes,
     Senate Hart Office Building, U.S. Senate, Washington, DC.
       Dear Senator Sarbanes: The undersigned organizations write 
     to express strong opposition to the Financial Services 
     Modernization Act of 1999 as reported out of the Senate 
     Banking Committee on March 4th. The Act would restructure the 
     financial services industry in the United States by allowing 
     broad affiliations among banks, insurance companies, and 
     security firms. Currently, the law strictly limits ownership 
     among different financial entities and between financial 
     companies and commercial corporations. The Act seeks to ease 
     these restrictions, without commensurate expansion of the 
     Community Reinvestment Act (CRA) to cover insurance 
     companies, securities firms, mortgage companies, and other 
     financial entities allowed to affiliate with banks. The Act 
     would undermine one of the most effective revitalization 
     vehicles for underserved low-income and minority communities, 
     including Hispanic American communities across the country.
       We have found, and research confirms, that all too often 
     the credit and financial needs of these communities are 
     severely underserved. Historically, many financial 
     institutions have avoided investing in these communities due 
     to their perceived higher level of risk. Unfortunately, 
     ``perceived higher level of risk'' is often code for ``low-
     income'' or ``minority.'' But the facts show that low-income 
     and minority communities are not inherently riskier than 
     other communities. In fact, most financial institutions find 
     them to be quite profitable, once they begin investing in 
     them. Unfortunately, without the CRA, many financial 
     institutions have not and would not be encouraged to do so.
       As the data show, Hispanics are the fastest-growing 
     population in the United States. We are a growing force in 
     the expansion of homeownership and small business 
     development, two leading indicators of the economic well-
     being of this country. For example, between 1987 and 1992, 
     Hispanic-owned business grew by 76%, compared to 26% for U.S. 
     businesses overall. According to a 1997 Harvard study, ``the 
     number of Hispanic homeowners has shown the most spectacular 
     rise'' in recent years compared to that of Whites and of 
     other minority groups. Population projections forecast 
     Hispanics to be the largest minority group in the U.S. by the 
     year 2005, causing the U.S. economy to be increasingly 
     dependent on the continued prosperity of the Hispanic 
     American community. Without the CRA, this growth may be 
     impeded.
       As reported out of the Senate Banking Committee, the 
     Financial Services Modernization Act of 1999 would hinder 
     that growth by weakening the CRA in the following three ways. 
     First, a ``satisfactory'' CRA rating is not required in order 
     for financial institutions to enjoy the new powers afforded 
     to them by the legislation, thereby allowing banks to 
     exercise their privilege, even if they are not meeting the 
     credit needs of the communities where they do business.
       Second, banks receiving a ``satisfactory'' CRA rating would 
     be given a ``safe harbor'' from public comment on CRA 
     performance. Since over 95% of banks receive a 
     ``satisfactory'' rating, this would undermine the 
     effectiveness of the law by restricting a community's right 
     to voice its experience with banks. While a ``satisfactory'' 
     rating provides a helpful guide to a bank's overall 
     performance, it may not provide an accurate picture at the 
     neighborhood level.
       Third, the Act proposes to exempt all small rural banks 
     (those with less than $100 million in assets) from CRA, 
     thereby releasing 76% of all rural banks from their CRA 
     obligations. As with the safe harbor provision, this 
     undermines the spirit and the effectiveness of the law by 
     exempting most rural banks. This would have particularly 
     adverse consequences in low-income rural communities where 
     often the only source of

[[Page S4740]]

     credit is a small bank. Moreover, researchers have found that 
     small banks have disproportionately poor CRA records compared 
     to larger banks, thereby highlighting the need for CRA in 
     rural communities and small towns.
       CRA is one of the strongest incentives to encourage 
     investment in low-income and minority communities. Over the 
     last twenty-two years, neighborhoods across the country have 
     benefited from CRA-encouraged investments. This has resulted 
     in increases in homeownership and business development, 
     leading to the rebirth of many American neighborhoods. 
     However, many communities remain underserved by capital and 
     investment vehicles. For this reason, reinforcement, not 
     weakening, of CRA is critically needed. We urge you to 
     support the continued strengthening of America's communities 
     by vigorously opposing the Financial Services Modernization 
     Act of 1999 as reported out of Committee, and supporting 
     amendments that would strengthen the Bill's CRA protections. 
     Thank you.
           Sincerely,
         Rick Dovalina, National President, League of United Latin 
           American Citizens; Arturo Vargas, Executive Director, 
           NALEO Educational Fund; Ruth Pagani, Executive 
           Director, National Hispanic Housing Council (NHHC); 
           Juan Figueroa, President and General Counsel, Puerto 
           Rican Legal Defense and Education Fund (PRLDEF); 
           Antonia Hernandez, President and General Counsel; 
           MALDEF; Raul Uzaguirre, President and Chief Executive 
           Officer, National Council of La Raza (NCLR); Manual 
           Mirabal, President and Chief Executive Officer, 
           National Puerto Rican Coalition (NPRC).
                                  ____

                                              National Congress of


                                             American Indians,

                                   Washington, DC, April 14, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing and Urban Affairs, 
         U.S. Senate, Washington, DC.
       Dear Senator Gramm: On behalf of the National Congress of 
     American Indians (``NCAI''), we are writing to express our 
     serious concern over the treatment of the Community 
     Reinvestment Act (``CRA'') in the Financial Services 
     Modernization Act of 1999. NCAI is the oldest, largest and 
     most representative national Indian organization devoted to 
     promoting and protecting the rights of tribal governments and 
     their citizens.
       The CFA has proven to be an effective means of encouraging 
     federally insured financial institutions to extend prudent 
     and profitable loans in traditionally underserved areas 
     including Indian Country. Specifically, the CRA has helped 
     focus attention to the challenges of extending credit to 
     reservations under current law and has acted as a catalyst to 
     reservation based economic development. Since the 
     implementation of the CRA, Native American groups and banks 
     have negotiated agreements for lending more than $155 million 
     within Indian Country.
       In its current form, we believe the Financial Services 
     Modernization Act of 1999 would seriously erode the 
     effectiveness of the CRA, a law that has certainly helped to 
     build homes, create jobs and restore hope in many of our 
     communities. We are particularly concerned that the bill 
     reported by your committee would exempt small rural banks 
     from coverage by the CRA and would create a ``safe harbor'' 
     under CRA for banks with satisfactory or better ratings thus 
     making it much more difficult for the public to comment on 
     problems with a bank's CRA performance in conjunction with an 
     expansion application filed by a bank. We are also concerned 
     that your bill does not require that all banks in a bank 
     holding company have a ``satisfactory'' CRA rating to 
     exercise the new powers provided by the legislation. This 
     would substantially roll back the CRA by permitting banks 
     that are not meeting the credit needs of communities to 
     benefit from the expanded powers to affiliate with securities 
     and insurance firms.
       We strongly urge you to reconsider these provisions of the 
     bill. As reported out of the Senate Banking Committee, the 
     Financial Services Act of 1999 drastically weakens the CRA 
     and unless this shortcoming is addressed, we would urge 
     strong opposition to the legislation.
           Sincerely,
                                                     W. Ron Allen,
                                                        President.
       (Also signed by 17 representatives of tribes and tribal 
     organizations.)
                                  ____

                                                 The United States


                                          Conference of Mayors

                                   Washington, DC, April 29, 1999.
       Dear Senator: The Community Reinvestment Act (CRA) has 
     played a critical role in encouraging federally insured 
     financial institutions to invest in the cities of our 
     country. Legislation reported out of the Senate Banking 
     Committee on March 4, the Financial Modernization Act of 
     1999, would dramatically weaken CRA. We strongly urge you to 
     oppose this legislation unless CRA is preserved and 
     strengthened.
       The United States Conference of Mayors is the nation's 
     largest nonpartisan organization dedicated to ensuring the 
     economic stability of the nation's largest cities. As mayors, 
     we recognize that CRA has been an essential tool in 
     revitalizing cities around this nation. In fact, there is now 
     increasing recognition that the strength and economic health 
     of whole regions require strong and vibrant cities. Creating 
     new economic activity--new businesses, new jobs, new 
     homeowners--is key to the revival of urban areas and their 
     surrounding regions, CRA has been a key component to creating 
     this new economic activity.
       Private sector investment encouraged under CRA has helped 
     to stabilize communities suffering from economic decline. CRA 
     has similarly helped to spur bank and thrift investment in 
     multi-family rental housing development and rehabilitation, 
     small business expansion, and community economic development. 
     CRA is a crucial complement to FHA Insurance, The HOME 
     program, Community Development Block Grants, and the low-
     income housing tax credit. These programs, which have built 
     or financed the purchase of millions of units of affordable 
     rental and ownership homes, work so effectively because they 
     leverage tens of millions of private dollars.
       In light of the success of CRA and our experiences with 
     community revitalization efforts, we are very troubled by 
     allegations that have been made that CRA has ``since been 
     corrupted into a system of legalized extortion.'' In contrast 
     to the description of community based organizations as 
     ``racketeers'' and ``thugs'' many of us have participated in 
     successful partnerships with private institutions and members 
     of the community. These relationships have resulted in a 
     tremendous infusion of capital into underserved communities 
     as well as increased banking services.
       The bill that was reported out of the Senate Banking 
     Committee would have dire consequences for the nation's 
     cities if it were enacted. First, the failure to require that 
     banks seeking to affiliate with securities and insurance 
     firms have a ``satisfactory'' CRA rating would permit banks 
     to ignore the credit needs of their communities and benefit 
     from the powers provided in the legislation. This is a 
     substantial rollback of CRA and would most certainly reduce 
     the flow of capital in these areas--returning us to a time 
     when banks and thrifts redlined communities with credit 
     worthy borrowers.
       In addition, the bill provides a ``safe harbor'' from 
     public comment on CRA performance to banks with a 
     ``satisfactory'' or better CRA rating. This provision 
     effectively eliminates public comment on a bank's CRA 
     performance. As you are undoubtedly aware, the opportunity to 
     comment on a bank's performance is a right given to every 
     member of the public. Public comment participation in the CRA 
     process is considered a critical component of the law's 
     success. The public often raises community investment issues 
     which have been overlooked by regulators. This provision 
     singles out CRA comments for unfair treatment. Unlike CRA 
     comments, individuals seeking to comment on other aspects of 
     a bank's performance would not face limitations on the scope 
     of information that they may introduce or be required to 
     carry a burden of proof. Moreover, data from regulators 
     indicated that the comment process has not been abused.
       Finally, the bill exempts small banks in rural areas 
     (assets less than $100 million in assets) from CRA 
     obligations. These institutions represent 76% of banks and 
     thrifts in rural communities. This provision would seriously 
     compromise the capital needs of rural residents who depend 
     almost exclusively on small banks and thrifts to meet their 
     credit needs. Residents in these communities rely on CRA to 
     encourage banks to make mortgage, small farm, and small 
     business loans.
       Prior to the enactment of CRA, banks, and thrifts routinely 
     redlined low- and moderate-income neighborhoods in our 
     nation's cities. The modest requirement in CRA that financial 
     institutions meet the credit needs of their communities has 
     lead to the successful channeling of billions of dollars into 
     localities.
       As reported out of the Senate Banking Committee, the 
     Financial Services Act of 1999 would severely weaken CRA and 
     our nation's cities. Unless the onerous CRA provisions are 
     addressed and CRA is preserved and strengthened, we would 
     urge strong opposition to the Senate bill.
           Sincerely,
     Richard Arrington, Jr., Birmingham, AL
     Patrick Henry Hays, North Little Rock, AR
     Robert Mitchell, Casa Grande, AZ
     Alex J. Harper, San Luis, AZ
     Neil Giuliano, Tempe, AZ
     George Miller, Tucson, AZ
     Richard F. Archer, Sierra Vista, AZ
     Marilyn R. Young, Yuma, AZ
     Ralph Appezzato, Alameda, CA
     Garry Fazzino, Palo Alto, CA
     Mary Rocha, Antioch, CA
     Shirley Dean, Berkeley, CA
     Eunice M. Ulloa, Chino, CA
     Judy Nadler, Santa Clara, CA
     Chris Christiansen, Covina, CA
     George Pettygrove, Fairfield, CA
     Larry R. Green, Glendora, CA
     Chris B. Silva, Indio, CA
     Roosevelt F. Dorn, Inglewood, CA
     Cathie Brown, Livermore, CA
     Donald E. Lahr, Santa Maria, CA
     David Smith, Newark, CA
     William E. Cunningham, Redlands, CA
     Willie L. Brown, Jr., San Francisco, CA
     Harriett Miller, Santa Barbara, CA
     Gary Podesto, Stockton, CA
     Robert R. Nolan, Upland, CA
     Wally Gregory, Visalia, CA
     Robert Frie, Arvada, CO
     Wellington E. Webb, Denver, CO
     John DeStefano, Jr., New Haven, CT

[[Page S4741]]

     Dannel P. Malloy, Stamford, CT
     Anthony A. Williams, Washington, DC
     Gerald Broening, Boynton Beach, FL
     Alex Penelas, Miami-Dade County, FL
     Mara Giulianti, Hollywood, FL
     Ralph L. Fletcher, Lakeland, FL
     Richard J. Kaplan, Lauderhill, FL
     James F. Fielding, Port St. Lucie, FL
     Alex G. Fekete, Pembroke Pines, FL
     Joe Schreiber, Tamarac, FL
     Bill Campbell, Atlanta, GA
     Bob Young, Augusta, GA
     Patsy Jo Hilliard, East Point, GA
     Felix F. Ungacta, Hagatna, Guam
     Stephen K. Yamashiro, Hawaii, HI
     Lee R. Clancey, Cedar Rapids, IA
     H. Brent Coles, Boise, ID
     Gregory R. Anderson, Pocatello, ID
     Neil Dillard, Carbondale, IL
     Richard Daley, Chicago, IL
     Jerry P. Genova, Calumet City, IL
     Angelo A. Ciambrone, Chicago Heights, IL
     Lydia Reid, Mansfield, IL
     Stanley F. Leach, Moline, IL
     Barbara Furlong, Oak Park, IL
     R. David Tebben, Pekin, IL
     Ross Ferraro, Carol Stream, IL
     Stephen J. Luecke, South Bend, IN
     Joseph R. Zickgraf, Columbia City, IN
     James P. Perron, Elkhart, IN
     Duane W. Dedelow, Jr., Hammond, IN
     Paul W. Helmke, Fort Wayne, IN
     Carol Marinovich, Kansas City, KS
     David L. Armstrong, Louisville, KY
     Waymond Morris, Owensboro, KY
     Edward G. ``Ned'' Randolph, Jr., Alexandria, LA
     Ruth Fontenot, New Iberia, LA
     Walter Comeaux, Lafayette, LA
     Marc Morial, New Orleans, LA
     John Barrett, III, North Adams, MA
     Nicholas J. Costello, Amesbury, MA
     Thomas M. Menino, Boston, MA
     David Ragucci, Everett, MA
     Patrick J. McManus, Lynn, MA
     Richard C. Howard, Malden, MA
     Thomas V. Kane, Portland, ME
     James L. Barker, Garden City, MI
     Dennis Archer, Detroit, MI
     Woodrow Stanley, Flint, MI
     Aldo Vagnozzi, Farmington Hills, MI
     Robert B. Jones, Kalamazoo, MI
     David C. Hollister, Lansing, MI
     Jack E. Kirksey, Livonia, MI
     Linsey Porter, Highland Park, MI
     Walter Moore, Pontiac, MI
     Donald F. Fracassi, Southfield, MI
     Sharon Sayles Belton, Minneapolis, MN
     Chuck Canfield, Rochester, MN
     Joseph L. Adams, University City, MO
     Larry R. Stobbs, St. Joseph, MO
     Harvey Johnson, Jr., Jackson, MS
     Jack Lynch, Butte, MT
     Patrick McCrory, Charlotte, NC
     George W. Liles, Concord, NC
     Jerry Ryan, Bellevue, NE
     Ken Gnadt, Grand Island, NE
     James Anzaldi, Clifton, NJ
     Anthony, Russo, Hoboken, NJ
     Sara B. Bost, Irvington, NJ
     Margie Semler, Passaic, NJ
     Albert McWilliams, Plainfield, NJ
     Thalia C. Kay, Pemberton Township, NJ
     Douglas Palmer, Trenton, NJ
     Lavonne Bekler Johnson, Willingboro Township, NJ
     Jan Laverty Jones, Las Vegas, NV
     Sandra L. Frankel, Brighton, NY
     Anthony M. Masiello, Buffalo, NY
     James C. Galie, Niagara Falls, NY
     William F. Glacken, Freeport, NY
     James A. Garner, Hempstead, NY
     Roy A. Bernardi, Syracuse, NY
     Edward A. Hanna, Utica, NY
     Ernest D. Davis, Mount Vernon, NY
     Donald L. Plusquellic, Akron, OH
     Richard D. Watkins, Canton, OH
     Michael B. Keys, Elyria, OH
     Paul Oyaski, Euclid, OH
     Beryl E. Rothschild, University Heights, OH
     William L. Pegues, Warrensville Heights, OH
     Thomas J. Longo, Garfield Heights, OH
     Debora A. Mallin, Bedford Heights, OH
     Marilou W. Smith, Kettering, OH
     David Berger, Lima, OH
     Joseph F. Koziura, Lorain, OH
     Cicil E. Powell, Lawton, OK
     M. Susan Savage, Tulsa, OK
     Bill Klammer, Lake Oswego, OR
     Vera Katz, Portland, OR
     Donald T. Cunnigham, Jr., Bethlehem, PA
     Timothy M. Fulkerson, New Castle, PA
     Joyce A. Savocchio, Erie, PA
     Stephen R. Reed, Harrisburg, PA
     Ted LeBlanc, Norristown, PA
     Edward Rendell, Philadelphia, PA
     Charles H. Robertson, York, PA
     William Miranda Marin, Caguas, PR
     James E. Doyle, Pawtucket, RI
     Vincent A. Cianci, Jr., Providence, RI
     James E. Talley, Spartanburg, SC
     Jon Kinsey, Chattanooga, TN
     Kirk Watson, Austin, TX
     David W. Moore, Beaumont, TX
     Ronald Kirk, Dallas, TX
     Jack Miller, Denton, TX
     Mary Lib Saleh, Euless, TX
     Charles Scoma, North Richland Hills, TX
     Lee P. Brown, Houston, TX
     Michael D. Morrison, Waco, TX
     Kenneth Barr, Fort Worth, TX
     Deedee Corradini, Salt Lake City, UT
     William E. Ward, Chesapeake, VA
     Paul D. Fraim, Norfolk, VA
     Peter Clavelle, Burlington, VT
     Mark Asmundson, Bellingham, WA
     Lynn Horton, Bremerton, WA
     Paul Schell, Seattle, WA
     Paul F. Jadin, Green Bay, WI
     John D. Medinger, La Crosse, WI
     Susan J. Bauman, Madison, WI
     Maricolette Walsh, Wauwatosa, WI
     John Lipphardt, Wheeling, WV
                                  ____

                                                   April 29, 1999.

Family Farm and Rural Organizations Support Community Reinvestment Act: 
        Oppose the Financial Services Modernization Act of 1999

       Dear Senator: As organizations working with and 
     representing rural residents, we write to register our strong 
     opposition to the Financial Services Modernization Act of 
     1999 as reported out of the Senate Banking Committee in late 
     March. We are very concerned that the bill substantially 
     undercuts the existing Community Reinvestment Act (CRA) and 
     totally ignores the need to modernize CRA to meet the 
     dramatic changes in financial services across the country.
       Rural America remains in desperate need of affordable 
     credit. CRA has been a law that has significantly expanded 
     access to credit in rural areas of our country. Despite this 
     increased access, there remain widening gaps and unmet needs 
     in ensuring credit access to all rural residents. A recent 
     Small Business Administration (SBA) report analyzing the June 
     1998 Federal Reserve Data shows a 4.6% decline in the number 
     of small farm loans. The value of total farm loans was $74.5 
     billion. Of great concern is the statistic that reveals a 
     troubling trend; the value of very large farm loans (over $1 
     million) increased by 25% while ``small'' farm loans (under 
     $250,000) increased a mere 3.9%. Larger loans are going to 
     fewer operations.
       Rural areas continue to suffer from a serious shortage of 
     affordable housing. Farmers are facing the worst financial 
     conditions in more than a decade due to declining commodity 
     prices. Rural Americans continue to need the tools of the CRA 
     to ensure accountability of their local lending institutions. 
     CRA helps to meet the credit demand of millions of family 
     farmers, rural residents, and local businesses.
       We strongly oppose three provisions in the Senate Banking 
     Committee reported bill which would have particularly 
     negative consequences for our communities.
       First, the bill contains a ``safe harbor'' for banks that 
     have achieved a ``satisfactory'' CRA rating in each of its 
     examinations in the prior 36-month period. This provision 
     would make banks and thrifts immune to public comment during 
     pending expansion applications unless individuals or groups 
     are able to provide ``substantial verifiable information'' 
     that the bank is not in compliance with CRA. This provision 
     would essentially eliminate the public's opportunity to 
     comment on a bank's performance in meeting the credit needs 
     of its communities. More than 95% of banks consistently 
     receive `satisfactory' or higher ratings. Rural residents 
     play an important role in bringing CRA performance issues to 
     the attention of regulators and making banks responsive to 
     community needs. This provision would deny citizens and 
     community based organizations the opportunity to comment on 
     the credit needs of their community.
       Two, the bill exempts from CRA banks and thrifts with less 
     than $100 million in assets located in non-metropolitan 
     areas. These institutions represent 76% of banks and thrifts 
     in rural communities. This provision would seriously 
     compromise the capital needs of rural residents who depend 
     almost exclusively on small banks and thrifts to meet their 
     credit needs. Banks and thrifts in rural areas face little 
     competition from other financial services institutions.
       In addition, despite assertions from the industry, many 
     small banks do not by their nature serve the credit needs of 
     their communities. In fact, data from the regulators show 
     that small banks do not invest more in their communities, on 
     average than larger banks. In addition, small banks have a 
     disproportionately high share of less than satisfactory CRA 
     ratings. A Congressional Research Service study of data from 
     1997 to mid-1998, found that banks with less than $100 
     million in assets received 70% of the below ``satisfactory'' 
     CRA ratings.
       In addition, arguments that CRA subjects small banks to 
     intrusive and time consuming compliance requirements are 
     unfounded. The CRA regulations were revised in 1995 in part 
     to reduce compliance burdens on small banks. The new rules 
     provide for a streamlined examination for banks with less 
     than $250 million in assets including an exemption from data 
     collection and reporting requirements. Small bank ratings now 
     focus exclusively on lending and lending related activities. 
     The need to reduce an already minimal regulatory burden on 
     small banks should not outweigh the credit needs of residents 
     of rural communities.
       Third, unlike last year's H.R. 10 voted out of the Senate 
     Banking Committee and this year's House Banking Committee 
     version of financial modernization, the Senate Banking 
     Committee reported bill fails to require that banks have a 
     ``satisfactory'' CRA rating in order to affiliate with 
     securities and insurance firms. In the absence of this 
     requirement, a bank could ignore the credit needs of its 
     communities and still benefit from the new affiliations and 
     powers provided under this legislation.
       The Small Business Administration (SBA) report on bank 
     holding company lending in rural communities reaffirms this 
     concern. While the 57 largest bank holding companies held 
     68.6 percent of all domestic bank assets in June 1998, they 
     made just 10.7% or 160,000 of all the outstanding farm loans. 
     These loans totaled just .18 percent of total assets in these 
     bank holding companies. This increasing concentration and 
     consolidation in

[[Page S4742]]

     financial services comes at a time when the community role in 
     determining whether this expansion is appropriate is being 
     reduced.
       In closing, CRA has been a valuable tool for over twenty 
     years to encourage financial institutions to help meet the 
     credit needs of rural communities across this nation. Access 
     to affordable capital is important to restoring economic 
     prosperity in our nation's rural areas. In its current form, 
     the Financial Services Modernization Act of 1999 permits 
     banks to ignore the needs of our communities and remove one 
     of the few tools that has resulted in a level of 
     accountability. We urge you to vote against the Financial 
     Services Modernization Act of 1999 unless these objections 
     are addressed. Please contact (202) 543-5675 with any 
     questions.
           Sincerely,
     American Corn Growers Association
     Center for Rural Affairs
     Federation of Southern Cooperatives
     Intertribal Agriculture Council
     Iowa Citizens for Community Improvement
     Land Loss Prevention Project (NC)
     Missouri Rural Crisis Center
     National Black Caucus of State Legislators
     National Catholic Rural Life Conference
     National Family Farm Coalition
     National Farmers Union
     National Neighborhood Housing Network
     National Rural Housing Coalition
     North American Farm Alliance
     Presbyterian Church (USA), Washington office
     Rural Coalition
     Sin Fronteras Organizing Project
     United Methodist Church, General Board of Church and Society
     Wisconsin Rural Development Center

  Mr. SARBANES. Finally, let me simply say, as the Democratic leader 
indicated, unless we can get the substitute in place, we are on a veto 
track with S. 900. The substitute will eliminate the veto problem. So, 
for those who want legislation, who want to see financial services 
modernization enacted into law, I urge them to vote for the substitute.
  I assume the chairman will probably make a motion to table.
  Mr. GRAMM. I will.
  Mr. SARBANES. Therefore, I urge Members to vote against the motion to 
table the substitute, thereby giving us the opportunity to then go 
forward and adopt the substitute.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, let me begin by noting that not one single 
organization which represents anyone who makes a living in any industry 
directly affected by this bill supports the Sarbanes substitute. The 
Sarbanes substitute is opposed by insurance companies, by those who 
represent the companies; it is opposed by the American Bankers 
Association, by the Bankers Roundtable, and by the Independent Bankers 
of America. It is opposed by every organization that represents any 
facet of the securities industry. This substitute is literally a 
substitute which has no support by anyone who is going to be directly 
affected by these laws.
  What are the major problems with it? There are more problems than I 
can possibly outline in 6 minutes, so let me just take a couple of 
them. We all know Alan Greenspan. We know he is the most respected 
person in America on economic matters. We all know if there is anybody 
on this planet who can lay any legitimate claim to the current level of 
prosperity in America, it is Alan Greenspan, because of his banking and 
monetary policies.
  We also know that Alan Greenspan is not someone who goes out looking 
for a fight. If he has to say something that anybody does not want to 
hear, he tends to go all around the barn before he says it. You need to 
know those things to understand how strongly Chairman Greenspan feels 
in his opposition to the Sarbanes substitute. In fact, he has said, ``I 
and my colleagues''--and by ``colleagues'' he means every member of the 
Board of Governors of the Federal Reserve, most of whom were appointed 
by Bill Clinton--``are firmly of the view that the long-term stability 
of the U.S. financial markets and the interests of the American 
taxpayer would be better served by no financial modernization bill 
rather than one that allows the proposed new activities to be conducted 
by the bank. . ..''
  Alan Greenspan says in the strongest way possible, in the most 
passionate terms that he has ever spoken on any issue in his public 
life: You would be better not to pass a bill than to pass the Sarbanes 
substitute.
  Why? Because the Sarbanes substitute lets banks engage in these 
expanded financial services within the bank, thereby putting at risk 
the taxpayer through FDIC insurance. By performing these services in 
banks, they get an implicit subsidy from FDIC insurance, from the 
discount window, from the Federal wire, that will make banks able--not 
because they are more efficient, but because of this subsidy--
ultimately able to dominate the securities industry and all other 
industries which would be affected. We would end up with a banking 
system that looks very much like the Japanese banking system, totally 
dominating our financial markets. Alan Greenspan is opposed to that. It 
is very dangerous for the American economy. It is dangerous for the 
taxpayer. I urge my colleagues to reject this substitute.
  A second issue I want to talk about is CRA. The current bill 
preserves CRA. The current bill makes two modest changes. One, it says 
that if a bank has a long-term history of compliance --has been in 
compliance three years in a row and is currently in compliance--that if 
a protest group or individual wants to inject themselves into the 
process, they can do it. They can say whatever they want to say. But 
the regulator can't hold up the bank's action in the name of CRA, given 
their long history of compliance and given that they are currently in 
compliance, unless the protester has more than a scintilla of evidence; 
unless the protester can present such relevant evidence as a reasonable 
mind might accept as adequate to support the claim; unless the 
protester has real, material--not seeming or imaginary--evidence. In 
other words, if you are going to stop a bank from doing something that 
it has been found qualified to do, you have to present some evidence--
hardly, a demanding constraint.
  Second, we exempt very small rural banks from CRA. Why? We exempt 
very small rural banks from CRA for a very simple reason:
  Ms. MIKULSKI. Mr. President, I rise in support of the Sarbanes 
substitute amendment to the Financial Services Modernization Act. I 
salute him for his leadership in seeking financial services reform that 
prepares us for the new century.
  I agree that we should reform our financial services. There is no 
doubt that changes in law have lagged behind changes in our banking and 
financial services industries.
  This amendment is a great improvement over the underlying bill. It 
would provide greater protections for consumers. It would also maintain 
the Community Reinvestment Act--which is so important in enabling low 
income communities to help themselves.
  However, I would like to raise a number of what I call ``flashing 
yellow lights'' or warning signals that we should be aware of before 
enacting financial services modernization. We should proceed with 
caution to avoid irrevocable changes when the savings of hard working 
families and the viability of our communities could be put in jeopardy.
  For example, financial services reform would make it easier for 
banks, securities firms and insurance companies to merge into 
oligopolies. The savings of many would be controlled by a few. 
Americans will know less about where their deposits are kept and how 
they are used.
  What would be the effect of these mergers on consumers? I am 
concerned that these mega institutions could lead to higher fees and 
fewer choices for consumers.
  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 legislation 
accelerates that trend.
  In addition, what would be the affect of this legislation on the 
alarming increase in foreign takeovers of US banks? I support increased 
globalization, but what will happen when home town banks are taken over 
by companies that have no roots or commitments to the community?
  With a globalization of financial resources, the local bank could be 
bought by a holding company based outside the United States. Instead of 
the friendly neighborhood teller, consumers would be contacting a 
computer operator in a country half-way around the globe through an 800 
number. Their account could be subject to

[[Page S4743]]

risks that have nothing to do with their job, their community or even 
the economy of the United States. I know that impersonalized 
globalization is not what banking customers want when they talk about 
modernization of financial services.
  So I will support the Sarbanes amendment. It goes further in 
answering my concerns. But I hope we will be able to address these 
concerns more fully as we move forward with this legislation. they 
generally do not have a city to serve, much less an inner city.

  Third, in the last 9 years, Federal regulators have performed 16,380 
CRA evaluations of these banks--evaluating them annually. These banks 
report that it costs them between $60,000 and $80,000 a year to comply 
with CRA. Yet, at the end of 9 years and 16,380 evaluations, just three 
small rural banks have been found to be substantially out of 
compliance. One million--excuse me, one trillion. Excuse me, let me be 
sure I have my figure here. At the end of this process, with small 
banks having spent perhaps $1,310,400,000,000 complying with paperwork 
in the name of evaluating community lending, we have found just three 
banks out of compliance. Not only does the substitute eliminate this 
provision that ends this senseless wasting of small bank resources that 
cost local communities and deny them access to credit, but it imposes 
confiscatory penalties that would make a bank, if it fell out of 
compliance with CRA, potentially subject to a $1 million fine, not just 
on the bank but on the bank officer or on the bank director.
  We have two letters here, one from the Independent Bankers and one 
from the ABA, raising the point that one of the toughest things to do 
now in this period of massive lawsuit liability is to get good people 
to serve on a bank board. Both the Independent Bankers of America and 
the ABA have written urging us not to adopt a provision that would make 
it virtually impossible for small banks, especially, to get qualified 
officers and board members because of the liability costs. I urge my 
colleagues to reject this substitute.
  The PRESIDING OFFICER. Under the previous order, the hour of 12 noon 
having arrived, the Senator from Texas is recognized to make a motion 
to table.
  Mr. SARBANES. Mr. President, I ask for 1 minute so I can pose a 
question to the Senator from Texas.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRAMM. Mr. President, I want 1 minute to respond.
  Mr. SARBANES. How does the Senator get this $1 trillion figure?
  Mr. GRAMM. We have had 16,380 examinations of small, rural 
institutions since 1990. Those small, rural institutions report to us 
that it costs them about $80,000 a year to keep the records to comply 
with these examinations, and that is where the number came from.
  Mr. SARBANES. My arithmetic--first of all, I do not concede the 
figures. In any event, even if I accept them, it is 1 billion, not 1 
trillion.
  Mr. GRAMM. If it is a billion or a trillion, it is a lot of money.
  Mr. SARBANES. A lot of money, but there is a big difference between a 
billion and a trillion. That is one of the problems with this debate, I 
underscore.
  Mr. GRAMM. I have my trusty calculator, and I will make the 
calculation again. But lest my colleague be correct, let me just 
restate it in his terms. The term is, does it make sense to make little 
banks spend $1.3 billion to comply with keeping paperwork when in 9 
years, only three banks out of 16,000 audits have been substantially 
out of compliance? Is that not overkill? Is that not bankrupting every 
small bank in America? The answer is yes.
  Mr. GRAMM. I move to table the pending substitute, and I ask for the 
yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table the amendment. The yeas and nays have been ordered. The clerk 
will call the roll.
  The legislative clerk called the roll.
  Mr. FITZGERALD (when his name was called). Present.
  Mr. REID. I announce that the Senator from North Dakota (Mr. Dorgan), 
is necessarily absent.
  I also announce that the Senator from Louisiana (Ms. Landrieu), is 
absent attending a funeral.
  I further announce that, if present and voting, the Senator from 
Louisiana (Ms. Landrieu), would vote ``no.''
  The PRESIDING OFFICER (Mr. Burns). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 54, nays 43, as follows:

                      [Rollcall Vote No. 100 Leg.]

                                YEAS--54

     Abraham
     Allard
     Ashcroft
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Chafee
     Cochran
     Collins
     Coverdell
     Craig
     Crapo
     DeWine
     Domenici
     Enzi
     Frist
     Gorton
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Kyl
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Murkowski
     Nickles
     Roberts
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner

                                NAYS--43

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Bryan
     Byrd
     Cleland
     Conrad
     Daschle
     Dodd
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham
     Harkin
     Hollings
     Inouye
     Johnson
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Moynihan
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Sarbanes
     Schumer
     Torricelli
     Wellstone
     Wyden

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                             NOT VOTING--2

     Dorgan
     Landrieu
       
  The motion was agreed to.
  Mr. LOTT. Mr. President, I ask unanimous consent that notwithstanding 
the agreement of May 4, Senator Sarbanes now be recognized to offer a 
CRA amendment with all other provisions of the previous consent 
agreement still intact.
  I further ask that a vote occur in relation to the CRA amendment at 7 
p.m. tonight, and if debate has been completed prior to that time, the 
amendment may be laid aside in order for Senator Gramm, or his 
designee, to offer an additional amendment.
  Mr. SARBANES. Mr. President, reserving the right to object, I think 
the agreement should be ``or a designee,'' and Senator Bryan is going 
to offer the amendment.
  Mr. LOTT. I modify it to say Senator Sarbanes or his designee.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LOTT. Mr. President, for the information of all Senators, Members 
should be aware that votes will occur today on the CRA issue and 
possibly other banking issues. If debate is completed before the 7 
o'clock hour, there are other amendments that could be considered. 
There will certainly be one at 7 o'clock on this CRA issue.
  If the Senate is able to complete this banking bill by the close of 
business on Thursday, then I would be prepared to announce at that time 
that there would be no votes on Friday. So if we can get this work 
completed--and it looks as if we may be able to; the managers are 
working together. And we have a couple of issues that will have to be 
debated and considered carefully, plus there are other amendments that 
won't take as long to be debated. This could be completed by Thursday 
night. If that is the case, we will not have any votes on Friday. If we 
are not able to finish it Thursday night, we may have to go over until 
Friday and complete it. I wanted Members to be aware of that 
possibility.
  I yield the floor.
  Mr. SARBANES. Mr. President, I yield to the distinguished Senator 
from Nevada.
  The PRESIDING OFFICER. The Senator from Nevada is recognized.


                           Amendment No. 303

(Purpose: To make amendments relating to the Community Reinvestment Act 
                    of 1977, and for other purposes)

  Mr. BRYAN. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.

[[Page S4744]]

  The legislative assistant read as follows:

       The Senator from Nevada [Mr. Bryan], for himself, Mr. Dodd, 
     and Mr. Kerry, proposes an amendment numbered 303.

  Mr. BRYAN. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 14, strike lines 8 and 9 and insert the following: 
     ``are well managed;
       ``(C) all of the insured depository institution 
     subsidiaries of the bank holding company have achieved a 
     rating of `satisfactory record of meeting community credit 
     needs', or better, at the most recent examination of each 
     such institution under the Community Reinvestment Act of 
     1977; and
       ``(D) the bank holding company has filed''.
       On page 14, line 20, strike ``and (B)'' and insert ``, (B), 
     and (C)''.
       On page 18, between lines 4 and 5, insert the following:
       ``(5) Limitation.--A bank holding company shall not be 
     required to divest any company held, or terminate any 
     activity conducted pursuant to, subsection (k) solely because 
     of a failure to comply with subsection (l)(1)(C).
       On page 66, strike lines 7 and 8 and insert the following: 
     ``bank is well capitalized and well managed;
       ``(E) each insured depository institution affiliate of the 
     national bank has achieved a rating of `satisfactory record 
     of meeting community credit needs', or better, at the most 
     recent examination of each such institution under the 
     Community Reinvestment Act of 1977; and
       ``(F) the national bank has received the''.
       On page 66, line 12, strike ``subparagraph (D)'' and insert 
     ``subparagraphs (D) and (E)''.
       On page 66, line 16, insert before the period ``, except 
     that the Comptroller may not require a national bank to 
     divest control of or otherwise terminate affiliation with a 
     financial subsidiary based on noncompliance with paragraph 
     (1)(E)''.
       On page 96, strike line 23 and all that follows through 
     page 98, line 4.
       On page 104, strike line 20 and all that follows through 
     page 105, line 14.
       Redesignate sections 304 through 307 and sections 309 
     through 311 as sections 303 through 309, respectively.
       Amend the table of contents accordingly.

  Mr. BRYAN. Mr. President, we are about ready to debate an important 
issue dealing with the Community Reinvestment Act. Let me say that I 
think there has been considerably more heat than light generated in the 
debate surrounding this issue. I thought it might be helpful to my 
colleagues to explain how the provisions of this act work, what is 
involved, what is not involved, the provisions that currently exist in 
the bill we are debating, and the contents of the amendment.
  The Community Reinvestment Act has been in operation now for 21 
years. The act itself is triggered in either of two circumstances--one, 
as part of a periodic review, and that depends upon the size of the 
institution. It applies only to insured depository institutions, so we 
are talking about banks and thrifts. It also is triggered when a 
depository institution files an application for a charter conversion, 
for merger, acquisition, or requesting authority for additional 
branches.
  Those applications, then, are reviewed by the appropriate bank 
regulator, or the thrift regulator, whether that be the OCC, the 
Federal Reserve, or the OTC. Notice is then given, and the community 
groups have an opportunity to comment on the application. So you have a 
periodic review, which may be annually or a longer period of time, or 
you have the circumstances in which an insured depository institution 
seeks either a charter conversion, a merger, an acquisition, or 
additional branches.
  Notice is given. Now, 97 percent of all depository institutions--
banks or thrifts--get a satisfactory CRA rating. The penalties that can 
be provided are that, No. 1, an application could be denied, an 
application could be accepted subject to certain conditions, or the 
application can be approved without conditions. I think it is important 
to understand who is making the decision here. It is not the community 
groups that have a veto power. These are decisions that are essentially 
made by bank regulators--regulators that have traditionally evinced no 
hostility to the banking industry. And even an institution which gets 
the lowest rating--substantial noncompliance is the lowest rating you 
can get--may still have its application approved. So nothing in the 
language of CRA compels a regulator to disapprove an application, even 
if the financial institution that is applying for the relief sought 
gets the lowest evaluation possible.
  What is the history in the last 21 years of the act? There have been 
some 86,000 applications filed over the last 21 years and, of those, 
only 660 have received adverse comments. So less than 1 percent of all 
of the applications relating to CRA that have been received have been 
subject to objections or adverse comments by any of the regulating 
groups over a period of 21 years.
  What has CRA accomplished? Well, it has accomplished a great deal. In 
point of fact, the CRA, over the years, has resulted in a substantial 
increase in lending and other financial activity within the inner-city 
and minority groups in America. CRA encourages banks to meet the credit 
needs of the entire community, including low- and moderate-income 
areas.
  Over the last 21 years, the CRA has been one of the strongest 
incentives to encourage investment in low-income and minority 
communities.
  Under the law, federally insured financial institutions have made 
billions of dollars in profitable market rate loans and investments in 
underserved urban and rural areas. And it has done so without creating 
a large Federal bureaucracy, or jeopardizing the safety and soundness 
of any financial institution.
  CRA has been an important tool in improving access to credit for 
minority and low- to moderate-income Americans.
  The dramatic increase in home ownership rates for minorities is 
attributable in large part to increased focus on banks' CRA 
performance. Between 1993 and 1997, the number of conventional home 
mortgage loans extended increased for African Americans by 72 percent; 
for Hispanics, 45 percent; for Asian Americans, 31 percent; for Native 
Americans, 30 percent; for low- and moderate-income census tracks by 45 
percent.
  Small business owners in low- and moderate-income communities have 
seen a substantial increase in their access to credit under the law.
  Under the emphasis of CRA, banks have made loans to African 
Americans, Native Americans, Hispanic and Asian Americans, and, 
according to the Small Business Administration, loans to African-
American-owned firms increased by 145 percent between 1992 and 1997. In 
1997 alone, banks made more than $34 billion in loans to entrepreneurs 
located in low- and moderate-income areas.
  These loans have financed businesses which have been critical to 
revitalizing the distressed communities.
  Mr. President, it seems to me that has a desirable result for every 
mayor of every major community in America struggling to revitalize the 
inner core of his or her State. That is the experience in my own State. 
That is the experience, I suggest, of every State.
  As a result of CRA, we are seeing more money being invested and 
loaned in inner cities with minority businesses.
  That, it seems to me, makes sense, and good public policy.
  Who, then, objects to CRA?
  We are dealing with a piece of legislation that will substantially 
transform the way in which modern financial institutions will be 
regulated--banking, securities and insurance.
  Mr. President, those groups are in support of CRA, and they are in 
support of the amendment which I have offered.
  Indeed, in the last session of the Congress, H.R. 10, which contains 
CRA provisions virtually identical to the ones that are contained in 
the Bryan amendment, were passed by the House of Representatives, and 
emerged from a Senate Banking Committee by a vote of 16 to 2--broad 
bipartisan support.
  In this Congress, the financial institution restructuring bill that 
is making its way through the other body was approved by a vote of 51 
to 8--51 to 8--and the CRA provisions contained in that piece of 
legislation are essentially identical to the provisions that the Bryan 
amendment addresses.
  Banks are supportive, the insurance industry is supportive, and the 
securities industry--the major players are supportive. Moreover, banks 
have found not only that it is good public policy, but it makes sense 
financially.
  The National Association of Home Builders, which has participated in 
an enormous growth in the rate of new housing starts, and has seen a 
remarkable increase in the percentage of home

[[Page S4745]]

ownership in America, has this to say about CRA.

  The National Association of Home Builders:

       Therefore, the NAHB, the National Association of Home 
     Builders, supports any amendments offered to remove or 
     replace the provisions in S. 900--

  That is the bill that we are debating--

     that deals with a much more restrictive and a roll-back 
     provision of CRA.

  The Home Builders go on to say:

       While the CRA may not be the perfect solution to ensuring 
     housing credit is available to all communities, financial 
     institutions of all sizes, through their compliance with CRA, 
     have provided crucial community development loans and 
     affordable housing production loans that have benefited 
     millions of people across the United States. We see no public 
     good served by a weakening or a reduction in the CRA 
     requirements.

  I will explain shortly how S. 900, the bill before us, would 
substantially weaken the CRA provisions, and the position taken by the 
Home Builders, and others, is to support the amendment which is 
presently before the body.
  Mr. President, the distinguished chairman of the committee and I have 
a difference of opinion. And he will have an opportunity, I am sure, to 
articulate his point of view. The chairman--it is entirely appropriate 
for him to do so--sent out letters to various groups to get their 
comments.
  A letter from a small banker dated March 26 of this year responds to 
that--a copy of which was made available to those of us who serve on 
the committee--a letter addressed to:

       Dear Senator Gramm: I received a copy of your letter to 
     Scott Jones--

  Mr. Jones is the President of the American Banking Association--

     regarding the proposed exemption from CRA requirements for 
     small banks. While I appreciate your efforts on our behalf, I 
     have to say that this exemption ``Don't mean jack to me.''

  That is a quote. That is his language.

       We have two bank charters, and have always received an 
     outstanding rating. The burden is not onerous, especially 
     under the revised requirements now in effect for the past two 
     or three years. The information I gather to determine in-area 
     versus out-of-area loans is useful to me outside of the CRA 
     requirements. I probably spend less than 5 hours a year on 
     the issue. I don't think it is worth squandering any 
     political capital you have to eliminate the CRA.

  That is the essential text of the letter that our distinguished 
chairman received. That small banker made reference to some provisions 
in CRA that were changed in 1996.
  Mr. President, recognizing that a small bank has a much smaller staff 
to deal with compliance issues, substantial changes were made in the 
CRA requirements for small banks. Essentially, we are talking about 
institutions under $250 million.
  No. 1, with respect to CRA, those small banks have no CRA reporting 
requirements.
  Let me reemphasize that. They have no CRA reporting requirements.
  And the standards which are applied to larger banks that are involved 
in a lending, a service, and an investment criteria are not applicable 
to small banks. Indeed, small banks do not have to compile any data. 
They don't have to submit any reports.

  They have to have records available so that when the bank examiner 
comes in pursuant to this periodic request, or if a small bank requests 
some activity which triggers the application of CRA, they simply say to 
the bank examiner, ``Our records are contained in the file cabinet over 
there.'' There is no reporting requirement and no affirmative burden on 
their part other than to have the records which, as the small banker 
who wrote the letter to our distinguished chairman pointed out, a bank 
would want to have for itself independent and separate and apart from 
the CRA requirements.
  So, indeed, there has been an acknowledgment and an attempt to 
streamline the requirements that small bankers are subject to. And that 
has been acknowledged by the correspondent who wrote to our 
distinguished chairman.
  What do we have in the current bill? The current bill does a couple 
of things which, in my view, roll back the provisions of CRA.
  It says, in effect, that if a financial institution has a CRA rating 
of satisfactory or above for a period of 36 months, 3 years, it would 
be deemed in compliance for purposes of CRA, and for any one of the 
applications for either a merger, an acquisition, or grant of 
extension, there would be no opportunity for community groups to 
comment.
  That would roll back the provisions.
  Mr. GRAMM. Will the Senator yield?
  Mr. BRYAN. I am happy to yield to the Senator.
  Mr. GRAMM. I know the Senator, and I know he would not want to state 
something that is incorrect. I will be brief.
  The amendment says if a bank has a long history of compliance, they 
have been in compliance for 3 years in a row, they are currently in 
compliance, in order for the regulator to prevent them from taking the 
action that they are allowed to take by being in compliance, that a 
person who protests has to present some substantial evidence.
  ``Substantial evidence'' is defined in the law as more than a 
scintilla. It does not in any way say they are deemed to be in 
compliance, other than that they are innocent until proven guilty if 
they have a good record. Anybody can protest, anybody can file a 
complaint, but the regulator can't stop the process or delay it unless 
the challenging party presents some ``substantial evidence.''
  This isn't for everybody. It is only for the banks that have a long 
history of compliance.
  I didn't want to have any confusion. That is exactly what it says.
  I thank the Senator.
  Mr. BRYAN. I thank the chairman.
  The chairman states correctly the contents of the bill. However, let 
me say in response to the Senator's position, we have in effect a 97-
percent compliance rate. Mr. President, 97 percent of the financial 
institutions in the country receive satisfactory or better. In the 
entire history of the Community Reinvestment Act, with some 86,000 
applications, we have had fewer than 1 percent of those protested in 
any way.
  In terms of balance, to give community groups an opportunity not only 
to comment but to register concerns, it strikes me that the Senator's 
provisions impose limitations that do not currently exist in the law. I 
know the able chairman well understands, even if there were a finding 
under current law that the particular financial institution has the 
lowest possible rating--substantial noncompliance--that does not 
preclude the bank regulator from approving the application.
  CRA is not an onerous burden. Under the current law, which would 
remain in place with the Bryan amendment, a bank that seeks a merger 
approval or charter provision change or a new branch, even if that bank 
had a substantial noncompliance, the lowest rating possible in the CRA, 
under the law, nothing precludes the bank regulator from approving that 
application.
  I understand the concern of the Senator from Texas in terms of 
balancing the equities here. It strikes me that we ought not to put 
that additional burden of proof on community groups who may want to 
file some legitimate concerns they have about a proposed merger, 
acquisition, or a branch extension.
  I think the record reflects, of 86,000 applications, we have had 
fewer than 1 percent, 660, that have availed themselves of this. I 
respectfully submit, in response to the comments of my friend from 
Texas, that is not, in my judgment, unduly burdensome.

  The Senator also provides in his version of S. 900 a small bank 
exemption. The effect of that would be to eliminate about 37 percent of 
all of the banks in the country from the current provisions of CRA. 
Again, I think it is a balance. It is not the purpose of the Senator 
from Nevada nor of those who support the Bryan amendment to want to 
impose an onerous, unreasonable, unfair burden upon a financial 
institution. However, I must say, I think the track record would 
indicate that is not the case.
  Responding to a legitimate concern of small banks, as I pointed out, 
in 1996 the rules were changed so that small banks do not have a 
reporting requirement. All they must do is maintain records so that the 
bank examiner who comes in periodically to review, or whenever the 
application is filed that triggers the CRA review to look at the 
records, can make sure in effect that the bank is lending in the 
community. It strikes me that is good public policy. Indeed, banks have 
profited from that activity.

[[Page S4746]]

  Those are the two provisions that the Senator's version of S. 900 
would contain. Also, it would eliminate CRA from the new activities 
which would be permitted under the provisions of this law.
  The thrust of this legislation is to provide a regulatory framework 
that deals with the reality of the marketplace. Many of those who do 
not serve on the Banking Committee have heard Glass-Steagall mentioned 
frequently in the course of financial modernization discussions. This 
is a Depression-era piece of legislation. I like it. It neatly 
compartmentalizes banking regulation, insurance regulation, and 
security regulation. It makes a lot of sense. In the aftermath of the 
financial collapse of the 1920s and the Great Depression that followed, 
a number of abuses were pointed out. This legislation was in response 
to those abuses. It served the Nation effectively for many decades.
  As a result of court decisions and actions taken by bank regulators, 
today much of Glass-Steagall has been effectively emasculated and the 
marketplace is dictating new products that involve combinations of 
insurance, securities, and banking functions. I agree with the 
distinguished chairman that we need a piece of legislation which 
effectively deals with that. In effect, what we are doing is 
establishing that modern framework. We have established essentially a 
system of functional regulation.
  It appears from the testimony we have received from the Banking 
Committee and others who have offered comment that the new financial 
world will deal not so much in terms of mergers and acquisitions but 
will seek to avail itself of the new financial services that banks will 
be able to participate in under the provisions of S. 900, the financial 
restructuring bill we are debating. Those services involve, 
essentially, securities and insurance functions.
  This is testimony offered before the House Banking Committee by 
Treasury Secretary Rubin. I think he makes a point far more effectively 
than I.

       Banking industry experts agree that most of the 
     consolidations within the banking community have occurred and 
     that the new frontier will involve mergers among banks, 
     securities and insurance firms.

  As a side point, that is the kind of activity which the S. 900 
restructuring bill will authorize.
  According to Treasury Secretary Rubin, if we wish to preserve the 
relevance of CRA at a time when the relative importance of bank mergers 
may decline and the establishment of nonbank financial services will 
become increasingly important, the authority to engage in newly 
authorized activities should be connected to a satisfactory CRA rating.
  That is the philosophical underpinning. We will be dealing with a new 
world, a new financial structure, and that, we believe, is appropriate 
in light of the changes in market conditions.
  What are the requirements that would be imposed upon a depository 
institution under the provisions of this amendment which would seek to 
avail itself of these new activities--insurance and securities? No. 1, 
as a condition precedent, a depository institution would have to have a 
satisfactory rating. That is not, it seems to me, an unreasonable 
provision.
  What kind of action must the regulator consider? If the institution 
has a satisfactory CRA rating and all other regulatory issues 
nonrelated to CRA are in place, that application could be approved, it 
could be subjected to certain conditions, or it could be denied. An 
agreement could be entered into between the financial institution and 
the regulator if, indeed, there were some concerns about maintaining 
the CRA, and the regulator would have the ability to do several things 
if there were a noncompliance with the agreement entered into.
  On balance, what we are talking about is preserving the relevance of 
CRA in this new financial world we are talking about that will deal 
with mergers and acquisitions involving brokerage and insurance type of 
services which are not currently authorized under the regulatory 
framework.
  So I think, just by way of concluding, what we are talking about is 
not a bold or reckless expansion of CRA. We are really talking about, 
No. 1, maintaining the status quo with respect to CRA and its 
traditional functions as it deals with the mergers and the acquisition 
and charter changes and the new branch request, which is the current 
part of the law. And we are simply saying, with respect to these new 
services, these new opportunities which financial institutions will be 
allowed to participate in, which as Secretary Rubin points out is where 
the action is going to be, that is where the field of play is. To say 
that with respect to those new activities no CRA would be applicable, 
no requirement would be in place, is, in effect, to roll back the 
application of CRA to the range of financial services that banks are 
currently allowed to participate in.
  In my judgment, this is a reasonable and fair amendment. Bankers 
support it. Securities firms support it. Insurance companies support 
it. It enjoys a broad range of support.
  Let me emphasize to my colleagues that, unlike some issues which have 
tended to divide us in terms of partisan differences, the House of 
Representatives, in considering banking legislation and financial 
restructuring--the same type of legislation we are debating here 
today--in a vote of 51 to 8 approved CRA provisions which essentially 
track the Bryan amendment. In the last Congress, when we came within a 
gnat's eyelash of getting financial restructuring legislation enacted, 
it was approved by a bipartisan majority in the House and it cleared 
the Senate Banking Committee on a vote of 16
to 2.
  So this should not be, and I hope it will not be, a partisan vote.
  In the 21 years that CRA has been around, 86,000 applications have 
been received that were triggered by the provisions of the existing 
law. And in fewer than 1 percent--fewer than 1 percent--have objections 
or adverse comments been made.
  I think the amendment is fair. It strikes a middle ground. It 
acknowledges the concerns of small banks with the changes that were 
made in 1996. I hope my colleagues on both sides of the aisle will 
support this legislation.
  I see the Senator from Maryland----
  Mr. SARBANES. Will the Senator yield for a question?
  Mr. BRYAN. I am happy to yield to the Senator from Maryland.
  The PRESIDING OFFICER (Mr. Bunning). The Senator from Maryland.
  Mr. SARBANES. First of all, I commend the able Senator from Nevada 
for an extremely fine statement in support of this amendment which I 
very strongly back.
  The Senator made reference--I think it is an extremely important 
point--to the fact that the decisions with respect to complying with 
CRA are made by the regulators. As I understand it, community groups or 
anyone else can come in and make comments when some of these steps are 
to be taken for which an institution would have to meet CRA muster, and 
some of those comments, I assume, can be right on point, others may 
wander about. But whatever the case, it is not the people who comment 
who make the judgment; it is the regulators who make the judgment. So 
they can take it into account, give it some weight, give it no weight--
isn't that correct?
  Mr. BRYAN. The Senator from Maryland is absolutely correct. It is the 
regulators, whether it is the OTS, or Federal Reserve, or the OCC.

  As the Senator from Maryland knows, because of his longstanding 
membership on the committee, much can be said about bank regulators. I 
do not believe anybody would indicate or suggest the record would 
indicate that there is a hostility by the regulators to the 
institutions they regulate. In effect, the regulators have the 
opportunity to consider the CRA issues presented among a range of other 
issues--capital adequacy, a whole host of things that may be unrelated.
  As the Senator from Maryland knows--and I think this is something 
that needs to be pointed out--even if the institution which has the 
application has the lowest possible rating--substantial noncompliance, 
which, in effect, means they have done virtually nothing--the regulator 
can still approve the application. They can still approve it. So there 
is no requirement under the existing law with respect to the kinds of 
mergers, acquisitions, charter changes, and branch expansions that 
requires a financial institution to even have a satisfactory rate.
  So this is hardly an onerous provision, I say to my friend from 
Maryland.

[[Page S4747]]

  Mr. SARBANES. The Senator from Texas interrupted the Senator to make 
the point on this ``comments'' question, the safe harbor issue, that if 
we previously had a satisfactory rating or better, they could not take 
into account people's comments, unless they had substantial, verifying 
information, and then we are being told that a lot of cases were read 
that indicated that ``substantial'' means a scintilla of evidence.
  The Senator was a distinguished attorney general for the State of 
Nevada for a number of years before he became the Governor. Wouldn't he 
read the phrase ``substantial, verifiable information'' as a more 
exacting standard than ``scintilla'' of evidence?
  Mr. BRYAN. The Senator from Maryland makes a good point. I think any 
fair reading, in terms of the standards of proof, is that a 
``substantial'' standard is much higher than a scintilla.
  In effect, what this provision would do is raise the bar 
substantially, I say to my friend from Maryland, for community 
investment groups being able to, in effect, make their case for the 
consideration--the consideration of the regulator.
  I come back to the point. Even if they make their case that, indeed, 
the bank has not been responsible, has not done what it ought to do 
under CRA, the regulator may disregard that and still grant that 
approval. So it strikes me that by posing a standard before they even 
get into the ball game of ``substantial,'' you indeed cut off access to 
much of the input the community groups ought to have before a regulator 
makes a decision.
  Mr. SARBANES. It is interesting. The current system I think is seen 
by most people as working fairly well. In fact, many fine financial 
institutions do not complain about it. They are prepared to continue to 
work under the current system, and many of them have even said they see 
strong positive value in it. So it seems to me this is an effort to 
institute an important change that would really cut off open comment.
  You see, none of this is done, as I understand it, in the committee 
bill with respect to management or capital or any of the other issues 
the regulators look at when they undertake to consider one of these 
mergers or affiliations. It is being applied only to CRA. I mean CRA is 
being singled out for the application of this kind of prescreening, as 
it were, of people's ability to come in and make their comments.
  Mr. BRYAN. The Senator makes a good point. That is absolutely 
correct. As the Senator knows, as a practical matter, although CRA is 
triggered generically in two circumstances--one, part of a periodic 
review; the other, when applications are made for charter changes or 
new branches or mergers or acquisitions--as a practical matter, the 
only opportunity community groups have is in this application process 
which the Senator has described.
  That is the only opportunity. So if you foreclose them by a standard 
that is unreasonable and difficult to meet, you have, for all intents 
and purposes, foreclosed community groups from registering any 
effective concerns that they have.
  Mr. SARBANES. I think that is an extremely important point. The 
chairman has said they have court opinions. I have not seen these cases 
that interpret ``substantial'' to mean ``a scintilla of evidence.''
  Mr. GRAMM. More than a scintilla.
  Mr. SARBANES. The chairman corrects me and says ``more than a 
scintilla.'' I don't know how much more, but more than a scintilla.
  In any event, isn't it the case that no full hearings have been held 
on CRA? We come to the floor, and we get all of these assertions about 
abuses of one sort or another, sort of radical changes in a program 
that is seen as having been the lifeblood, enabling communities to 
renew themselves. To my knowledge, we have not had within the committee 
any sort of comprehensive hearings to examine those questions; is that 
the Senator's understanding?
  Mr. BRYAN. That is the understanding of the Senator from Nevada, we 
have had no hearings at all.
  I must tell the Senator from Maryland that the financial institutions 
in my State are supportive of CRA. If we want to take anecdotal 
evidence, I have to say financial institutions in my State have 
indicated, one, it is good public policy, and, two, they have 
financially benefited. But there is no record before us, based upon any 
hearings or testimony--and I must say I think that there is opportunity 
for hearings to be held. When we are dealing with some other regulatory 
relief issues in the Banking Committee, that might be an appropriate 
time to bring people in so we can build a record.
  My understanding is that we have had nothing to that effect and, 
indeed, this Senator has been on the committee now for 11 years. 
Financial institutions in my own State are very supportive of the 
provisions.
  Mr. SARBANES. Isn't it also the case, I ask the Senator, that in the 
mid-1990s, when a number of banks were complaining about the regulatory 
burden associated with CRA, Secretary Rubin undertook a major effort to 
address the question of regulatory burden and made very substantial 
changes in the requirements, which were greeted by the various banking 
associations at the time as being very forthcoming in dealing with this 
question of overregulation?
  Mr. BRYAN. The Senator from Maryland is correct. Recognizing that 
small banks are in a different situation than larger banks in terms of 
staff capability, the Secretary did precisely that. In January 1996, 
these new provisions went into effect, and they are appropriate, in my 
judgment, and they are dramatic.
  No small bank under the size of $250 million has to report CRA. There 
is no reporting requirement for CRA that is incumbent upon a small 
bank, as defined in the provisions.
  The responsibility of the small bank is simply to make available to 
the bank examiner, when he or she comes in periodically or when the 
examiner is reviewing the records for an application, the fact that the 
bank is serving the community.
  Moreover, the standards which are required for a larger bank dealing 
with a lending standard, a service standard and investment standard are 
inapplicable to small banks.

  In trying to balance the inequities here, as I know the distinguished 
Senator from Maryland is interested in doing and all of us share in a 
very bipartisan way, dealing with the very special concerns of small 
banks has been addressed, we have eliminated the reporting requirement 
and have simply said, if I might respond to my friend from Maryland, 
that when the bank examiner comes in, the only obligation on the part 
of the financial institution is to direct the bank examiner to the file 
drawer and say, ``Those are our records.'' The bank examiner examines 
those records, and that is the burden that is imposed.
  I must say, in terms of the balance, as the Senator from Maryland 
knows, coming from a State which has major metropolitan areas that 
fight urban decay, as does every major community in America, CRA is one 
of the most effective redevelopment tools for the inner cities in 
America that we have. It has poured hundreds of millions of dollars of 
new investments into the inner cities. That benefits not just the inner 
cities, but that benefits all of us.
  The tragedy that occurred in Littleton, CO, 2 weeks ago occurred in a 
suburban area, but I think it is increasingly apparent to America, 
whether you live in the inner city or live in the suburbs, the problems 
that our inner cities have in America spread like a contagion. So it is 
in the best interest of every American, wherever he or she lives, that 
those inner cities which face all the problems of urban decay, crime, 
and drugs, that what we can do to help to build those inner cities and 
strengthen the hands of mayors, Democrats, Republicans, nonpartisan, is 
important public policy, and CRA has done the job. That is why the U.S. 
Conference of Mayors, as the distinguished ranking member knows, has 
been so strongly supportive of the provisions in the Bryan amendment 
that we offer today.
  Mr. SARBANES. The Senator has been very patient. Will he indulge me 
for one further question?
  Mr. BRYAN. The Senator from Nevada is happy to do so.
  Mr. SARBANES. The Senator's amendment, I think, has an extremely 
important provision which says that if a banking institution wishes to 
go into securities or into insurance, which would be permitted in a 
comprehensive way for the first time by this legislation, that banking 
institution must

[[Page S4748]]

pass the CRA test in order to do that. It is asserted that this is a, I 
think the language was used by my colleague, the chairman, a massive 
expansion of CRA.
  I take a very different view of that. It seems to me it is only 
keeping CRA abreast of the developments that are taking place with 
respect to financial modernization, because heretofore banks could not 
reach out and do--they did some of those activities within the bank of 
a very limited nature that had been permitted either by regulation or 
by court opinion but which were highly controversial and contested, and 
one of the things this bill is intended to do is to resolve those 
questions in terms of the structure of the financial services industry. 
Both the Senator and I are supportive of trying to do that.
  It seems to me that if the bank is now going to be permitted to move 
out to do these other activities, it is not some massive expansion of 
CRA. That CRA requirement would be placed upon the bank before they 
could move to do those other activities. Otherwise, it seems to me, 
over time, you will erode CRA, as institutions begin to shift their 
assets out from under the banking activity into the securities and the 
insurance activities.

  This amendment, the proposal the Senator has, does not extend CRA to 
the securities and insurance affiliates; am I correct on that point?
  Mr. BRYAN. The Senator is correct.
  Mr. SARBANES. Which in fact has been strongly urged by a number of 
the community groups that are supportive of CRA. They in effect want to 
extend it out. If that were to be done, I would recognize that as an 
expansion, and we could fight that issue, as it were. But that is not 
what is in this amendment.
  This amendment puts the requirement only on the bank, if it seeks to 
go out and do those activities. That seems to me to be perfectly 
reasonable. In fact, it seems to me failure to do that is really a 
setback or an erosion of CRA.
  I ask the Senator his view on that question.
  Mr. BRYAN. I share the observation and the conclusion reached by the 
distinguished ranking member. That is precisely the case. As the 
Senator from Maryland knows, we are dealing with a changing dynamic in 
the financial marketplace. That really is the catalyst that brings us 
into this financial restructuring debate.
  The Senator may have been off the floor when I shared the observation 
that the Treasury Secretary made, which reflects the view that the 
Senator has expounded upon. He says, in effect:

       [I]f we wish to preserve the relevance of CRA at a time 
     when the relative importance of bank mergers may decline and 
     the establishment of non-bank financial [services] will 
     become increasingly important, the authority to engage in 
     newly authorized activities should be connected to. . .CRA.

  He is saying that much better than I. He is saying, in effect: Look, 
this marketplace is shifting, it is moving. From what we have seen 
historically, since CRA has been in effect, with the traditional 
consolidation and mergers of one bank with another, that is not likely 
to be where the dynamic is in the marketplace in the future. We have 
already seen it.
  What we are going to see are consolidations and mergers with other 
aspects of the financial services community--insurance and securities. 
And if you say that CRA has no reference or application to those 
applications, in effect you are relegating CRA to the dustbin of 
history; by and large, it is no longer as relevant as it is currently.
  So, in effect, what we are trying to do is simply keep CRA as 
relevant in the new financial world as we have in the old financial 
world. I do not view this as an extension of CRA. It simply reflects a 
change in the marketplace that we are likely to see with respect to the 
way the financial services are provided to Americans.
  Mr. SARBANES. In fact, unless we do this, you could have a bank in 
substantial noncompliance with respect to the CRA test which would then 
be able to reach out and exercise these additional powers?
  Mr. BRYAN. That is precisely the case.
  Mr. SARBANES. I thank the Senator. I thank him very much for his 
strong opening statement on this important amendment.
  Mr. BRYAN. I thank the Senator for his comments, which I think helped 
elucidate a number of comments which are going to be important in this 
debate.
  I yield the floor. I note that the Senator from Minnesota may wish to 
speak.
  Mr. GRAMS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. GRAMS. I thank the Chair.
  Mr. President, I want to take time today to first outline my support 
for the bill overall, and then also to talk a little bit about the 
current pending business, and that is the question concerning CRA.
  As a member of the Senate Banking Committee, I rise in strong support 
of S. 900, the Financial Services Modernization Act of 1999, and urge 
my colleagues to take the committee's recommendation to pass this very 
important piece of legislation.
  The Glass-Steagall Act--which prohibits commercial banks from 
affiliating with companies predominantly engaged in the securities 
busines--was passed at a different point in time and in a dramatically 
different economy. In response to the numerous commercial bank failures 
during the depression, the Glass-Steagall Act was enacted as part of 
President Roosevelt's economic recovery package. One premise leading to 
the law which has since been proven incorrect, by the way--was that 
commercial banks which were involved in securities underwriting failed 
at a higher rate than other banks due to losses in their securities 
business when Wall Street collapsed. Subsequent studies have proven 
that these very same banks actually fared better than other banks which 
had not diversified by offering broad securities products. 
Unfortunately, as with most of the flawed legislation on our books, the 
law was not sunset and has hindered America's financial institutions--
banks and securities firms alike--since its enactment in the 1930s.
  Although commercial banks in recent years have been able to conduct 
limited securities underwriting activities through Section 20 
affiliates, S. 900 appropriately repeals the Glass-Steagall 
prohibitions on common ownership of commercial banks and securities 
firms and will allow these activities to be conducted without the 
arbitrary restrictions which govern these activities currently.
  The Bank Holding Company Act also includes similar restrictions in 
Section 4(c)(8) which have prevented safe, sound, and well managed 
commercial banks from affiliating with insurance companies. Although 
insurance is unquestionably a financial product, banks have been 
prohibited from underwriting insurance, and insurance companies have 
been restricted from fully entering the business of banking. This bill 
removes the Bank Holding Company Act restrictions and it preempts State 
laws which prohibit these affiliations.
  Although there always seems to be broad agreement that the time for 
reform is now, every recent effort has failed because the devil has 
been in the details of how to regulate the new entities. S. 900 
successfully incorporates a wide array of negotiated agreements between 
the interested industries to provide functional regulation--meaning 
regulation by product and not by the entity offering it. Under the 
bill's regulatory structure, banking products will be regulated by bank 
regulators, securities activities will be regulated by the Securities 
and Exchange Commission, and insurance will continue to be regulated by 
State insurance commissioners. This system will ensure that the experts 
in each area will oversee the activities to protect the consumer and to 
ensure that all parties are playing on a level playing field.
  As part of this system of functional regulation, the bill retains the 
current system of State regulation of insurance. While I strongly 
support State regulation of insurance, I believe there is a role for 
some Federal oversight. I believe that because Congress delegates the 
authority to regulate the insurance activities of national banks, it 
also has the responsibility to ensure that State regulation does not 
result in bloated, burdensome, and unresponsive regulation. Also, I 
will be holding hearings this year in the Securities Subcommittee to 
explore where any flaws exist and will work hard to address them with 
all of the interested parties.

[[Page S4749]]

  Another major area of functional regulation contained in S. 900 is 
the regulation of securities activities. The bill provides a workable 
compromise which eliminates the bank's existing broker-dealer exemption 
and substitutes a system of targeted exemptions which protect 
traditional banking products while requiring other securities 
activities to be offered by a broker-dealer. Also, the bill requires 
the SEC and the Federal Reserve Board to work together to determine how 
future products will be regulated.
  There has been some talk around Washington that an amendment may be 
offered to delete these bank exemptions and give the SEC complete 
authority to determine how future products will be regulated.
  Let me be clear that if this amendment is offered, it is done so for 
only one reason--and that would be to kill the bill. If the bank 
exemptions are eliminated and traditional activities, such as trust 
activities, are not statutorily protected, the entire banking industry 
will unite against this bill. Again, I urge my colleagues to oppose any 
amendments which significantly alter the bill's securities provisions.
  When repealing current law affiliation restrictions, the question is 
also raised about what activities the new broader bank holding 
companies will be able to conduct. The bill contains a standard--
financial in nature--by which all activities of a bank holding company 
must comply. This provision maintains the current separation of banking 
and commercial activities, while providing appropriate flexibility, 
again, subject to Federal Reserve Board oversight. Some have criticized 
even the narrow flexibility which is provided in this bill. However, 
without this flexibility many financial companies will not be able to 
take advantage of the new structure contained in the bill and will 
continue to expand their activities outside of the bank holding company 
model and, thus, outside the oversight that the structure would ensure. 
Also, while on the topic of banking and commerce, I want to briefly 
touch on the unitary thrift holding company. There are three thrift 
related provisions either in S. 900 or which are expected to be 
considered as floor amendments. First, as reported by the Committee, 
the bill prevents the formation of any new unitary thrift holding 
companies after February 28, 1999. This provision will protect any 
applications which were ``in the pipeline'' at that time, on the date 
the bill was unveiled but will prevent any new unitary charters, thus 
providing a finite universe of unitary charters.
  Mr. President, another provision which is included in the base text 
of the bill extends the assessment differential between banks and 
thrifts on the payment of interest on bonds that were issued by the 
Financing Corporation as part of the savings and loan crisis. In 1996, 
Congress enacted legislation requiring thrifts to make a one-time 
assessment into the Saving Association Insurance Fund or better known 
as SAIF, to fully capitalize the then-undercapitalized fund. This 
assessment was included predominantly because it was scored as a 
revenue gain under budget rules, and it could be used as the offset 
that Congress needed to grant the President added spending that he was 
demanding in return for his support of the balanced budget plan.
  In order to lighten the blow to thrifts and to ensure that the FICO 
bond interests payments were made in a timely and also in a dependable 
manner, Congress for the first time spread the assessment for FICO 
interest to the commercial banks. Under that legislation, banks were to 
be assessed at a rate one-fifth of that which thrifts are assessed 
until January 1, 2000, at which time all institutions would be assessed 
at the same rate.
  The bill before us today extends for 3 years the period during which 
there will be an assessment differential. Not surprisingly, the thrift 
industry adamantly opposed this provision. It is expected that Senator 
Johnson will be offering an amendment, which I intend to support, which 
strikes the FICO assessment extension and eliminates the thrifts' 
ability to affiliate with nonfinancial firms.
  Although this amendment presents an unpopular choice for thrifts, I 
believe that it is in the best interest of the thrifts in my State 
because it will positively impact their bottom line while only slightly 
impacting their ability to affiliate.
  I should note that if the Johnson amendment were approved outside of 
the underlying modernization bill, it would be much more burdensome, 
because thrifts would then be limited to selling only to banks or to 
other thrifts. However, the bill's expansion of the ability of bank 
holding companies to affiliate with insurance companies and securities 
firms passes through to thrifts and will now permit nonunitary thrifts 
to also sell to banks, sell to securities firms, or insurance 
companies.
  Now I want to take a moment to discuss the issue which will likely be 
the most contentious during the debate on this bill. That is the 
Community Reinvestment Act or CRA. During consideration of this bill, 
the Banking Committee approved two balanced amendments designed to 
bring rationality to a law which has ventured far from what I believe 
was its original purpose. CRA was enacted in 1977 to encourage 
financial institutions to help meet the credit needs of the local 
communities in which they were chartered. Although noble sounding, CRA 
has drifted far afield from that original purpose. S. 900 includes a 
small bank exemption, approved on a bipartisan vote of the committee, 
which exempts banks with assets of under $100 million and which are 
outside of a metropolitan statistical area for the CRA.
  Although I have received a number of calls of opposition from 
constituents in urban areas in my State, which will not be affected by 
this exemption, I do think it is important to listen to what some of 
the bankers in rural Minnesota are also saying. I am sure this is true 
not only in Minnesota but in rural banks across the country.
  Although these bankers are often vilified, I believe that they play a 
very crucial role in ensuring that affordable financial services are 
widely available in the rural America.

  Just take, for example, the comments of John Schmid of the Security 
State Bank in Sebeka, MN. John writes:

       We are a small rural Minnesota bank with assets of $21 
     million--$21 million, this is not a large money center bank--
     and our town population is 680 souls. We could not exist if 
     we did not support and reinvest as much as we could in our 
     town and surrounding area.

  Gregory Morgan of First National Bank of Montgomery, MN, also tells a 
similar story. He writes:

       Our bank is 36 years old, founded on the idea of serving 
     the entire community of Montgomery and as such, we have been 
     successful. Our efforts of living and breathing community 
     reinvestment are not driven by having to be in compliance 
     with some law written in Washington but rather by listening 
     and serving our friends and neighbors throughout the 
     Montgomery area.

  Yet another constituent committed to his hometown is Romane Dold, of 
Currie State Bank. Romane writes:

       We are a small community bank located in a town of 300 
     people. Our assets are $17 million. Our bank has always 
     adhered to the regulations of CRA and, in fact, received an 
     ``Outstanding'' rating in our most recent exam. The problem 
     that we have with the regulations is that it just is not 
     necessary. Our bank has been in this town since 1931 and 
     quite honestly, if we hadn't been reinvesting in this 
     community for over 60 years we wouldn't be here. CRA has just 
     been another ``little burden'' that we have to contend with 
     to appease some regulator.

  Finally, the message Kieth Eitreim of Jasper State Bank in Jasper, 
MN, shared also proved that CRA is a bottom-line issue, costing small 
rural communities precious dollars, a lot of money. His bank is

       . . .an $18 million bank located in a town of 600 people in 
     southwestern Minnesota. CRA is a requirement that does 
     absolutely nothing to protect the people of my community 
     except to cost them money. The last exam we had lasted 3 days 
     and proved what we already knew. We service our community. If 
     we did not, we would not be in business.

  Mr. SARBANES. Will the Senator yield on that point?
  Mr. GRAMS. I will yield to the Senator.
  Mr. SARBANES. I am quite prepared to concede that there are a lot of 
small banks that do, in fact, service their community, as the Senator 
has indicated by the quotes. We have never held extended hearings on 
this issue, but the material from the Federal Deposit Insurance 
Corporation says that 57 percent of small banks and thrifts have a 
loan-to-deposit ratio below 70 percent and that 17 percent of those 
have levels less than 50 percent. Conceding that there are small banks 
who

[[Page S4750]]

really pay attention to their community, it is obvious that there are 
also small banks which are not doing that.
  In fact, the Madison Wisconsin Capital Times, in an editorial a 
couple of years ago, said:

       Many rural banks establish a very different pattern than 
     reinvesting in their communities where local lending takes a 
     lower priority than making more assured investment like 
     Federal Government securities. Thus, such banks drain local 
     resources of the very localities that support them, making it 
     much harder for local citizens to get credit.

  I do not gainsay the examples that the Senator cited. But clearly, 
there are examples on the other side. And CRA, of course, is directed 
to get not at the good or the best actors, but the ones that are not 
addressing needs. The statistics from the regulators seem to indicate, 
and this editorial that we have--and we have other comments to the same 
effect--seems to indicate that there is a problem.

  Mr. GRAMS. I understand the concern, and I know those numbers have 
been raised in the questions.
  I also know, if you look at the other side of the story, I have 
talked to some of these small bankers who say they live in a town or 
work in a town of 300 people. And if you look out in the rural parts of 
the country today, most of the population in these small towns is 
growing in age. So his concern was, although we make all these loans 
available, there are not many home mortgages being sought. There are 
not many automobiles being bought. There are not many washers and 
dryers for which loans are being asked. There isn't the demand for the 
loan.
  You have to expect that these bankers are going to have to put the 
money to some use, if there is nobody out there asking for the loan. 
The question I have for the Senator is, how many of those loans have 
been asked for and then denied?
  The story I have--and I don't have this information in front of me--
is that he said it is awfully hard to loan money to my community when 
there is no request for loans. What do I do, let the money sit in the 
safe overnight? No, he has to invest it, maybe in some of these other 
government or other financial institutions or financial mechanisms.
  I think there are two sides of that story. It is not that these banks 
are turning down loans. In many cases, in these small communities in 
rural parts of the country, there is no demand for these loans. The 
bank is a good, safe place to keep it, but not always to be able to use 
the bank's facilities.
  Mr. SARBANES. That is a reasonable point. It ought to be examined in 
a set of careful hearings, because, in fact, the particular institution 
may confront that problem, although it may be overlooking loan 
possibilities, which has frequently been the case and is certainly the 
case in many instances in which areas people were neglected in terms of 
the availability of credit. We have never done those kinds of hearings. 
We have never really looked at this problem in some sort of objective, 
comprehensive way.
  And we hear all these kinds of ad hoc stories, as it were. But, you 
know, there are counter-ad hoc stories. I am frank to say I don't think 
we ought to be making the kind of significant changes in the CRA that 
are in the committee bill without having gone through the sort of 
process I am talking about.
  I thank the Senator for yielding.
  Mr. GRAMS. Mr. President, by putting a face on the businesspeople 
working day in and day out trying to help America's rural communities 
strive and survive, I hope we can eliminate the vilification which is 
cast upon them. We are talking about banks under $100 million. As the 
gentleman from Sebeka said: 680 people is not a major financial center, 
and we have done the best we can to meet the requirements. We would not 
be in existence and would not be able to survive in our community if we 
didn't reinvest and if we had turned down these loans.
  There is a commonsense way to look at it. According to the stories we 
have heard and the bankers we have talked to, a lot of times these are 
banks with three or four employees. Many times they are asked to have a 
full-time employee just to work on government regulations, which takes 
a lot of money that could be used for loans, et cetera, out of the 
bank, and, as one banker said, it does absolutely nothing for his 
community. That is where we have to look at some of this. This is 
common sense.
  By using their words to show that they are meeting their communities' 
needs, not because Washington tells them to do so or says they have to, 
but, again, because it is in their best interest and it is in the best 
interest of their community and their town, it proves the need for the 
small bank exemption.
  The Committee also included a provision which has mistakenly been 
deemed a ``safe harbor.'' Unlike a safe harbor, which gives an 
institution a free ride, the rebuttable presumption included in S. 900 
simply gives meaning to the work of the regulators during CRA exams. 
CRA's stated purpose is to require each appropriate federal banking 
regulator to use its authority when examining financial institutions to 
encourage such institutions to help meet the credit needs of the local 
communities. By providing a rebuttable presumption, the bill gives the 
regulator the benefit of the doubt that they are meeting the 
requirements of CRA by encouraging action by the institution during the 
exam. However, the bill provides a safety that if someone feels that 
the regulator has not properly assessed the institution, provided the 
individual can prove the regulators failure, it can still protest an 
action. Thus, this amendment simply protects federal banking regulators 
against harassment by individuals who simply want to criticize their 
work.
  Finally, Mr. President, I regret to have to include a negative 
comment in this statement about an otherwise outstanding bill. However, 
I believe that the operating subsidiary provisions included in S. 900 
are inadequate and should be amended. As the Senator who worked on a 
bipartisan basis last year with Senator Reed of Rhode Island to draft a 
compromise operating subsidiary amendment, I have vested a great deal 
of time studying the pluses and minuses of this option. I have come to 
the conclusion that it is appropriate for national banks to conduct 
full financial activities, with the exception of insurance underwriting 
and real estate development. I enthusiastically support the op sub 
amendment of Senator Shelby which will be offered to this bill. It is 
identical to the amendment I authored last year and again this year in 
Committee. The amendment provides adequate safeguards to ensure that 
the sub poses no greater risk to the bank than a holding company 
affiliate. Another benefit of this amendment is to provide competition 
among regulators. A recent conversation I had with a banking lawyer 
convinced me that this amendment is prudent public policy. The attorney 
shared with me that in his dealings with the Federal Reserve Board and 
the Office of the Comptroller of the Currency, one of the agencies have 
been cooperative in helping his client work through issues and find 
creative ways to deal with their problems while the other has done 
nothing to help. If we were to eliminate the competition, regulators 
would have no incentive to be responsive to the institutions they 
regulate and American banks would have no where to turn if they are 
unhappy with their treatment.
  Mr. President, in closing I again urge my colleagues to support this 
important legislation so that we can move the bill through conference 
and to the President for his signature.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Voinovich). The Senator from Illinois.
  Mr. DURBIN. I thank the Chair.
  Mr. President, the bill which is before the Senate, S. 900, is known 
in the shorthand form as the Financial Modernization Act. It is a 150-
page bill which has been the subject of debate and deliberation on 
Capitol Hill for almost 10 years--a 10-year effort by the House and the 
Senate to try to modernize the laws and regulations in Washington 
relative to banks and financial services. Of course, anyone who has 
paid any attention understands that while we have been debating, there 
has been a revolution taking place.
  I am reminded that just a few years ago we passed major reform in the 
area of telecommunications--years of hearings, extraordinary testimony 
from expert witnesses, the best staff work, the best lawyers, the best 
efforts by the

[[Page S4751]]

Members of the House and Senate--and we delivered the 
Telecommunications Act modernizing regulation when it came to this 
industry.
  Now, a few years later, we take a look at that work product. I was 
amused to find someone who came to my office and reported to me that 
they had found in that 1,000-page bill only two references to the 
Internet. Think of that. We modernized our telecommunications law and 
almost overlooked the most amazing phenomena that is taking place in 
telecommunications.
  I hope we don't make the same mistake here. I hope in our effort to 
modernize financial institutions that we are thoughtful, that we 
modernize them in a way that is good for everyone--consumers and 
families in America as well as the owners of those institutions.
  Twenty-two years ago we took a look at banking in America. We decided 
that we had some interest as a nation in making certain that the banks 
served the communities where they were located. That is not a radical 
notion, is it--to say if you have a bank in a town that is holding the 
savings and checking accounts of individuals and families and 
businesses, that when that bank does business it should do business in 
that same community where the people live, where the businesses are 
located, where the farmers have their farms, and where the ranchers 
have their ranches.
  We found that some banks were, in effect, in a parasitic capacity. 
They were drawing out the resources of communities and regions and not 
putting the money back in. In its worse situation, you would find in 
some of the urban areas redlining, where banks would take the money out 
of a community and refuse to write mortgages for the people who wanted 
to build homes, or to modernize their homes. They wouldn't put money 
into the small businesses in the same communities where they were 
drawing the money.
  In 1977, we decided there was a need for legislation called the 
Community Reinvestment Act. It speaks for itself--that the banks 
reinvest in the communities where they are located. It is not a radical 
concept. In fact, I think it is a rational concept. It is one that, 
frankly, has served us very well for 22 years. Now, as part of Senate 
bill 900, there is an effort to radically change community 
reinvestment.
  I don't know what the experience of other Senators might be. But I 
can tell you what my experience has been in my hometown of Springfield, 
IL. I have lived in that town for about 30 years, practiced law there, 
and raised a family. There was a time when I not only knew the name of 
every bank downtown, but I knew the bank presidents. I might not have 
socialized with them, but I sure knew where they were. I knew where 
they lived, and I knew who their families were. I had a feeling that 
those banks were going to be around for a long time. You could just 
tick them off: The First National Bank, the Illinois National Bank, The 
Springfield Marine Bank.

  But over a span of 10 or 15 years a dramatic change has taken place. 
I think a lot of Americans find themselves in the same situation that I 
am in. I struggle to remember the latest names of these latest banks. 
Which one is the First National Bank? Which one is the Planters and 
Growers Bank? I can't keep up with it. It seems every 6 or 12 months 
there is a change, and not just a change in name, there is a change in 
ownership. The bank that used to be run downtown in Springfield may be 
run out of someplace in Ohio, New York, or Europe.
  If Members ask whether or not we need this law of 1977, this 
Community Reinvestment Act, to make certain that as these changes are 
taking place in the banking industry--whoever owns them, wherever their 
home might be--that they still serve the communities where they draw 
their money from, I think is still a very sound concept.
  Yet this bill, S. 900, suggests it is a concept that should be 
largely abandoned, because in three specific areas there are changes in 
the law.
  First, it eliminates the requirement that all banks within a holding 
company have and maintain satisfactory Community Reinvestment Act 
ratings as a condition for exercising new financial powers. To put it 
in common English, if you want to take your bank and holding company 
and expand it in some direction, we are going to take a look to see if 
you have been good citizens in the communities where you are located.
  I think that is a reasonable suggestion. That is the law. But this 
bill changes it. This bill removes that requirement and says you can't 
take a look at their records and see if they have been helping local 
farmers and businesspeople, families, with mortgages.
  Does that make sense, at a time when bank ownership is becoming 
further and further removed from the people who bank, that we are going 
to somehow absolve them of responsibility to the neighborhoods, the 
communities, the towns, the counties around them? I don't think that 
makes any sense at all.
  The second thing, the so-called safe harbor provision. If an 
institution had a good conduct ribbon for 36 months under the Community 
Reinvestment Act, this bill basically says leave those banks alone, 
don't ask any more questions.
  I don't think that makes sense either.
  The Community Reinvestment Act examinations take place about once 
every 18 to 24 months. In fact, for the smaller institutions, they have 
been streamlined more dramatically. I don't think we ought to say that 
after some 3 years of good conduct we are no longer going to ask basic 
questions as to whether or not you are making an investment in your 
community.
  The final provision, which the previous speaker, the Senator from 
Minnesota, addressed from his point of view, was whether or not a 
bank--rural bank in this instance--with less than $100 million in 
assets should be required to meet the requirements of the Community 
Reinvestment Act. An argument can be made, and has been made by some, 
that these are smaller institutions and, as such, should not be 
burdened by regulators and paperwork, let them do their business, they 
are good neighbors, and things will work out.
  Yet in the report filed with this bill, we find the statistics do not 
bear out that point of view. Let me read:

       Over 76 percent of rural U.S. banks and thrifts have assets 
     less than $100 million.

  We are talking about more than three-fourths of the bank and thrift 
institutions in the smalltown areas.

       It is asserted these small rural banks by their nature 
     serve the credit needs of their local neighbors. However, 
     small banks have historically received the lowest Community 
     Reinvestment Act ratings. Institutions with less than $100 
     million in assets accounted for 92 percent of institutions 
     receiving noncompliance ratings under the CRA.

  What many do is take the money from the community and then do not 
lend it back into the communities. They turn around and buy government 
securities instead of lending it to the businesses and families that 
need those assets to make investments in the communities.
  I don't think the small bank exemption is the way to go. I think the 
provision in the CRA change relating to that overlooks the fact that 
just a few years ago we put in new regulations to streamline CRA 
investigations in smaller banks, banks of less than $250 million in 
assets. We exempted many small banks from reporting requirements and 
eliminated a lot of documentation and paperwork. We need to continue to 
focus on banks of all sizes to make sure they are doing the right 
thing.
  After 22 years of the Community Reinvestment Act, what do we have to 
show for it? Has it worked? I think, quite honestly, it has worked very 
well. My State of Illinois is very diverse, with a large city like 
Chicago and many small towns. In the Chicago area, thanks to a strong 
economy and CRA, the number of home loans to low-income borrowers 
almost doubled between 1990 and 1996, enabling 30,000 families to 
become homeowners. Is it of value to those families that those banks 
put the money back into the community? I think it obviously is.
  I want to take a look at some of the other areas of my State. Voice 
of the People, in the Chicago Uptown area, has provided quality, 
affordable housing for low-income families. The racially and 
economically diverse community of Uptown Chicago, on the far north side 
of town, partnered with the

[[Page S4752]]

Uptown National Bank of Chicago and completed the International Homes 
project, a development of 28 town homes constructed on five vacant lots 
within a four-square-block area in Uptown. This made homeownership 
possible for 28 lower-income minority and immigrant families. Half of 
these first-time homeowners are families earning under 50 percent of 
median income.

  At the same time, down in my old hometown of East St. Louis is 
Winstanley/Industry Park Neighborhood Organization, a new nonprofit 
corporation representing 8,000 people. For those not familiar with it, 
my old hometown has had a tough time for the last 20 or 25 years. They 
struggled to keep the community together and to survive. The 
Winstanley/Industry Park Neighborhood Organization has been a plus. It 
is a mixed-use area comprised of residential, commercial, and abandoned 
industrial sites. What they have tried to do is to work with Magna Bank 
of Illinois to change the area. They have created a farmers market, 
community owned and operated, which was developed by this organization. 
What makes the market particularly unique is 14 of the 16 vendors are 
local residents.
  If your bank were located somewhere in Europe and you came into the 
branch in your hometown and said, ``We have some people here who are 
struggling to make a living; they are low income and they want a chance 
to start a farmers market,'' is it more likely that you are going to 
get a sympathetic response from someone who knows the community, has a 
responsibility to the community, rather than someone who is just 
hammering away at the bottom line? I think the answer is obvious.
  A residential loan counseling program of the same organization has 
launched a response to the victimization of over 1,400 lower-income 
families who were being misled by unscrupulous realtors into home 
purchase agreements known as bond-for-deed. The realtors who engaged in 
this often held the title to the properties throughout the length of 
the contract without recording the transaction and without hazard 
insurance for the purchaser. Most of these agreements contain no terms 
and have open-end type mortgage balances. This organization counseling 
program helped these same residents, lower-income families, refinance 
with conventional mortgages on their own homes.
  Finally, West Humboldt Park is a low-income, predominantly minority 
neighborhood on Chicago's west side. It is plagued by poverty, 
illiteracy, welfare dependence, street and domestic violence, alcohol 
and substance abuse, and a lack of job opportunity. In 1989, Orr High 
School and the 12 neighborhood elementary schools formed a partnership 
with Bank of America--then Continental Bank--establishing a community 
network of schools in West Humboldt. The partnership has grown to 
include over 25 programs providing education and social services. They 
include Boys and Girls Clubs, the creation of the BUILD project, which 
is a group of parents who are really trying to keep the streets safe 
for their kids.
  It amazes me that in our efforts to modernize the laws involving 
banks and thrift institutions, one of the first casualties proposed in 
the Republican majority bill before the Senate is to eliminate the 
Community Reinvestment Act. A party which dedicates itself to the 
premise that local control is best is virtually ready to give it away. 
To say that when it comes to local control of banking assets so 
critical for building and rebuilding a community, it will no longer 
hold them responsible, I think that is shortsighted.
  For 22 years, the Community Reinvestment Act has worked. I hope we 
defeat this provision if we can muster a direct vote on it. If not, 
defeat the bill if it continues to push the things which are not in the 
best interests of consumers and families across America.

  I yield the floor.
  The PRESIDING OFFICER (Mr. Roberts). The distinguished Senator from 
Texas is recognized.
  Mr. GRAMM. Mr. President, I want to respond to the amendment that has 
been offered. I apologize if anybody has the idea, listening to this 
debate, that there is not another side to the argument. We had several 
people who had time constraints and wanted to speak. Senator Sarbanes 
and I are being held hostage here, in managing the bill. So as a 
courtesy to others, we have let them speak first. But I now want to 
give a comprehensive response to this issue. Let me begin.
  Mr. SARBANES. Will the Senator yield for a minute?
  Mr. GRAMM. I am happy to yield.
  Mr. SARBANES. How long would the Senator expect to go?
  Mr. GRAMM. I think it is going to take me probably a minimum of about 
30 minutes to go through the entire group of issues.
  Mr. SARBANES. Could we then put Senator Bayh and Senator Edwards in 
line to speak after you finish?
  Mr. GRAMM. I do not know that any Republican has spoken on this 
issue. Did Senator Enzi speak?
  To this point, if I might say, the distinguished Senator from Nevada 
spoke at length. You engaged in a lengthy colloquy with him. We then 
had a nonrelevant speaker.
  Mr. SARBANES. Senator Grams spoke for you.
  Mr. GRAMM. By nonrelevant I do not mean the Senator was irrelevant on 
the issue. It had no relevance to this issue. It was about another 
issue completely. Senator Grams really talked about the bill itself.
  So it is my turn to speak. I intend to speak and answer the points 
that have been raised. Then I would like to continue going side to 
side. We only have one other person here. I do not know if he is going 
to speak at any great length.
  Mr. SARBANES. Then I guess our colleagues know in about 30 minutes 
they could hope to get recognition to speak.
  I thank the Senator.
  Mr. GRAMM. Mr. President, I think it is important for people to step 
back and look at what is being proposed. I have to break the discussion 
down into two parts. No. 1, what it is that Senator Sarbanes would do 
with his amendment, and, second, what it is he would undo with his 
amendment.
  Mr. SARBANES. Senator Bryan.
  Mr. GRAMM. So let me explain what he would do with his amendment, 
then explain what he would undo, and then explain why both what he 
would do and what he would undo is bad.
  First of all, let me begin with current law in CRA, then what I am 
going to do is go through what the Senator's amendment would do. I am 
then going to talk about the history of CRA and within that history I 
am going to try to explain the problems that we are trying to fix in 
the underlying bill. Then I want to talk at some length about those 
problems and about the underlying bill. I think I will have covered the 
whole waterfront.
  Let me remind our colleagues the current Community Reinvestment Act 
basically has two provisions. The first provision is that bank 
regulators have to consider how a bank has been meeting local credit 
needs only when a bank applies to open a new bank, branch or to merge. 
Second, bank regulators may deny application based on a CRA record. So 
basically, in terms of the existing CRA law, the way it was written, 
there is no violation for simply failing to comply. The enforcement 
mechanism is that if you apply to open a new branch or open a bank or 
to merge, then the bank regulator--whichever one you are subject to, 
based on your charter--looks to see if you are meeting the needs of 
your community. And community reinvestment, I would like to remind our 
colleagues, is focused on lending. The primary focus of community 
reinvestment is lending in the communities where you take deposits.
  A bank regulator can deny an application based on your CRA record. 
There is no penalty involved other than the denial of the application. 
That is current law in CRA. What the substitute that has been offered 
by Senator Bryan would do--I have ``The Sarbanes Substitute,'' because 
Senator Sarbanes offered this in committee and we assumed he would 
offer it today, but it is the same provision--is this:

  The Bryan substitute would add eight more requirements to CRA than 
the are required under current law. In fact, this would be a good 
opportunity to ask unanimous consent to have printed in the Record a 
letter from Chairman Greenspan that outlines what the CRA provisions of 
this substitute are, what the CRA provisions of the bill are, and 
exactly what they would do. Because, as I am sure all of

[[Page S4753]]

our colleagues are aware, what tends to happen in these debates is 
people set up straw men. In this case the straw man is that somehow the 
underlying bill undoes CRA --that is straw man 1. Straw man 2 is that 
the substitute virtually leaves CRA as it is.
  The reality, as I will paint in some detail, is that the underlying 
bill tries to deal with two clear abuses in CRA: One, an integrity 
provision; and, two, a relevancy provision. It in no way does violence 
to the basic idea of CRA. And the second reality as compared to the 
straw man is that this substitute is the most massive expansion of CRA 
in its history and would literally impose a penalty structure that goes 
far beyond anything ever contemplated in CRA when it was adopted in 
1977, or that has ever been discussed since. In fact, our colleague 
keeps wondering where the hearings are concerning the two modest 
changes that we have made in the underlying bill, without ever raising 
the question: Where are the hearings on which these massive punitive 
penalties would be based? Where is the abuse that they seek to address? 
The point is, the rhetoric of Senator Sarbanes applies more to his 
substitute than it does the underlying bill.
  So let me ask unanimous consent that the letter from Alan Greenspan 
with regard to the CRA provisions of the substitute and the CRA 
provisions of the underlying bill be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                         Board of Governors of the


                                       Federal Reserve System,

                                    Washington, DC, April 7, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         U.S. Senate, Washington, DC.
       Dear Mr. Chairman: You have asked for an analysis of how 
     the financial modernization bills recently passed by the 
     House Committee on Banking and Financial Services (H.R. 10) 
     and the Senate Committee on Banking, Housing, and Urban 
     Affairs affect the Community Reinvestment Act of 1977 (CRA). 
     Enclosed is a memorandum from the Board's General Counsel 
     discussing the impact of these bills on the CRA.
       That memo indicates that H.R. 10 would affect the CRA in 
     three principal ways. It would require at least a 
     ``satisfactory'' CRA performance rating as a precondition for 
     engaging in the new financial activities, provide for the 
     enforcement of this requirement, including through penalties 
     and divestiture, and apply the CRA to uninsured wholesale 
     financial institutions. Currently, the CRA does not require 
     that an institution's CRA record be considered in connection 
     with proposals to engage in nonbanking activities, authorize 
     enforcement of the Act outside the applications process, or 
     apply to uninsured depository institutions.
       The bill recently passed by the Senate Committee on 
     Banking, Housing, and Urban Affairs does not contain similar 
     provisions. The Senate bill, however, does contain two CRA-
     related provisions not contained in H.R. 10: an exemption 
     from the CRA for small insured depository institutions that 
     are located outside metropolitan areas and a rebuttable 
     presumption regarding an institution's compliance with the 
     CRA.
       I hope this information is helpful.
           Sincerely,
                                                   Alan Greenspan,
                                                         Chairman.
       Enclosure.

Memorandum Regarding the Effect of Recent Legislative Proposals on the 
                       Community Reinvestment Act

       Chairman Phil Gramm has asked for an analysis of how H.R. 
     10, as passed by the House Committee on Banking and Financial 
     Services last month, and the bill passed by the Senate 
     Committee on Banking, Housing, and Urban Affairs on March 4, 
     1999, would affect the Community Reinvestment Act of 1977 
     (``CRA'').
       H.R. 10 would primarily impact the CRA in the following 
     three ways.
       1. The CRA currently applies only to federally insured 
     depository institutions. H.R. 10 would subject the newly 
     established uninsured wholesale financial institutions to the 
     CRA.
       2. The CRA currently requires that the Federal banking 
     agencies consider the CRA performance of an insured 
     depository institution in connection with proposals by the 
     institution, or the institution's holding company, to acquire 
     or establish a deposit-taking facility (e.g., open a branch 
     or acquire or merge with another insured depository 
     institution). It does not require that an institution's CRA 
     record of performance be considered in connection with 
     proposals to engage in, or acquire a company engaged in, 
     nonbanking activities. H.R. 10 would allow a financial 
     holding company to engage in new financial activities only if 
     all of the company's subsidiary depository institutions have 
     and maintain at least a ``satisfactory'' CRA rating. Thus, 
     H.R. 10 would link CRA performance to the ability of a 
     banking organization to engage in, or acquire a company 
     engaged in, a nonbanking activity. More than 95 percent of 
     the depository institutions examined for CRA compliance in 
     1997 received a ``satisfactory'' or better CRA rating.
       3. Current law does not authorize a Federal banking agency 
     to take any type of enforcement action against an insured 
     depository institution that has a less than satisfactory CRA 
     rating, other than denying proposals by the institution (or 
     the institution's holding company) to establish or acquire a 
     deposit-taking facility. Thus, current law does not permit 
     the Federal banking agencies to take actions, including 
     enforcement actions or divestiture proceedings, outside the 
     applications process if an institution fails to maintain a 
     ``satisfactory'' CRA rating on an ongoing basis. See 
     Memorandum from Walter Dellinger, Assistant Attorney General, 
     U.S. Department of Justice, to Eugene A. Ludwig, Comptroller 
     of the Currency, 18 U.S. Op. Office of Legal Counsel No. 
     39 (Dec. 15, 1994).
       H.R. 10 would require that the subsidiary depository 
     institutions of a financial holding company maintain at least 
     a ``satisfactory'' CRA rating for the holding company to 
     continue to engage in the new financial activities. If a 
     subsidiary depository institution fails to maintain such a 
     rating, the financial holding company and subsidiary 
     depository institution must execute an agreement with the 
     appropriate Federal banking agencies to correct the 
     deficiency and such agencies could impose limitations on the 
     activities of the financial holding company or subsidiary 
     depository institution until the subsidiary's rating is 
     restored. The failure by a financial holding company or 
     subsidiary depository institution to comply with these 
     requirements would constitute a violation of the Bank Holding 
     Company Act. In such circumstances, the appropriate Federal 
     banking agency could take enforcement action (e.g., issue a 
     cease and desist order, assess civil monetary penalties or, 
     in the case of the Board, seek criminal sanctions) against 
     the financial holding company, the subsidiary depository 
     institution, or an individual participating in the violation 
     (such as an officer or director of the holding company or 
     depository institution). Finally, if the subsidiary 
     depository institution's CRA rating is not restored to at 
     least the ``satisfactory'' level by its next examination (or 
     such longer period as the Board determines to be 
     appropriate), H.R. 10 would authorize the Board to require 
     that the financial holding company divest the subsidiary 
     depository institution or, alternatively, cease engaging in 
     new financial activities.
       Section 121 of H.R. 10 also would permit a national bank to 
     control an operating subsidiary engaged in financial 
     activities permissible for a financial holding company, but 
     only if the national bank and its depository institution 
     affiliates have and maintain at least a ``satisfactory'' CRA 
     rating.\1\ National banks and affiliated depository 
     institutions that did not maintain such a rating could be 
     subject to the same type of corrective measures as discussed 
     above for financial holding companies.
---------------------------------------------------------------------------
     \1\ Part 5 of the OCC's regulations, which purports to allow 
     subsidiaries of national banks to engage in activities that 
     national banks are not permitted to conduct directly, 
     currently requires that a national bank have and maintain at 
     least a ``satisfactory'' CRA rating to control an operating 
     subsidiary engaged in principal activities that the bank 
     cannot conduct directly. See 12 C.F.R. 
     Sec. Sec. 5.34(f)(3)(iii), 5.3(g)).
---------------------------------------------------------------------------
       The bill passed by the Senate Banking Committee does not 
     contain provisions similar to those discussed above. The 
     Senate bill, however, would exempt from the CRA any insured 
     depository institution that has $100 million or less in total 
     assets and that is located outside a Metropolitan Statistical 
     Area. Data indicate that approximately 3,871 insured banks 
     and thrifts, representing approximately 37 percent of all 
     insured banks and thrifts and 2.7 percent of the assets of 
     all such institutions, would meet these criteria, as of 
     December 31, 1998. In addition, under the Senate bill, an 
     insured depository institution would be presumed to be in 
     compliance with the CRA until its next examination if the 
     institution received at least a ``satisfactory'' rating at 
     its most recent CRA performance examination and at each CRA 
     examination in the preceding three years. This presumption 
     would not attach if the appropriate Federal banking agency 
     receives substantial verifiable information, arising since 
     the date of the institution's most recent CRA examination, 
     that demonstrates the institution is not in compliance with 
     the CRA.

  Mr. SARBANES. Will the Senator yield? I understood the Greenspan 
letter compared the provisions in the House bill with the committee 
bill, not the provisions of the substitute.
  Mr. GRAMM. They are virtually identical, but I stand corrected. In 
fact, let me yield to you to tell us the difference.
  Mr. SARBANES. They are not identical. There are some significant 
differences between the two, and I will develop them after the Senator 
finishes his presentation.
  But as I understand it, your request to the Fed and their response 
was to compare the House bill with the committee bill. Am I correct in 
that?
  Mr. GRAMM. I think that is correct. I stand corrected. I would like 
it printed in the Record, but I would be happy

[[Page S4754]]

to hear the distinguished Democratic ranking member of the committee 
explain to us the differences. I assert that there are no significant 
differences, but I would like to hear them.
  Let me go over basically what we have in terms of additions to CRA in 
the pending amendment, if the Senate decided to adopt it.
  No. 1, by making noncompliance with CRA or falling out of compliance 
with CRA a violation of banking law, officers and directors of banks 
for the first time could be fined up to $1 million a day for CRA 
noncompliance. I will come back to this in a moment.
  Under this substitute, banks can be fined up to $1 million a day for 
falling out of compliance.
  Under this substitute, cease and desist authority for CRA 
noncompliance are brought into the system.
  Bank regulators may place any restrictions on any banking activities 
for CRA noncompliance.
  Bank regulators may place any restrictions on any insurance 
activities for CRA noncompliance.
  Bank regulators may place any restrictions on any securities 
activities for CRA noncompliance.
  Bank regulators may place any restrictions on any other activities of 
the holding company for CRA noncompliance.
  Any violation by any one bank in the holding company can trigger 
penalties against any and all activities of the entire banking company.
  Insurance sales of bank subsidiaries can be restricted for CRA 
noncompliance.
  Finally, the provision adds new expansions of CRA far beyond the 
existing law. Under current law, banks sell insurance--small banks in 
cities of less than 5,000, other banks depending on their State 
regulation--and they do it without CRA approval.
  The substitute would expand the decision of banks or ability of banks 
to sell insurance to require CRA approval. Some 20 banks now provide 
some security services. They do it without being required to get CRA 
approval. The pending substitute would expand CRA approval to that 
activity.
  The first point I want to make is, contrary to the rhetoric being 
used, we are talking about the largest, most significant expansion of 
CRA in history--none of which is based on any assertion of any abuse--
and we are talking about imposing confiscatory penalties that are 
devastating to our banking industry.
  I want to read pieces of two letters on this issue of the potential 
for a million-dollar-a-day fine. One letter is from the Independent 
Community Bankers of America. This is a letter from an organization of 
very, very small, generally community banks, often in rural areas that 
would be affected by this. Let me read the paragraph:

       We also have grave concerns about expanding CRA enforcement 
     authority to include the levying of heavy fines and penalties 
     against banks or their officers and directors. An ongoing 
     challenge for many community banks in small communities is 
     finding willing and qualified bank directors. Legislation 
     following the savings and loan crisis of the 1980s and 1990s 
     greatly increased the amount of civil money penalties to 
     which bank officers and directors may be subject. Any 
     increase in the potential for fines and penalties could 
     provide further disincentive for service on a bank board.

  Here is the point. If a small bank is going to hire somebody to be 
president or be an officer or recruit somebody to be on a bank board, 
they are going to have to buy liability insurance to protect that 
person from this potential fine, which would literally put thousands of 
rural banks in America out of compliance.
  If there is a problem here that needs to be fixed, if there is an 
abuse that should be dealt with, then one might say that perhaps this 
is justified. But here is the record: There have been some 16,380 
examinations of small, rural banks in America since 1990, and of those 
16,380 examinations, three banks and S&Ls have been found to be out of 
compliance to a substantial degree.
  Our ranking member of the committee would bring in the potential for 
a million-dollar-a-day fine based on the fact that in 16,380 audits on 
CRA since 1990--9 years--there have been three banks substantially out 
of compliance. What is the justification for these massive punitive 
fines? There is no justification.
  The justification basically is that this is seen as an opportunity to 
massively expand CRA. That is what the justification is.
  The second letter, on exactly the same subject, is from the American 
Bankers Association. Here is what they say:

       We would oppose amendments we understand may be offered 
     that would contain provisions not only eliminating the two 
     CRA provisions currently in the bill, but also adding 
     additional new CRA requirements. One strong concern the ABA 
     has is that the potential for such penalties could 
     discourage directors from serving on community bank boards 
     and increase the cost of officer and director liability 
     insurance coverage for banks. There has been no 
     justification given for inserting these new penalties into 
     CRA, particularly given the outstanding record the banking 
     industry has in serving communities across the country.

  I remind my colleagues, this substitute seeks to impose these massive 
punitive penalties against small banks in America when in 16,380 exams, 
which cost those banks cumulatively $1,310,400,000 to keep the records 
and comply with the exam--$1,310,400,000; I have the decimal points 
right this time--after all that money, after all those exams, three 
small, rural banks or S&Ls were found substantially out of compliance.
  If this is not regulatory overkill that drives working men and women 
in America crazy and that threatens little banks all over the State of 
Kansas, the State of the Presiding Officer, and all over Indiana and 
all over Texas and all over America, that threatens their very 
existence, I don't know what it is.
  First of all, this is totally unjustified, makes absolutely no sense 
and, to quote my colleague from Maryland, never has a hearing been held 
on this subject. Never has any justification been given whatsoever for 
imposing a million-dollar fine on bank board members and bank officers 
in the name of CRA. It is the most gross overkill and regulatory burden 
that this Senator has seen in the entire time that I have been debating 
banking legislation.
  I remind my colleagues that I spent 12 years of my life teaching 
money and banking in college. I have spent too long of my life, 21 
years, in the House and Senate, and I have been serving on the Banking 
Committee every day I have been in the Senate, and I have had the 
privilege this year of serving as chairman. I have never seen such a 
massive regulatory overkill as these proposed provisions, and I am 
confident that they will be rejected.
  (Mr. SANTORUM assumed the Chair.)
  Mr. SARBANES. Will the chairman yield on this point?
  Mr. GRAMM. I will be happy to yield.
  Mr. SARBANES. I am looking at a table from the Federal Deposit 
Insurance Corporation, from 1990 through 1998, that those 320 
institutions were given a ``needs to improve'' rating which, of course, 
is below compliance, and 18 institutions were given ``substantial 
noncompliance.''
  The Senator is using this ``three'' figure, and I don't know where 
that comes from.
  Mr. GRAMM. I can tell you where it comes from. It comes from looking 
at the banks and S&Ls that meet two tests: One, they have less than 
$100 million of assets; and, two, they operate solely outside standard 
metropolitan areas.
  And my figure is, that those banks have been subjected, since 1990, 
to 16,380 examinations. And in those 16,380 examinations, the average 
of which has cost that little bank about $80,000, according to some 488 
banks which have written us on this subject, that these 16,380 
examinations--this is from the Federal Financial Institutions 
Examination Council--that in these 16,380 examinations, costing, on 
average, $80,000 apiece--so this is $1.3 billion that has been taken 
out of these little bitty communities and out of their banks, where 
people are paid higher interest rates and have gotten less credit--the 
result of that has been that three of these banks, over a 9-year 
period, have been found to be in substantial noncompliance.
  You do not have to have a Ph.D. in mathematics to figure out, if you 
have done 16,380 exams on these small, rural banks, and only three of 
them have been in substantial noncompliance, you

[[Page S4755]]

are spending a tremendous amount of their money to find a very, very 
small number of bad actors--in fact, three one-hundredths of 1 percent.
  What is even more astounding is that all of these little banks 
combined make up only 2.8 percent of the capital of the banking system. 
They are getting 44 percent of the examinations. They make up only 2.7 
percent of the assets of the banking system, and out of 16,380 exams, 
only three of them were out of compliance.
  Mr. SARBANES. If the Senator----
  Mr. GRAMM. What is wrong here? What does not make sense here?
  Mr. SARBANES. If the Senator will yield, he simply stated the point 
all over again, but it hasn't squared the factual discrepancy.
  According to our data from bank regulatory agencies, more than 70 
small, rural banks and thrifts are currently deemed not in compliance; 
that is, below a satisfactory rating with CRA this year alone.
  Since 1990, 338 small, rural banks and thrifts received CRA ratings 
below satisfactory.
  Sure, the Senator can make the same speech about those numbers, but I 
just want to get those on the Record, because those numbers are very 
significantly different from the numbers which the Senator is putting 
forward.
  Mr. GRAMM. If I might reclaim my time--and I think probably we would 
be better off to let me go through and make my presentation and let the 
Senator do the same--let me go back and restate the facts.
  What the Senator has done is basically taken a totally different 
classification than I am talking about. I have been very clear in what 
I am saying. Here is what I am saying. And it is devastating, there is 
no question about that. I am glad I am not on the other side of this 
argument. I would be trying to change the subject, if I were. But here 
are the devastating facts.
  The devastating facts are, that of the little banks in America--less 
than $100 million in deposits; probably have 6 to 10 employees--that 
are outside standard metropolitan areas--so these are banks that do not 
have a city to serve, much less an inner city.
  Mr. SARBANES. Those are the banks we are talking about. Those are the 
figures I am giving you.
  Mr. GRAMM. Look, let me go ahead. I will explain the difference in 
what you are saying and what I am saying. OK. So let me start at the 
top. I will go all the way down, make my point, and then I want to go 
on and give my presentation. You all have had many opportunities to 
give yours today. And I listened to them faithfully.
  But here is the point, if you take every bank in America that has 
less than $100 million of deposits, and that is also outside a standard 
metropolitan area, they make up 38 percent of the financial 
institutions in the country. They have 44 percent of the audits. In 
fact, they were audited for CRA 16,380 times from 1990 through 1998.

  In those 16,380 audits, that cost, on average--cost the bank; I am 
not talking about the Government regulator; but cost the bank to comply 
with gathering all the information, spending the week in the audit, 
keeping all the records, designating a CRA officer--and I will later in 
my presentation read actual letters from the banks--these little banks 
and these little communities spent $1.3 billion of their money 
complying with this law.
  Of these 16,380 examinations, only three banks, over a period of 9 
years, only three banks were found to be substantially out of 
compliance.
  Our colleague has taken a different definition, ``marginally out of 
compliance,'' and the number was bigger, maybe 70 out of 16,380. The 
point being, my statement is true, that only three banks, out of all of 
these that are audited, have turned out to be substantially out of 
compliance.
  On the basis of that, our colleague would impose a $1 million-a-day 
fine on officers and board members. And I stand by my point that that 
is the biggest overkill I have seen.
  I think I have dealt with the proposals made which would be added by 
the amendment that is pending.
  These proposals really boil down to punitive, crushing, regulatory 
burden and fines, imposing a $1 million-a-day fine on bank officers and 
bank board members, massively expanding CRA.
  The justification in 1977 for CRA was, ``Well, you've got deposit 
insurance. That's a good subsidy. We ought to be able to force these 
institutions to allocate capital for a public purpose.'' But for the 
first time, this substitute would expand CRA to a noninsured 
institution where there is no logic for its expansion. For the first 
time, CRA approval would be necessary for selling insurance and selling 
securities within a bank or at an affiliate of a bank holding company.
  These are massive expansions of regulatory burden. They are totally 
unjustified based on any facts, no matter how you read them. I cannot 
believe that a majority of the Senators would vote to do those things.
  Let me talk about what we undo if we adopt the Senator's amendment. 
And I want to take some time to go through this. I have not done this 
at great length.
  I want people to understand what is the problem with CRA that we are 
trying to deal with in these two very modest amendments which the 
Banking Committee has written.
  First of all, let me talk about what you can view as good news. In 
1977, there was a rider to a bill that was written by Senator Proxmire 
that created what we today call CRA. It said that banks should lend in 
the communities where they collect deposits. There was no enforcement 
mechanism. It was simply to be used when evaluating approval for bank 
mergers and branches.
  A Democrat Senator raised an objection to the provision, worrying 
about redtape and paperwork. Interestingly enough, the distinguished 
chairman at that time said, ``No problem. The redtape and paperwork 
will be nominal. No big deal.'' We have all heard it millions of times 
when thousands of programs have become law. There was a vote in the 
Banking Committee to strip out this provision. And that vote failed on 
a 7-7 tie.
  We then had the bill come to the floor of the Senate. There was 
another vote. And I do not have the total here, but I think it was 41-
30. We had some huge number of Members of the Senate who were absent. 
So the bill became law.
  So here is the point I want to make. In 1977, we started out with a 
CRA requirement. And in that year--and these figures are all from the 
National Community Reinvestment Coalition--in that year there were 
about $50 million of CRA loans or cash payments or commitments to lend. 
And that number was relatively small, until 1992.
  Now, what happened in 1992? Well, two things happened. One, we 
started having a rash of mergers, so that these very large banks and 
also some small banks had to get CRA approval to merge. What happened 
is this number started to grow very rapidly. Last year, in loans, 
commitments to lend, cash payments, the total was $694 billion.
  Now, to put that in perspective, the loans, commitments to lend, and 
cash payments, and commitments to pay cash--and I am going to talk 
about cash payments at some great length here in a moment--totaled $694 
billion last year. That is bigger than the Canadian economy. That is 
bigger than the combined assets of Ford, General Motors, and Chrysler. 
That is bigger than the discretionary budget of the Federal Government. 
Yet our colleagues, who will oppose these two very simple amendments, 
say there is no need to look at a potential reform in CRA.
  CRA is now bigger than General Motors. It has grown from virtually 
nothing to become larger than the discretionary budget of the Federal 
Government, and yet our Democrat colleagues refuse to admit the 
possibility--or many of them do--that we might need some degree of 
effort to deal with abuses which would naturally occur in a program 
that grew in a very short time from $50 million to $694 billion.
  Why do I think this is a relevant point? Well, let me give you one 
fact. According to the community groups, $9 billion has been paid or 
committed in cash. Had you gone to that committee hearing in 1977 and 
said to the then chairman of the Banking Committee, Senator Proxmire, 
``Well, what about cash payments, what about people literally giving 
community groups and individuals money not to testify against their 
merger or not to oppose it or actually paying them to support it,'' 
what he would think about that? I can tell you: he would have said, 
``It is not possible.''

[[Page S4756]]

  This bill in no way contemplates that cash payments would be made, 
but the fact remains that as this program has exploded, $9 billion of 
cash payments and cash commitments have been made. This basically 
represents an abuse that needs to be dealt with. In fact, in the one 
hearing we had on this subject, the spokesman for these reinvestment 
coalitions admitted there were abuses. He called it ``green mail,'' and 
he said that it hurt the program. Most people would call it blackmail. 
The point is, if these abuses exist--and no one disputes they do--why 
shouldn't we begin to try to do something about them?
  Now, let me turn to a quote, and then I will get into some of these 
abuses.
  This is a quote from a Cornell University law professor, Jonathan 
Macey, who specializes in banking law and is one of the most respected 
lawyers in banking law in the country. Here is what he said about CRA, 
as it exists in 1999:

       You see really weird things when you look at the Code of 
     Federal Regulations . . . like Federal regulators are 
     encouraged to leave the room and allowing community groups to 
     negotiate ex parte with bankers in a community reinvestment 
     context . . . Giving jobs to the top five officials of these 
     communities or shake-down groups is generally high up on the 
     list (of demands).
       So what we really have is a bit of old world Sicily brought 
     into the United States, but legitimized and given the patina 
     of government support.

  It has never been stated more clearly than that.
  Now, let me give you an example, if you would give me those 
agreements.
  Part of our problem--and this will be discussed later, and I hope 
people will listen to this point--part of our problem is that community 
groups, in negotiating with banks, in virtually every case negotiate 
for and insist on the confidentiality of these agreements. So one of 
the problems in evaluating this $9 billion is, we do not have any of 
the facts as to where this money goes, who it goes to, and what they do 
with it when they get it.
  One of the amendments that Senator Bennett or someone else will be 
offering later in the Senate's consideration of financial services 
modernization is a sunshine amendment, which says that in the future 
these agreements have to be made public, that they have to go to the 
regulator, that the regulator has to require that the information be 
provided, and that they be made public. The logic of that is, nothing 
disinfects like sunshine.
  Now, it so happens that we have three of these agreements that we 
have obtained on the condition that we not disclose the names of the 
bank or community group involved. We have redacted those names. I just 
want to give you a flavor of what these agreements looks like, and I 
have pieces of three of them here.
  This is Bank A: Provide blank--and this is a community group--with a 
grant of up to $20,000. Provide blank--another community group--with a 
grant of up to $50,000. Provide blank with a grant of up to $25,000 to 
pay reasonable and necessary ``soft costs'' to be incurred by blank. 
Provide blank with a grant of a reasonable amount. . . .
  That is the quid; now the quo:
  Blank agrees to withdraw on the date hereof the comment letter, dated 
blank 28, 19 blank, and any related materials collectively, the comment 
letter filed with the Office of the Comptroller of the Currency, the 
Federal Reserve Bank, and the board. I don't have the second sheet.
  The point is, the community groups gets all of these cash grants and 
then agrees to withdraw the complaints they have filed, a classic quid 
pro quo.
  Now, what happened to these complaints? Were they not meritorious or 
did the community groups suddenly no longer care about the people they 
were protesting against? What did all of those cash grants do that 
induced them to withdraw their comment?
  Bank A, one more thing, blank and blank agree--this is the community 
group and the bank--agree not to disseminate or otherwise make 
available to the public copies of this agreement.
  So the community group gets these cash payments and in return agrees 
to withdraw their protests, and then the bank and group agree that they 
will keep the agreement secret.
  Now, let's look at Bank B: Blank will receive a fee of 2 and three-
quarters percent of the face amount of each program loan made by blank. 
This is an agreement whereby a community activist and their community 
group receive a rake-off of 2.75 percent of the face value of every 
loan made under this agreement.
  Do you think people receiving that loan know that this individual and 
this group will get 2.75 percent? In fact, they don't. And, as you will 
see later, unless we open up this process, they never will. No one will 
ever know what is happening. Continuing with the Bank B's agreement:
  Blank will receive a fee of $200,000 as reimbursement; according to 
blank, $100,000 is payable upon execution and delivery and $100,000 six 
months later.
  We have the quid, now the quo.
  The community group or the individual agrees to withdraw all pending 
protests of blank regulatory applications and related materials and not 
to sponsor, either directly or indirectly, the protest or to supply 
information in connection with any protest relating to pending or 
future blank applications with regulators.
  In other words, the community group is agreeing that in return for 
this 2.75 percent of the face value of all loans that are made, not 
only will they withdraw the complaint they have already filed, but they 
will never make another one. They will never make another one, no 
matter what.
  At blank's request--listen to this one. Many of you wonder why you 
have gotten letters from banks, and I got a letter from a big North 
Carolina bank, might I say, and I was shocked. Then I read the letter 
and it, in essence, said that they are required by a CRA agreement to 
send me this letter saying they support CRA. I said, how is it possible 
that somebody could be required to send me a letter? And this is a 
different bank altogether and a different agreement. Here is how it 
happens:
  In addition, the bank agrees to send letters to customers of blank 
previously contacted by blank--well, I will get to the point on the 
next sheet. And then the community group agrees to purge their files 
and database of all information related to this bank's customers. In 
other words, they get this breakoff; they get these cash payments. They 
agree to withdraw their objection. They will never do another 
objection. They are even going to destroy the computer database they 
used to do it.
  Now I think we are getting to the thing I mentioned. The community 
group agrees to: immediately cease and desist all activities directed 
against blank; to maintain the confidentiality of this agreement, to 
maintain the confidentiality of this agreement and any other 
agreements; to cooperate with them in getting agreements with other 
banks. And then is the thing about sending letters. This is called 
``public policy partnership.''
  In this public policy partnership: blank will work with the blank to 
establish a clear written declaratory statement indicating support for 
the Community Reinvestment Act and the Home Mortgage Disclosure Act, 
and the party's opposition to any attempts to weaken the law. Blank 
will send the final copy of this statement to the blank, the American 
Bankers Association, the Federal Reserve Board, the Office of the 
Comptroller of the Currency, the blank Congressional delegation, and 
all Members of the House and Senate banking committees.
  So when you have letters from banks telling you what great things CRA 
is doing, many of those were dictated by commitments they made as part 
of contracts, secret agreements they signed with protesters in order to 
get them out of the way to do their work.
  Now, I could go into a hundred other examples--someone who graduates 
from college, goes to graduate school, and goes to work for the Federal 
Reserve in acquisitions and mergers, quits and goes into business, 
spends 4 years harassing a bank and bank presidents, and finally the 
bank craters and gives them $1.4 million, gives them $200,000 to set up 
their organization; they now have 20 offices, lending $3.5 billion, 
getting 2.75 percent of every penny they lend right off the top, that 
nobody knows about, forcing people to participate in their program and 
pay $50 a month for 5 years in order to get the loan, and the bank 
actually collects the money for them as if somehow it were part of the 
loan. I could go

[[Page S4757]]

on and on. But we are not here to debate dramatic reforms in CRA. We 
are only trying to do two things, and here they are; here is the 
concern. You have heard the number.
  Only in 1 percent of the cases is a protest filed. Well, remember 
that in 90-some-odd percent of the cases, where somebody wants to open 
or close a branch, regulators generally get no comments. Where the 
protests come are in the big mergers, and in some of the smaller ones 
that get contentious. But what happens more often than not is that 
rather than filing a protest, the protest group simply goes to the bank 
and says: I am going to file a protest and I am going to say--to quote 
one of the protesters in what they said about a bank in New England--I 
am going to say, A, you are a racist; and, B, you are a loan shark. 
That is my charge. I am going to make that charge, and you can either 
reach an agreement with me, or I am going to do that.

  Now, here is the problem, and I don't think it is that hard to 
visualize. You have a bank and it has agreed to merge with another 
bank. And people don't know whether the merger is going to be approved 
or whether it is good or bad for the bank. So during that period, the 
stocks of these two banks are just fluttering. The bank literally has 
hundreds of millions--and sometimes billions with these big bank 
mergers--at risk. So it doesn't take a lot of imagination to see that 
when a protester shows up and says, ``Look, I am going to go to the 
Comptroller of the Currency and tell him you are a racist and that you 
are a loan shark; I am going to file a complaint and I am going to hold 
up this merger,'' the bank is under immense pressure to act as quickly 
as possible. What is happening in America today is that banks that are 
risking hundreds of millions, or billions, of dollars are settling 
these threats with secret agreements that the public knows nothing 
about, and they are often paying thousands, or hundreds of thousands, 
of dollars in cash payments.
  Now, who ever said CRA had anything to do with cash? Yet, according 
to the CRA groups, $9 billion of cash payments have been made under 
CRA. I would like to ban cash payments, quite frankly. I don't think 
they are what CRA is about. I don't think some protester getting a 
rake-off of interest or getting a cash payment is what community 
lending is about. I think it is wrong, but I don't have the votes to do 
it and I didn't try to do it.
  So, here are the two modest changes in our bill. Number 1, consider a 
bank that has been consistently in compliance with CRA. In fact, in its 
last 3 evaluations it has consistently been in compliance and is in 
compliance now. What do we require that Senator Sarbanes and others so 
strenuously object to? We require that if a bank has historically been 
in compliance, if it has been evaluated for meeting its community 
lending requirements by its Federal regulator three times in a row and 
was found to be in compliance, and if it is currently in compliance, 
then somebody can still protest. They can call the bank all the nasty 
names they want to call them. In fact, the regulator is required to 
hold a hearing if they provide any complaint just saying ``I oppose 
it.'' There is a hearing.
  None of that has changed. Anybody can say whatever they want to say. 
All our amendment says, however, is that before you can stop the action 
from going forward in the normal timeframe, the objector has to present 
substantial evidence. In other words, a bank that is historically in 
compliance, and is in compliance now, is deemed to still be innocent 
until proven guilty. And a protester can protest all they want to. But 
the regulator can't stop or delay the process unless some substantial 
evidence is presented.
  Now, I know we have some distinguished attorneys here, and I am not 
going to get into any kind of legal debate with distinguished 
attorneys. Number 1, I object to duels between armed and unarmed men, 
especially when I am the unarmed man. Every once in a while, I have 
mercy on other types of issues where I am armed and others are not. I 
don't shoot down unarmed men.
  But I want to remind those who aren't legal experts that 
``substantial evidence'' is not a trivial phrase. It was chosen because 
it is not trivial. It is referred to 900 times in the United States 
Code. There have been over 400 instances in case law where the term 
``substantial evidence'' has been defined. Let me give you some 
definitions that came from the Supreme Court, and they are important 
because they give examples of the evidence that is required to be 
submitted by a protester in order to stop a bank from doing something 
that they are qualified to do based on their record.
  In other words, what do you have to have in order to say, ``This 
person is not meeting the requirement of law and I want him stopped''? 
Knowing that it may cost them hundreds of millions of dollars, even 
billions of dollars, what is the standard you have to meet? What does 
``substantial evidence'' mean?
  Here is what it means. Here are four definitions from Supreme Court 
rulings. ``Substantial evidence'' is understood to mean:
  No. 1, ``more than a mere scintilla.'' More than a mere scintilla.
  No. 2, ``such relevant evidence as a reasonable mind might accept as 
adequate to support a claim.''
  Not that they have to accept it. Notice that the Court said that 
substantial evidence is ``such relevant evidence as a reasonable mind 
might accept.'' They might not accept it. But they might accept it as 
adequate to support a claim.
  No. 3, ``real, material, not seeming imaginary.''
  And, finally, ``considerable in amount, value and worth.''
  I fail to understand why there is an objection when a protester wants 
to come into a bank which has been in compliance with the lending laws 
of this country for three evaluations in a row and is currently in 
compliance, why anyone would object to saying that in order to stop the 
bank from exercising the right they have earned, the protester has to 
provide some evidence. I cannot understand why anybody would object to 
that. Why is it important?
  I have spent a lot of time talking about why it is reasonable. But 
why is it important?
  It is important because it eliminates the worst abuses where someone 
comes in, they have no evidence, they have no facts, there is no abuse. 
They simply say, ``I will go away if you can give me some money.'' In 
this case, if they can't provide substantial evidence, they can't stop 
the process. But it doesn't prevent the regulator from saying, ``You 
have to do a new CRA review.''
  Our colleague talked about what regulators could do. Nothing in our 
amendment would prevent the regulator from saying, ``Every time you 
want to merge, we have to have a new CRA evaluation.'' We don't stop 
that. All we are trying to do is to require some substance--and require 
someone to have the evidence--before they can stop the application 
process and cost taxpayers and investors hundreds of millions of 
dollars.
  It is a strange thing to say in America. But I am going to say it, 
because I believe it. I will never forget when the American Airline 
pilots were getting ready to go on strike. I met with some Members of 
Congress to talk about what Congress could do because of the disruption 
that might be caused by the strike. I finally said, ``Look. You know, 
it is no secret that most unions do not love me, but I believe in 
freedom. And people have a right to strike, if they want to strike. And 
I am not voting for a bill that prevents them from striking.'' One 
Member of Congress, who will go unnamed, said, ``Well, wait a minute. 
These pilots make $150,000 a year. I am not worried about their 
rights.''
  Let me tell you why that is relevant. One of the reasons this is so 
hard to discuss is that everybody has the idea that these bankers are 
rich. So we are not worried about their rights.
  When do our rights end based on how much money we have? I can 
understand and I accept that you ought not have more rights because you 
have more money, but you ought not have less.
  The idea that we would let someone or some group impose hundreds of 
millions of dollars of costs on other citizens, many of whom are 
stockholders--my teacher retirement fund, I am sure, is invested in 
some financial institution, or in a thrift. I don't know, because I 
don't keep up with what they are invested in. But every teacher in 
America is invested in stocks of some of these companies.

[[Page S4758]]

  How is it right to let somebody literally deprive them of millions of 
dollars without providing any evidence?
  So that is the substance of the first committee provision. I don't 
know why it requires so much discussion, but it does. I don't mind 
discussing it, though, because it is something that I feel strongly 
about.
  This is about abuse. This is about a wrong that is going on in 
America today, right now. The fact that there are many success stories 
in CRA, the fact that there are probably wonderful people in almost 
every circumstance, does not justify looking the other way at the kind 
of abuses that are occurring. We are not trying to fix them here.
  We are going to have a lot of hearings this summer. We are going to 
bring a lot of people in and put them under oath. We are going to have 
a major GAO study. We are going to look at this thing in great detail.
  We are just trying to deal with two little commonsense things that 
ought to be done in the bill. I talked about the first. What is the 
second?
  The second committee provision exempts little banks in rural areas 
from CRA. Why? Because the regulatory burden on these very small banks 
in very rural areas is oppressive.
  First of all, these are banks that are not in standard metropolitan 
areas. They are by and large serving areas that do not have a city, 
much less an inner city to serve. So making them comply with these laws 
that are really aimed at inner-city lending makes absolutely no sense.
  Why is this provision important? Because these banks--as documented 
in the letters they have written to us--are spending $60,000 to $80,000 
a year complying with CRA.
  I have used the figure before, but it fits here, and I want to use it 
again. Since 1990, there have been 16,380 CRA examinations of these 
little banks in rural areas, and only three of them have been found to 
be substantially noncompliant. But even though three bad actors have 
been found, $1.3 billion in compliance costs has been imposed on these 
little banks that have only between 6 and 10 employees. It is a very 
heavy regulatory burden.
  Let me read just a couple of letters from the banks that are 
affected. Our colleague from Illinois was here. I am sorry he left. We 
probably have more letters from Illinois than any other State. But he 
won't get to hear it. But I am going read three of his letters, and 
then the others.
  This is a letter from Franklin Bank in Franklin, IL. I don't know how 
big the bank is, but it is small. Their building looks like a house. 
Here is what he says:

       Were it not for the time-consuming paperwork involved, we 
     in small banks in rural America would find CRA laughable. Our 
     community is our business. We wrote this book long before the 
     government did. Offering us exemption from the requirements 
     of the Community Reinvestment Act would not change the way we 
     do business, but it would relieve us of the mounting 
     paperwork from this examination for one day every other year.

  In other words, relief by exempting them--they don't change their 
business. They are just not going to have the examination to do and the 
paperwork and cost of about $80,000 involved in it.
  This is from Security Bank of Hamilton, IL:

       Our experience is that regulators struggle to fill out 
     their questionnaires when we are being examined as most 
     sections do not apply. Then we really have to stretch to 
     imagine our community of 3,000 having the same problem as 
     Chicago or Los Angeles as none of the demographic 
     stratifications fit.

  This is the First National Bank of Nokomis, IL. It doesn't say how 
big they are:

       I truly believe we could free up one-half to one employee 
     in our banking operation to put in positive service thereby 
     expanding our service to the community we serve.

  That is what they believe they could do if we could reduce the 
regulatory burden on them.
  They don't say in their letter, but my guess is they don't have even 
10 employees. So when they are talking about freeing up one half of one 
employee, they are talking about a tremendous reduction in their cost 
and their regulatory burden.
  Let me read a couple of other letters. This is from the Cattle 
National Bank in Seward, NE:

       Since the origination of public disclosure of CRA 
     examinations, we have not had one person from our community 
     ever request the information.

  I remind Members that CRA went into effect in 1977 and public 
disclosure went into effect about a decade after that.
  So for about 12 years nobody in this little community has ever raised 
a CRA question. The only people who have raised those questions are 
bank consultants.
  The next bank is Copiah Bank from Crystal Springs, MS:

       Our compliance officer, Gerry Broome, and his assistant 
     have spent many research hours and reams of paper in their 
     efforts to comply with mandated requirement's paper work. We 
     have even had to outsource some of its checkpoints to a 
     compliance consultant from time to time.

                           *   *   *   *   *

       As an $83 million community bank, we feel an obligation to 
     help you in your efforts toward easing our paper work burden.

  Lakeside State Bank, New Town, ND:

       As a former bank examiner for the Federal Deposit Insurance 
     Corporation, which included consumer compliance experience, 
     and as a banker for over 15 years I believe I have a good 
     understanding of the intent and the workings of the CRA.

                           *   *   *   *   *

       Over the 47 years of our existence we have provided 
     financing to virtually every main street business in our 
     town, our customer base includes approximately 80 percent of 
     the area farmers and for the last several years over 50 
     percent of our loans have been to American Indians.
       The law [he means the CRA law] is a heavy burden because of 
     the expansiveness of the regulations and the paper 
     requirements of compliance. We spend hours documenting what 
     we have already done, rather than spending that time more 
     efficiently by doing more for our community.

  The Farmers and Merchant Bank of Arnett, OK:

       I am the CEO as well as the chief loan officer, compliance 
     officer and CRA officer. I have to wear so many hats because 
     we are small and have a staff of only 7 including myself. CRA 
     compliance, done correctly, takes a lot of time, which takes 
     me away from my primary responsibility of loaning money to my 
     community. It has almost gotten to the point that lending is 
     a secondary function. It seems like we have the choice of 
     lending to our community or writing up CRA plans showing how 
     we would loan to the community if we had time to make loans.

                           *   *   *   *   *

       Large banks can hire full time CRA officers and other 
     compliance personnel to administer CRA programs but, small 
     banks cannot. . . .

  Redlands Centennial Bank:

       We spent approximately $80 thousand of our shareholders' 
     money last year supporting this ill-defined regulation. Even 
     the regulators who examined us were hard pressed to give us 
     specific definition on how we might better implement this 
     regulation.

                           *   *   *   *   *

       I am urging you to get rid of the nonsensical CRA yoke. 
     Keep up the fight because there are a lot of us out here who 
     are too busy balancing, making a living with government 
     regulation in this crazy business.

  Chemical Bank North is a bank of $74 million in Grayling, MI:

       As it is, we must devote disproportionate resources to 
     creating and maintaining the ``paper trail'' that the current 
     CRA regulations require. Our board members must attend time 
     consuming CRA Committee meetings and our officers and staff 
     members spend significant valuable time preparing reports and 
     keeping records that serve no purpose other than to keep us 
     in compliance with a regulation that attempts to enforce from 
     a regulatory standpoint what we do everyday in the normal 
     course of our business. . . . I would estimate that we devote 
     the equivalent of a full time employee to all aspects of CRA 
     compliance.

  The First National Bank of Wamego, KS--I mispronounced Wamego 
yesterday; the Presiding Officer was from Kansas and I appreciate him 
correcting me. This is a $65 million bank, which means this bank 
probably has five or six employees.

       Our bank was listed two years in a row as the ``best'' bank 
     in Kansas to obtain loans for small businesses. . . . [This 
     bank also was rated outstanding on CRA.]

                           *   *   *   *   *

       [O]ur outstanding grade did not make us a better bank. The 
     CRA did not make us make loans we wouldn't have made. The CRA 
     did take a lot of employees' time to document that we were an 
     outstanding bank.

  This is from Nebraska National in Kearney, NE. This is a very small 
bank. In fact, I think this might be one of the smallest banks in 
America that was not a recent start. This bank has $34 million in 
assets, so we are talking about probably four or five employees working 
in this bank:


[[Page S4759]]


       We do not make foreign loans, we don't speculate in 
     derivatives, and we don't siphon deposits from this area to 
     fund loans elsewhere. Instead, like virtually all the banks 
     under $250 million in assets we provide home loans, business 
     loans, farm loans, and construction loans. We don't do this 
     because of the Community Reinvestment Act but because it 
     makes good business sense. . . . I bitterly resent every 
     minute of my time and that of my staff spent to comply with 
     this regulation because it takes time away from productive 
     duties.
       I feel the regulation is now being used by consumer 
     activist groups to ``shakedown'' banks seeking regulatory 
     approval for expansion or merger.

  Finally, from American State Bank, an independent bank, from 
Portland, OR:

       As one of the oldest and most strongly capitalized African 
     American-owned banks west of the Mississippi River, Portland-
     based American State Bank supports your position on CRA 
     exemption for non-metropolitan banks.
       We also urge you to explore exempting from CRA requirements 
     minority-owned commercial banks. . . . Today, minority-owned 
     banks still maintain their focus on serving our nation's 
     minority communities and their citizens. It is redundant, at 
     best, to impose CRA requirements on banks whose sole purpose 
     is to serve minority citizens. At worst, it compels minority 
     banks to sustain burdensome expenses and administrative costs 
     and subjects banks to a bureaucracy largely unaware of the 
     realities of the inner-city marketplace.

  I have covered a lot of territory. Let me sum up with the following 
points. The Bryan amendment before us has two parts. It does a whole 
bunch of bad things, and it undoes two little good things. What are the 
whole bunch of bad things it does? It is the largest expansion in the 
regulatory burden of CRA in American history; it would expand CRA to 
noninsured institutions, violating the very logic of CRA, which is, 
banks get deposit insurance that is partly subsidized by the 
Government, so it is reasonable for the Government to force them to do 
things that have a community benefit.
  The proposed substitute would expand CRA to institutions that are not 
insured. It would expand CRA approval as being necessary to sell 
insurance and securities in a bank, something that is not required 
today and it is occurring every day today without CRA approval.
  The proposed amendment would impose a potential fine of $1-million-a-
day on bank officers and bank board members without any evidence 
whatsoever that abuses occur. In fact, as I pointed out over and over 
again, with small banks in rural areas having 16,380 examinations at a 
cost of about $80,000 in annual compliance, where the banks had to pay 
$1.3 billion to comply with all this regulation, all this paperwork--
all of these evaluations, 16,380 of them, found only three banks that 
were substantially out of compliance. So, the regulatory overkill 
already exists. Why you would want to come in and subject small banks 
and large banks, and their officers and board members, to a million-
dollar-a-day for if their institution fell out of compliance with CRA, 
I cannot understand. In fact, I have never heard an explanation for 
this draconian change in law.
  I read earlier, and I will not read again, letters from the American 
Bankers Association and the Independent Bankers Association saying how 
the pending amendment will make it virtually impossible for them to get 
quality people who will serve on bank boards. They also talk about the 
cost of liability insurance, which will explode if you are going to 
impose these new potential penalties on banks, their officers and 
directors, all in the name of abuses that apparently exist at the 
extreme level in .03 percent of all CRA examinations.
  Those are all the bad things the substitute does. What are the good 
things that it undoes? Is that a word, ``undoes''? I guess so. To try 
to curb some of the abuses--and the abuses are very similar to the 
strike lawsuit that we dealt with 2 years ago, and again last year.
  The abuse basically occurs during the critical moment when a bank is 
trying to merge with another bank or sell or engage in some new 
activity: it's at that moment the bank has a lot at stake and is most 
vulnerable. Under current law, any protester can come in and threaten 
to hold the whole thing up. This creates immense pressure on the bank 
to settle with that protester and either commit some bank action or pay 
the protester cash in return for not filing a protest.
  A lot of rhetoric has been used on this, and I am being redundant 
because when other people say something wrong, you have to say it right 
twice to get people to get it straight. Our amendment does not prevent 
people from protesting. They can protest. Our amendment does not 
prevent people from filing complaints. They can file complaints whether 
they have any facts or whether not. Our amendment does not prevent the 
regulator from holding a hearing. Under current law, the regulator has 
to hold a hearing if somebody complains. We do not change that. Our 
amendment does not prevent the regulator from forcing an entirely new 
CRA evaluation.
  All our amendment says is: If you have a bank that has been in 
compliance with CRA over a 3-year period, and if they are currently in 
compliance, a protester can still file a protest, but in order to stop 
the bank's application from going forward, the protester has to provide 
substantial evidence.
  Then I went through and read from Supreme Court cases, how you define 
``substantial evidence''--more than a scintilla; enough that a 
reasonable person might believe that what you are saying is true. Those 
are not high standards.
  Why anybody would want to let protesters potentially impose hundreds 
of thousands of dollars or millions of dollars in losses on a bank and 
their stockholders, many of whom are members of teacher retirement 
programs and other broad investment groups, without providing any 
evidence whatsoever to back up their claim, I don't know. But that is 
the debate we are having.
  So, that is what the amendment does and does not do. It is not a safe 
harbor. It is not a safe harbor. It is not a safe harbor. The Secretary 
of the Treasury came up with the use of that term and now all critics 
use it, even though it is verifiably false. This is a rebuttable 
presumption. Stated another way, if a bank has a good record of 
compliance and it is deemed by the regulator to be in compliance, it is 
innocent until proven guilty. You have to present some facts to 
substantiate your claim if you are going to stop it from going forward. 
You don't have to have any facts to state your opinion. You don't have 
to have any facts to declare that there ought to be a hearing. You 
don't have to have any facts to protest. But before the regulator can 
stop it, you have to present some facts.

  The final provision that would be undone here is the eminently 
reasonable exemption of very, very small, very, very rural banks that 
on average have a regulatory burden of about $80,000 a year in 
complying with CRA, even though in the last 9 years, with 16,380 
examinations of these small, rural banks, only three have been deemed 
to be substantially out of compliance with CRA.
  If you were from a small town like I am, or you represented a State 
that had a lot of little bitty towns and a few little bitty banks left 
and you went to those banks, you would discover why only .03 percent 
have been found out of compliance in 9 years. If you are from a small 
town and you have a bank with four or five employees, your bank ends up 
lending to everybody in town because they have nobody else to lend to. 
That is basically what the debate is about.
  I wish every person could, in some simple form, get all these facts. 
But it takes time to debate them, and I am grateful to have the 
opportunity. I am sure we will get some more opportunity today. But I 
thank my colleagues for their patience, and I yield the floor.
  The PRESIDING OFFICER (Mr. Crapo). The Senator from Indiana.
  Mr. BAYH. Mr. President, I rise in strong support of the Bryan 
amendment, which contains, in my opinion, a balanced approach to the 
Community Reinvestment Act as well as a bipartisan spirit enjoyed in 
the last session of Congress.
  I also want to say, to my colleague from the State of Texas, how much 
I respect his expertise in this area as well as his dedication to this 
cause. But I must also respectfully disagree and say to all those who 
are concerned about this issue that if there are problems with this 
amendment, in terms of

[[Page S4760]]

the fines that can be imposed or other details, let's correct them. If, 
in the past, overly zealous advocates have used CRA as an excuse for 
extortion, then let's prosecute them. If there are other problems, 
let's correct them.
  Let's throw out the bathwater, not the baby. At the dawn of the 21st 
century, let us not turn back the clock and deny to thousands of 
Americans, because of the color of their skin, because of their race, 
because of their income, the right to access one of the basic tools for 
empowerment and progress, and that is credit and the ability to start a 
business or build a home. We cannot return to those days.
  I should also say I am somewhat disappointed that we have arrived at 
this impasse, because this is important legislation. It is my great 
hope we will ultimately get it enacted, because it is important to the 
financial services industry, insurance, banking, as well as other 
industries that need access to credit and to consumers across our 
country. This should not be a partisan debate. In fact, in the very 
recent past, it has been nonpartisan or even bipartisan. Unfortunately, 
it has become an issue that has broken down more and more along party 
lines.

  I especially regret this has happened in large part because of 
efforts to curtail and restrict the Community Reinvestment Act, which 
the vast majority of evidence has suggested works well, has served the 
American people well in the past, and I believe is critical to equal 
opportunity for all Americans as we advance to a new century and a new 
millennium.
  We are increasingly relying upon the use of market forces to create 
opportunity. We are asking the American people to be self-sufficient, 
to save, to work hard, to be personally responsible, and I support 
those trends. At the same time, we need to ensure that the market 
system works for all Americans and that every American, regardless of 
whether that person happens to come from the right side of the tracks 
or the wrong side of the tracks, be he or she Hispanic, African 
American, Native American or any other race, creed or religion in this 
society, that they have access to those tools in the marketplace that 
will allow them to be self-sufficient, to build a better way of life 
for themselves and their families.
  It is important that we pass this law, as I mentioned. It is one of 
the areas in which we are internationally competitive. It is important 
that we pass legislation that will allow our financial services 
industry to provide comprehensive services to their customers and to 
compete with our foreign competitors.
  It is important that consumers be allowed to have access to these 
services on a coordinated basis, on a one-stop shopping basis. It is 
better for consumers as well. It means jobs for your State and my State 
and the rest of the 48 States across the United States of America, not 
just in insurance, which is important to the State of Indiana, or 
investment banking or in securities or on the part of insurance company 
employees, agents, and brokers across this country. It means jobs for 
small businesses and industries in the State of Indiana and elsewhere 
that need access to low-cost credit, so that they can invest, be more 
competitive, more productive and create good-paying jobs across our 
country. This is an issue not just for Wall Street, but for Main Street 
and for all of our streets across this country.
  Unfortunately, there has been increasing partisanship. I think that 
is very, very important. Just last year this measure passed out of the 
Senate Banking Committee on a 16-to-2 vote. This year, unfortunately, 
it broke down exactly along party lines, 11 to 9.
  Earlier this year, this provision, very similar to the amendment I am 
supporting today, passed out of the House of Representatives Banking 
Committee 52 to 8, with the vast majority of Republicans and Democrats 
supporting a continuation of a vital CRA and equal financial 
opportunity for all Americans.
  The administration strongly supports this point of view. It is 
important to note that there is virtually no significant opposition 
from industry groups. I find it to be somewhat ironic that in the past, 
members of my own party have been accused of favoring legislation that 
would unduly hamstring business for ideological reasons. Today, the 
shoe seems to be on the other foot.
  Let me be very clear what this dispute that has brought us to this 
impasse is not about. It is not about the organization under which 
future banking, insurance and security services will be offered. This 
is not really a dispute about operating subsidiaries versus the 
affiliates and holding companies, although there is a very serious 
dispute between the Secretary of the Treasury and the Chairman of the 
Federal Reserve on this issue. I am convinced that this can be resolved 
if we are given a chance.

  Our dispute in this impasse is really not about the unitary thrift 
and whether commercial entities should be allowed to get involved in 
the financial services sector. That is a legitimate issue and a concern 
that I am convinced that, too, can be resolved if we can only deal with 
the issue currently before us. No, Mr. President, the dispute that has 
brought us to this point involves the Community Reinvestment Act.
  I say to my colleagues and those listening and watching us at home 
that the Community Reinvestment Act has been good for America and good 
for Americans. It is working. Between 1993 and 1997--4 years--loans in 
low- and middle-income areas across our country for mortgages and 
building homes increased 45 percent, 45 percent in just 4 years; up 72 
percent for African Americans; up 45 percent for Hispanic Americans; up 
30 percent for Native Americans.
  In the same period of time, actually just last year alone, there were 
525,000 loans to small business men and women in low- and moderate-
income areas, with total capital investments of $34 billion.
  The Community Reinvestment Act has proven to be a boom for the 
American dream: families wishing to invest in home ownership, 
entrepreneurs wishing to start small businesses, Americans of every 
race, creed and religion wanting to participate in the American dream 
of a better way of life for themselves and for their loved ones.
  The Community Reinvestment Act has worked in my own home State of 
Indiana. I won't go through all the cases here. From Gary, East 
Chicago, Indianapolis, South Bend, Lafayette, Bloomington, from the 
north to the south, from the east to the west, in communities large and 
small across my State, more Hoosiers have opportunities to make 
investments, make a decent income through a good job, buy a home, or 
start a small business. It has been good for our country. It has been 
good for my State.
  Mr. President, I have a letter with me today that I think my 
colleagues will find to be of some interest. It was sent to me 2 days 
ago. It happens to be from the mayor of the city of Fort Wayne. The 
reason this may be of interest is that Fort Wayne is the second largest 
city in the State of Indiana. More than that, Paul Helmke, the mayor of 
Fort Wayne, happened to be my opponent in the race for the Senate last 
year.
  Paul Helmke is a card-carrying member of the Republican Party. He 
also believes in opportunities for the citizens of Fort Wayne, business 
investment expansion, and home ownership. The mayor of Fort Wayne, my 
opponent in the election last year, has written me asking me to support 
a vigorous and vital Community Reinvestment Act.
  I read from his correspondence:

       . . . In Fort Wayne, banks have fulfilled their CRA 
     requirements in creative and meaningful ways that have 
     allowed us to leverage their resources with public and other 
     private influences to help in our urban revitalization 
     efforts.
       . . . Perhaps the banking community would continue to see 
     their investment in urban renewal as beneficial without the 
     CRA requirements. But I do not think that it is wise to tempt 
     fate.

  Mr. President, neither do I. Involved mayors, like Mayor Helmke, who 
was the head of the mayors association last year, and I believe 
concerned Senators should rise to vote in favor of a vital and 
continually vigorous Community Reinvestment Act. On April 22 of this 
year, the Los Angeles Times wrote:

       Before Congress voted to establish the CRA in 1977, many 
     banks wrote off entire areas, refusing to lend to anyone who 
     lived behind the red line.

  The unfortunate truth is that while the vast majority of bankers 
across our country are involved and caring and doing a good job, both 
before and afterwards, too often there were bankers

[[Page S4761]]

who were willing to accept deposits from some parts of our communities 
and not make loans to those very same parts of our communities. That is 
what CRA has established. It is a very strong track record of change.
  Unfortunately, the bill, as unamended, before us poses a serious 
threat to the continuation of this progress we have seen across this 
country and in my State. My understanding is it would make 97 percent 
of all banks presumptively exempt from the requirements of CRA, 38 
percent entirely exempt from the provisions of CRA, and would exclude 
the whole new areas banks hope to get into, entirely exempt, new users 
entirely exempt from the provisions of CRA. Mr. President, now is not 
the time to turn back the clock.
  I will summarize before yielding the floor. Access to credit today is 
as important an opportunity for Americans of every walk of life as 
rural electrification was in the 1930s. Access to credit today is as 
important to the future well-being of all of our citizens as universal 
service to telephones was in the fifties and the sixties.
  That is why I believe very strongly, as we ask Americans to be more 
responsible, to take charge of their own lives, as we encourage them to 
start homes and build businesses and to build for the future, we must 
give them the tools within the market economy to get the job done. That 
means equal access to credit as we approach the new millennium, not 
just to the few, not just to the powerful, but to Americans of every 
race, ethnicity, and those of even modest means. That, Mr. President, 
is why I rise in support of the Bryan amendment and urge my colleagues 
to vote in the affirmative for it.
  Thank you. I yield the floor.
  Mr. EDWARDS. Would the Senator from Indiana yield for a question?
  Mr. BAYH. I would be glad to yield to my colleague from North 
Carolina.
  Mr. EDWARDS. Thank you.
  I am wondering, Senator Bayh, if you have had the same experience I 
have had. That is, I come from a State with many banks, including some 
of the largest banks in America, Bank of America being one. And having 
had many conversations with representatives of banks that are 
headquartered in my State, what I hear from them is, in fact, they 
enjoy participating in the Community Reinvestment Act. They take great 
pride in the work they do in the communities where they are located. 
They have absolutely no opposition to the Community Reinvestment Act 
and, in fact, do not oppose the Community Reinvestment Act provisions 
of the Democratic substitute offered by Senator Sarbanes.
  I am just curious whether the banks in your State of Indiana have had 
the same kind of reaction.
  Mr. BAYH. I say to the Senator, I appreciate your question. As a 
matter of fact, one of the things that has been most impressive about 
this issue has been the uniformity of opinion among our banks in my 
State, large and small. They find that CRA has not been a significant 
impediment to their doing business, and really the industry groups are 
not in opposition at all. As a matter of fact, they support the intent 
behind this very, very important provision.
  So we have a situation here where many of our community groups, 
including our mayors--as a matter of fact, I should mention for the 
Record I spoke to the mayor or Gary last night, as well, who believes 
very strongly that a city like Gary, which has been struggling to get 
back on its feet, needs this provision.
  The banks are not opposed and, in fact, find it to be a very positive 
element.
  Mr. EDWARDS. That is exactly the response I have had. I thank the 
Senator.
  Mr. President, I seek recognition at this time.
  The PRESIDING OFFICER. The Senator from North Carolina is recognized.
  Mr. DODD. Will the Senator from North Carolina yield?
  Mr. EDWARDS. Absolutely.
  Mr. DODD. I want to say to my colleague from Indiana, before he 
leaves the floor, that was an excellent set of remarks. I think it 
points out the importance of this issue. I was particularly taken by 
the comments of your mayor of--which city was that, I ask?
  Mr. BAYH. Fort Wayne.
  Mr. DODD. Fort Wayne. This was your former opponent, I think, that my 
colleague pointed out. And I just say to my colleague, again, I have 
had a similar reaction from my mayors across my State. I know others 
have.
  We have a tendency to think of these issues in terms of just what the 
banking community wants. And that is an important consideration for us, 
as we certainly deal with financial institutions. But I think--and I 
would ask my colleague from Indiana whether or not he would agree with 
this--that, in addition to the banking community, we bear a special 
responsibility, as Members of the Senate, to also consider what occurs 
to the customers' financial services.

  I think sometimes that constituency is given a back seat when it 
comes to considering the implications of decisions we make. It is the 
farmer in Wyoming; it is the small businessperson in Connecticut; it is 
the consumer in Indiana; it is the minority business in North 
Carolina--all of us have consumers out here who use these financial 
institutions.
  I commend my colleague from Indiana for a very thoughtful set of 
remarks, pointing out that side of the equation, the consumer side, the 
user side, the business side of our financial services, and I commend 
him again for his remarks.
  Mrs. BOXER. Before the Senator yields, I wonder if I could pose a 
question for 20 seconds.
  Mr. EDWARDS. Of course.
  Mrs. BOXER. Thank you. I also want to thank my colleague for his 
remarks. I wonder if he was aware of the comments made --and this gets 
to the Senator from North Carolina--by the President of Bank of America 
about this program. If not, I would like to put them in the Record. If 
he answered that question----
  Mr. ENZI addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I believe the Senator from North Carolina 
has the floor. The question was being directed to the Senator from 
Indiana.
  The PRESIDING OFFICER. The Senator from North Carolina does have the 
floor and may only yield for a question.
  Mrs. BOXER. I would be happy to direct this to the Senator from North 
Carolina.
  Mr. EDWARDS. Yes, absolutely. I am aware, I say to Senator Boxer, of 
the comment by Hugh McColl, who is head of Bank of America. I think I 
can quote him exactly.
  Mrs. BOXER. I would like you to do that right now in the Record, 
because it is a very telling comment.
  Mr. EDWARDS. I think it is, too. He says, ``My company supports the 
Community Reinvestment Act both in spirit and in fact. We have gone way 
beyond its requirements. We have had fun doing it. And we have made a 
business out of it.''
  Now, here is the head of the largest, or one of the largest, banks in 
the country, headquartered in my home State. I happen to know that Mr. 
McColl has, in fact, strongly supported the Community Reinvestment Act. 
His bank has gone above and beyond the call of duty in that respect.
  Mrs. BOXER. One more question before I yield to my friend.
  I find it very interesting that Senators would get up and attack this 
program as if it were some kind of a giveaway program. These bank 
presidents have told us that these loans are very profitable. As a 
matter of fact, I wonder if the Senator is aware, at least in 
California--and now we do have a tie in because, as you know, Mr. 
McColl, although headquartered in your fair State, does a lot of 
business in my fair State--they have told us that they are doing very 
well with their CRA ratings. As a matter of fact, they are telling us--
and I want to know if the Senator was aware of this--that their 
portfolio of CRA loans--these are loans that never used to be made in 
the old days--are just as profitable, that portfolio, as their other 
loans. Is my friend aware of that?
  Mr. EDWARDS. Yes, I say to Senator Boxer, I am aware of that, and 
that is what I have been told consistently by the banks located in 
North Carolina.
  Mrs. BOXER. I thank my friend, and also my friend from Indiana, 
because I think the notion that somehow, if you are for CRA, you are 
for doing something with social value and yet interfering with business 
is simply not true.

[[Page S4762]]

 These loans are profitable loans. They are good for the community. It 
goes back to the old adage: ``If you do good, you do good things, you 
will do well.''

  I hope we will stand together in favor of this program that does good 
things for people and does well for the banks.
  I yield back to my friend.
  Mr. EDWARDS. Thank you, I say to Senator Boxer.
  I will add to what she just said: When you do good things and have 
the impact that the Community Reinvestment Act has had, it does not 
just inure to the benefit of the people who are directly affected, it 
inures to the benefit of all of us.
  Mrs. BOXER. Absolutely.
  Mr. EDWARDS. I want to address that in just a moment. I want to say, 
first, in relation to the remarks of my friend, the Senator from 
Indiana, who has become a very close friend and colleague of mine 
during our tenure--we came to the Senate together--that I am proud of 
what he had to say. I completely agree with everything he had to say, 
and his remarks particularly about turning back the clock on this very, 
very important piece of legislation ring true with me and I think ring 
true with most Americans.
  Mr. President, if I may, there is a really critical thing I want 
Americans, who are listening to this debate, to understand. This is not 
some obscure piece of banking legislation that has nothing to do with 
their lives.
  It is really important for Americans to understand that this bill--I 
refer now to Senator Gramm's bill--that this bill will have, or has the 
potential to have, a dramatic effect on the lives of every American, 
not just the poor, not just minorities, not just the elderly, not just 
those who run a small business or want to get into the family farming 
business, and not just those people who are directly impacted by the 
Community Reinvestment Act.
  This bill has the potential to affect every single one of us, every 
single American. And here is why. Because it weakens the Community 
Reinvestment Act. Because of CRA, we provide low-income housing, we 
provide single-family housing, we give families a place to live, we 
give small businessmen and women, minority and otherwise, a chance to 
engage in entrepreneurship, to open their own business. We give the 
people the opportunity, in my home State of North Carolina, to start a 
small farm, and expand that farm.
  Every time we provide these kinds of economic opportunities to 
people, every time we give families, core families, a chance to live 
together, to stay together, and not be spread out, we do a number of 
things: No. 1, we reduce crime; No. 2, we create pride, an 
extraordinary amount of self-esteem that may not have existed before; 
and we give people an opportunity to do something they otherwise might 
not be able to do--own their own home or open their own business.
  I speak to every American when I say, crime, core family values, the 
fact that the folks who benefit directly from the Community 
Reinvestment Act are folks that we may otherwise, as a Government, have 
to support, these are things that affect every American. This bill is 
not some obscure banking bill that has nothing to do with people's 
lives. The Community Reivestment Act has a dramatic effect and has had 
a dramatic effect on every single American. I think it is critically 
important for people to understand that.

  I think it is also important for them to understand what exactly 
Senator Gramm's bill does to the existence of the Community 
Reinvestment Act. I have heard the bill described by him and others as 
being ``Community Reinvestment Act neutral,'' as to the overall 
purposes of this legislation.
  I might add parenthetically that I strongly support the idea that 
banks ought to be able to expand services and affiliate with other 
financial institutions. They ought to be able to sell insurance. They 
ought to be able to sell securities. It is good for banks. We have a 
lot of banks in my State that need to do this and want to do it and, I 
think, ought to be able to do it. It is also good for consumers because 
it creates competition, and it is a good thing for consumers to have 
access to these services when they go to their banks. I strongly 
support those opportunities.
  Here is the problem. Under existing law, when a bank seeks to expand, 
either by merger or by opening a branch, then its CRA rating is one of 
the things that is taken into consideration. Under the provision that 
is proposed by Senator Gramm, when a bank seeks to expand services by 
affiliating with a company that sells insurance, by affiliating with a 
company that sells securities, CRA, or the Community Reinvestment Act, 
plays no role whatsoever.
  Let me say this in the simplest terms. A bank with a completely 
unsatisfactory Community Reinvestment Act rating that has been 
determined by regulators to not be complying with the law, to not be 
doing what it should be doing with respect to investing in its 
community, I am talking about a totally noncompliant bank, that factor 
cannot even be taken into consideration in determining whether that 
bank should be allowed to sell insurance and whether it should be 
allowed to sell securities.
  This bill, Senator Gramm's bill, is not CRA neutral for one simple 
reason. We are, by virtue of this law, expanding what banks can do, 
allowing them to sell insurance, allowing them to sell securities. If 
we don't take CRA, which presently applies to applications for 
branching and mergers, and apply it as a precondition for these new 
services they are going to engage in, then we have withdrawn from CRA. 
We will have cut the underpinnings from CRA. It is something we 
shouldn't do--it is fundamental--we shouldn't do. CRA compliance ought 
to be a consideration when banks seek to engage in the expanded 
services permitted under this bill in exactly the same way, in exactly 
the same fashion that it presently applies to their attempts to merge 
with other banks or to their attempts to open other branches.
  Now, I want to show a couple of examples with the indulgence of my 
colleagues.
  I want to show a couple examples of what the Community Reinvestment 
Act has done in North Carolina. I show now a photograph of a 
neighborhood, an economically disadvantaged neighborhood, a minority 
neighborhood in Durham, NC. This is a house that existed in that 
neighborhood.
  As a result of the Community Reinvestment Act, and as a result of a 
bank partnering with local community groups, this house that we have 
just taken a look at was turned into this house.
  If I could hold up the first photo just a minute, this was a crime-
ridden, drug-infested community. As a result of the Community 
Reinvestment Act, we went from this to this--a place that the people 
who occupy this home are proud of; a low-income family was able to 
reside there. They take pride in their community. And as Reverend 
Brooks, who was part of this effort, said:

       Before, there were drug dealers sitting on this corner. 
     Now, we have homeowners hoping to be in these houses.

  The Community Reinvestment Act. It changes communities. It changes 
families. It changes people's lives. It also changes the financial 
obligations that the rest of us, as Americans, have to support 
opportunities for people who want to support themselves. They just need 
a chance. What the Community Reinvestment Act does is, it gives those 
folks a chance.

  I want to show one last photo. We have seen one house. This is a 
neighborhood. This is located in Durham, NC. This is a neighborhood 
that, again, has gone from a high-crime, drug-dealers-on-the-street-
corner neighborhood to a model community. Can you imagine the 
difference between the way a family feels when they live in a community 
where right outside their doorstep people are selling drugs and all the 
houses are in terrible shape versus how they feel when they find 
themselves in a community that looks like this? Now they take pride in 
their community. The children growing up in this community take pride 
in where they live. It gives them a sense of self-esteem. It allows 
them an opportunity to have pride in themselves and their family that 
they otherwise might not have.
  Now, there are some simple facts that I will speak to briefly that 
have emerged from the progress of the Community Reinvestment Act during 
the time it has been in place. If I could have the appropriate chart, 
please.
  First of all, just since 1993, the private sector lending in low- and 
moderate-income areas, which is what we have been concerned with, has 
risen.

[[Page S4763]]

 From 1993, I guess this is the number of loans, 185,014 to 268,463 in 
1997. Over a period of 4 years, there is an increase of 45 percent, 
almost a 50-percent increase in just 4 years, as a result of the 
Community Reinvestment Act.
  The argument is made that--and we have heard a lot of it from Senator 
Gramm over the course of the last 45 minutes to an hour--that the 
Community Reinvestment Act places an enormous regulatory burden on 
banks, unfairly so.
  Well, I think, unfortunately, with all due respect to Senator Gramm, 
the facts do not bear that argument out. What we find is that among 
CRA-covered institutions, when they make an application, for example, 
when a bank decides they are going to merge with another bank, when a 
bank decides they are going to expand and open a branch, and therefore 
they file a CRA application, 99 percent of those applications are never 
even challenged by community groups. So we start with a base of 99 
percent where there is no challenge whatsoever. I would love the 
comments of Senator Sarbanes on this in a moment, if he will. It is my 
understanding that the banks are not required to keep additional 
information as a result of this expansion of services. In fact, I think 
they use exactly the same base data that they kept previously. Is that 
correct, Senator Sarbanes?
  Mr. SARBANES. I say to the Senator, that is correct. Senator Bryan 
spoke to that earlier, about the effort that was made in the mid-1990s 
to ease the regulatory burden on the banks.
  Mr. EDWARDS. That is my understanding.
  So we start with this basic idea that 99 percent of all the CRA-
covered applications are not challenged at all. Then of the ones that 
are challenged, in only 1 percent of those cases are the applications 
denied. So 1 percent are challenged versus 99 percent that are not, and 
of that 1 percent, only 1 percent of those are denied.
  I think the facts prove that CRA has not been an enormous regulatory 
burden and that banks, as has been the experience of Senator Bayh, as 
has been the experience of Senator Dodd in Connecticut, and as has been 
my experience in talking to my bankers in North Carolina, the reality 
is they do not oppose the Community Reinvestment Act. They simply do 
not.
  As the quote from Hugh McColl indicated earlier, banks take great 
pride in their opportunities to invest in their community. Our banks 
are good corporate citizens who do what they do because they take pride 
in it. They believe in the Community Reinvestment Act. They support it. 
They are not opposed to it.
  Finally, this chart depicts what CRA has done in loans to low- and 
moderate-income communities. This is as of 1997, $34 billion in small 
business loans. I think it is really important that we understand we 
are not just talking about housing. We are talking about small 
businesses, entrepreneurs who want to get started and just need a leg 
up, giving them a chance to develop their own business, $34 billion as 
a result of the Community Reinvestment Act; $18.6 billion in community 
development, the kind of community development that we saw photographs 
of just a few moments ago; and critically important to my State of 
North Carolina--and I suspect Senator Bayh's State of Indiana--$11 
billion in small farm loans. That is $11 billion going to small farmers 
as a result of the Community Reinvestment Act.

  Here is what we have. We have a bill that makes a great deal of sense 
on the whole. We want to expand the services of banks. We believe--at 
least I believe--that banks ought to be able to engage in those 
services. But it is critically important that we maintain the viability 
and the vitality of the Community Reinvestment Act. It is important 
that we maintain it for a lot of reasons: because we need to support 
minorities; we need to support the elderly; we need to support low-
income families; we need to support people who need or want to start 
their own small business or their own family farm. It makes good 
business economic sense for the country.
  But what I want the American people to hear from me today, if they 
hear nothing else, is that this is not some obscure piece of banking 
legislation that is technical or difficult to understand. This 
legislation can affect their lives and, in fact, will affect the lives 
of every American every day because to the extent that we keep poor 
families together, to the extent that we reduce crime in this country, 
to the extent that we give people an opportunity to seek out good 
employment, to get jobs to support their own families--all those things 
that we as Americans believe in--when we do those things in 
conjunction, we as a country benefit. And to the extent that we look at 
it selfishly, we as individuals benefit because those people will not 
be supported by the Government. They won't be supported by taxpayers. 
They will support themselves. And the reality is that is exactly what 
they want. They want the opportunity to support themselves and to know 
the pride of homeownership. That is what community reinvestment is all 
about. That is the reason Senators Sarbanes, Kerry, Bayh, Dodd, and 
myself believe in it so deeply.
  Mr. SARBANES. Will the Senator yield for a question?
  Mr. EDWARDS. Yes.
  Mr. SARBANES. Let me compliment the Senator from Indiana and the 
Senator from North Carolina for their very strong presentations and 
their tremendous contributions to the Banking Committee. They both came 
on the committee this year, and we are barely a few months into their 
first session and they have both made extraordinary contributions to 
the work of the committee and to the work of the Senate. I simply want 
to say, as one Senator who has been here for a while, we are very 
honored to have them as part of the Senate and thankful and grateful to 
them for the contributions they make.
  I wanted to ask the Senator this: In a letter we received from the 
U.S. Conference of Mayors, which in effect fits in with the point that 
both Senators were making about the importance of the Community 
Reinvestment Act--it is signed by close to 170 mayors from all over the 
country, besides the ones that are trustees and on the advisory board 
of the U.S. Conference of Mayors--it says:

       . . .As mayors, we recognize that CRA has been an essential 
     tool in revitalizing cities around this nation. In fact, 
     there is now increasing recognition that the strength and 
     economic health of whole regions require strong and vibrant 
     cities. Creating new economic activity--new businesses, new 
     jobs, new homeowners--is key to the revival of urban areas 
     and their surrounding regions, CRA has been a key component 
     to creating this new economic activity.

  They go on later to say:

       Prior to the enactment of CRA, banks and thrifts routinely 
     redlined low and moderate-income neighborhoods in our 
     nation's cities. The modest requirement in CRA that financial 
     institutions meet the credit needs of their communities has 
     led to the successful channeling of billions of dollars into 
     localities.

  Then they note that the bill brought out by the committee would 
severely weaken CRA. They say:
       Unless the onerous CRA provisions are addressed and CRA is 
     preserved and strengthened, we would urge strong opposition 
     to the Senate bill.

  I raise that with the Senator because it seems to me that it goes to 
this very point, including the pictures he was showing. We are talking 
about the elected officials who are right on the front line, so to 
speak, trying to deal with the problems of their communities, trying to 
bring them back and achieve revitalization and renewal. They, 
obviously, have come in feeling very strongly.
  Mr. President, does the Senator feel that this is another perspective 
on the very point he was trying to make of the importance of CRA--not 
just for the people who directly benefit from it but for the broader 
community, for all of us, it seems to me, here is, in a sense, an 
endorsement of the very position the Senator has been enunciating.
  Mr. EDWARDS. I think that is a wonderful indication, as the Senator 
put it, of the people on the ground, on the spot, seeing what is 
happening on a day-to-day basis, recognizing how critically important 
CRA is to this country. They see what is happening. I think it goes 
hand in hand with the fact that the banks--and I might add, I take 
great pride in the fact that every bank in North Carolina has a 
satisfactory CRA rating, every single one of them--are helping make a 
difference.
  I think the fact that the mayors are behind it, the fact that the 
community

[[Page S4764]]

groups are behind it, the fact that the banks themselves, the financial 
institutions, are behind it, I think all these things in combination go 
to prove a very simple point: The Community Reinvestment Act has been 
good for America. It is good for the specific groups it directly 
benefits, and it is good for all of us as Americans because it allows 
these folks to support themselves, which is what they want to do.
  Mr. BAYH. Will the Senator yield for a question?
  Mr. EDWARDS. Yes.
  Mr. BAYH. Mr. President, I echo the words of the Senator from 
Maryland in complimenting my friend from North Carolina for his 
eloquence and his insightful presentation on a continued, strong CRA. I 
observe and I can tell that he has taken his advocacy skills from the 
courtroom to the floor of the Senate, and the American people are 
better for it.
  I compliment the Senator on his statement, which is built upon what 
the ranking member said in the statement he read from the Conference of 
Mayors. The Senator from North Carolina has become a dear friend and 
someone I have admiration and great respect for. I have heard the 
Senator mention on many occasions his dedication to ensuring that not 
just big cities or large institutions have opportunities, but that the 
farmers and small rural areas across North Carolina are afforded the 
same opportunities as those in the large cities and in the large 
financial institutions.
  My question is this: Very often, this financial modernization bill is 
portrayed as something that just Wall Street and big institutions are 
interested in. The Senator touched on this briefly, and there is one 
thing I was hoping he can expand on. I wonder if his experience in 
North Carolina is the same as ours in Indiana, which is that CRA can be 
an engine for making sure that farmers and small businesses in rural 
areas are afforded the same kinds of opportunities as the mayors 
indicated the cities enjoy.
  Mr. EDWARDS. I thank the Senator for his kind comments. He and I 
share the same feelings about each other. We share a lot of the same 
beliefs and values. There is no question that in the State of North 
Carolina we have had the same experience they have had in Indiana, 
which is that the Community Reinvestment Act, in fact, reaches out into 
rural, underserved communities, to small farmers, small businesses and 
communities that are chronically and economically disadvantaged and so 
desperately need its help. I think it is another example of how well 
the CRA has worked.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER (Mr. Abraham). The Senator from Wyoming is 
recognized.
  Mr. KERRY. Will my colleague yield for a question?
  The PRESIDING OFFICER. The Senator from Wyoming has the floor.
  Mr. KERRY. I would like to ask a question.
  Mr. ENZI. The Senator doesn't even know what my statement would be. 
It would be difficult to yield for a question based on what I haven't 
said yet. There is a little bit of smoke that needs to be cleared out 
of the Chamber before we proceed.
  Mr. SARBANES. Mr. President, I think the Senator was just asking you 
to yield in order to determine the procedure.
  Mr. KERRY. I was just going to ask the Senator how long he was going 
to speak.
  Mr. ENZI. I apologize. I have been listening to a lot of statements 
made, and I probably reacted in a way that I should not have.
  Mr. GRAMM. Will the Senator yield?
  Mr. ENZI. I will yield for a question, yes.
  Mr. GRAMM. Mr. President, I will make the following point. We go back 
and forth to try to keep some balance in the debate.
  I think when people have a real question that it is a logical thing 
to do. But when questions used really disrupt the flow of the debate so 
that you have long periods of time on one side of the aisle, I don't 
think it is quite fair. Obviously under the rules we can do it, but it 
can be done on both sides.
  I would like to just suggest--we are going to vote on this at about 7 
o'clock. We have plenty of time. Everybody can be heard. I would just 
like to suggest that we go back and forth. Everybody will get a chance 
to speak.
  I urge our colleagues, if you have a real question on something you 
don't know--other than, ``Do you realize that our proposal is a great 
proposal and their proposal is a rotten proposal?''--yes, I realize 
that--if you have a real question, I think it makes sense. But in 
fairness to what we try to do in going back and forth, I urge people to 
wait for their time to speak so we have debate on both sides of the 
aisle. That is my point.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wyoming has the floor.
  Mr. ENZI. The answer to the question of the Senator from 
Massachusetts is, I think about 10 minutes.
  Mr. KERRY. I thank the Senator.
  Mr. SARBANES. I ask unanimous consent that when the Senator from 
Wyoming concludes that the Senator from Massachusetts be recognized.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  The Senator from Wyoming.
  Mr. ENZI. Mr. President, I thank you for the recognition. I 
appreciate this opportunity to speak.

  There is a certain amount of tension that builds up as you listen to 
some of the comments. The comments have been very good about CRA, the 
Community Reinvestment Act, in general, and in general nothing is going 
to happen to that CRA. The Community Reinvestment Act will still be in 
place. There will still be community reinvestment.
  There are two changes in this bill that have been suggested. They 
make some changes. They make some important changes that may make CRA 
more viable, more valuable, more productive, and more useful.
  There has been a tremendous escalation in the number of dollars being 
given in CRA commitments. We note that in 1995 the annual dollars were 
26 million, almost $27 million. In 1998, the annual dollars were 694 
million.
  What do you suppose caused the increase? Are banks just discovering 
this? I don't think so.
  A while ago you had the opportunity to listen to some of the contents 
of an agreement that was necessary in order to move on in a banking 
arrangement. There are a lot of clauses in that which are pretty 
disturbing to me.
  It has been said that you are not hearing from the banks. If that 
letter has been used by many groups--you can see by the numbers that it 
is rapidly escalating--how many groups are being brought into this? 
There is a clause in that which says they cannot complain about CRA. 
That is freedom of speech? You cannot complain about somebody extorting 
money from you?
  When banks are merging, there are a lot of stockholders who are 
nervous. There are customers who are nervous. They do not know whether 
they want to stay with the bank or not just because of the media 
turmoil that is caused by the merger.
  Then you have a group coming in to take advantage of that crisis 
moment, that interest moment. They raise an issue. The bank isn't found 
to be out of compliance; the bank is in compliance. Under this bill, 
they have to have been in compliance for 3 years. For 3 years they have 
been following this.
  We had some discussion earlier that there are audits done on this. 
They are checked on. It has always been shown that the ones that are 
most likely to be involved in this, the bigger banks, are also the best 
respondents. But there is a clause they have that says, first of all, 
they are not going to complain about CRA; second, they are going to 
write this Congress and say what a good deal CRA is.
  Does that sound like a normal business transaction? Does that sound 
like something that businesses ought to be involved in?
  If these things are really invalid actions by those banks, they ought 
to be taken to the highest level and the highest opportunity to punish. 
But that destroys the value of the company. So they enter into 
agreements like this and send letters that say that the CRA is OK.
  This bill does not gut CRA. It keeps the same program in place. If a 
bank, which is audited regularly, has met the criteria for 3 years, and 
meets it at the moment, then actual objections have

[[Page S4765]]

to be lodged. It seems like common sense to me. It doesn't sound like 
doing away with the program. It is just common sense.
  Small banks were mentioned. There is a change for small banks in 
here, too, if they have under $100 million in assets. I think if any of 
you look into banks, you will find that it is a very small bank that 
has five or six employees. You will probably find that one of those 
employees is dedicated to just doing CRA--doing CRA so they can prove 
that they don't have a problem. It is only rural banks.

  We have had these letters from Fort Wayne and some other cities. 
Those aren't rural banks. I don't care what their asset base is. They 
don't get this advantage.
  We are talking about the very small communities. I have those in 
Wyoming. Those very small communities, even if they only have one or 
two employees, have to have somebody dedicated to doing the CRA. It is 
a paperwork experience. They are having to fill out paperwork to prove 
that they are not in violation in a community where there may not even 
be minorities. So they cannot rest as well, because they don't have a 
classification they can meet in their customer base in their community.
  Three-fourths of the banks are rural banks. It was said that we had 
an amendment that put that at $2 million. I also want to point out a 
comment that was made about these small banks. There were over 16,000 
of them audited for CRA. There were three out of compliance. According 
to my record, there were three out of compliance. There are some that 
get lower ratings, and I have explained why they are lower ratings. But 
even if they were considerably more out of compliance, it is not good 
auditing to do it under that basis.
  I am an accountant. I am the only accountant in the Senate. When you 
have criteria for auditing businesses, you come up with higher 
statistics than that kind of a base, or even a higher base than that. 
You have to. Otherwise, you are wasting resources.
  What I am saying is that some of these benefits that are talked about 
may not have been worth it even on the basis of the auditing costs. We 
are talking about the basis of the business cost as well complying with 
this law.
  These banks are community banks--rural banks. In Wyoming, the bank 
may be 100 miles from another bank. Who do you think they serve? People 
from other States in the Nation don't mail their money there. It is the 
people who live in that community, and they expect and they get 
service, or the bank goes out of business.
  We have heard some statistics about how business has increased 
because of the CRA. We have heard statistics about how loans have 
increased because of the CRA. Take a look at the timeframe. It wasn't 
the CRA that drove up the number of people buying houses or drove up 
the opportunity for more people to go into business. It was the 
interest rate. The interest rate plummeted. More people could make 
house payments. More people bought houses. It wasn't that the banks 
were being forced into this; the banks are already precluded from 
having to do bad loans. They are not loaning to just anybody who comes 
in the door. They are just doing a lot of paperwork to show that the 
loans they are granting are valid loans and the ones they are not are 
not valid loans.
  The economy makes the difference in whether new businesses start and 
whether people buy more houses. The exemption for small banks will 
solve some problems for small banks, and it probably ought to be a 
higher amount than that.
  Again, if you are looking at auditing statistics, you could double or 
triple that number without affecting the numbers that are out of 
compliance; hardly at all.
  I want to reiterate again that that amount of extortion to the big 
banks has gone from $27 billion up to $694 billion. That is going to be 
something on an ever-increasing basis. As more people get into the 
business of taking on CRA, taking a base and a commission off of that, 
none of this goes to the sector of the community we are talking about.

  CRA is important. CRA is included in the bill. CRA only makes two 
changes. It does not gut the bill. There are two changes: One for 
small, rural banks so we don't have to spend so much annually complying 
with CRA and they instead can put it into their community, which is 
where they put their money; the other one is for the big banks so they 
don't have to write these required letters we heard to their 
Congressman saying they don't have any problem with CRA.
  This is not an attempt to gut CRA. This is an attempt to make it more 
valuable, more useful and more applicable in the banks.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KERRY. Mr. President, I thank particularly the Senator from 
Maryland, the ranking member, for his leadership on this issue. I 
regret that the Senate is in the position it is in on this particular 
bill.
  I have previously supported financial modernization. We have voted on 
it in several incarnations. Last year I was among those who happily 
sent this bill, what was then H.R. 10, to the Senate with a very 
significant vote of support in the Banking Committee, because we 
believed overwhelmingly that we had the right balance between the 
interests of the financial services community, whom we are all 
concerned about and we all understand need the needs of that community; 
at the same time we had what most people thought was a very fair and 
sensible recognition of the virtues of the CRA.
  In the waning hours of the last Congress, all Members remember there 
was a single, very adamant voice of opposition, the now chairman of the 
committee, who in fairness has deep-rooted beliefs about it, but who 
frankly stood in a very, very small number last year who ultimately, 
because of the timing of the bill, was able to prevent an entire bill 
from passing the Senate.
  Now we are back here once again revisiting the important imperatives 
of financial modernization. This year many of us who want to vote for 
that financial modernization are put in the very difficult position of 
having to take a position of fundamental principle that because we 
believe so deeply that the CRA provision is so disturbed by this bill 
that a strong relationship that has existed and worked with a profound, 
positive impact for people in this country, is being sufficiently 
undone, even attacked, and requires that we oppose the bill in its 
current form.
  I am used to going through Pyrrhic exercises in the Senate, 
regrettably with increased frequency. It is a sad commentary on the 
nature of the legislative process today that sometimes measures move 
through here in a very partisan way and then we ultimately wind up in 
the conference committee with the administration negotiating and things 
are changed.
  That may or may not happen here. It certainly didn't have to be this 
way. We could have arrived at some kind of fairminded compromise that 
reflected the views of the vast majority of Senators. Instead, we find 
ourselves with a bill that is not just about financial modernization. 
It is also about a significant reduction in the capacity of the 
Community Reinvestment Act to work. Many Members believe very, very 
deeply we can do better than that.
  I think we obviously need to recognize that U.S. financial 
institutions as a whole are the most efficient providers of financial 
services in the world today. There have been remarkable changes in the 
marketplace in the last years. All Members ought to pay proper tribute 
to the virtues of the entrepreneurs who have themselves undertaken to 
put those changes in place.
  I don't think Congress can stand here with a straight face and take 
entire credit for the virtues of the economy that we are living in 
today. I do think we take partial credit because I think it was a 
courageous effort in 1993 to face up to the realities of the deficit 
and to come up with a solid deficit reduction act. In addition to the 
congressional efforts, Alan Greenspan, the chairman of the Fed, 
deserves enormous credit for his courage during the banking crisis of 
the last years of the 1980s and the beginning of the 1990s when he took 
bold action to help refinance the banks, as well as his remarkable 
stewardship of monetary policy itself.
  Finally, it seems to me a very significant amount of the credit goes 
to the companies themselves and the CEOs

[[Page S4766]]

who saw a change coming down the road, who responded to the demands of 
the 1980s when people were writing books about Japan, Inc. and writing 
off American enterprise and suggesting we needed a wholesale adoption 
of another model. Indeed, our model has proven perhaps at times to be 
excessive and at times even to be insensitive, but nevertheless to be 
way ahead of any other capacity or structure in the world in the 
marketplace.
  Increasingly, one of the reasons for that success has been the 
blurring of the lines between banking, insurance, and securities. We 
need to do our part. We are way behind the curve, years behind the 
curve. Were it not for the thoughtful and judicious steps taken by the 
regulators themselves without congressional impetus we perhaps wouldn't 
have been able to accomplish some of what we have.
  Now is the time to respond by breaking down the artificial legal 
barriers of an outdated era, the barriers that prevented banks, 
security firms and insurance companies from affiliating. It is time we 
take the step to ratify the liberation of financial service companies 
so they can provide a broader array of services to consumers and 
corporate customers. I don't think we should hesitate to do it. This is 
several years overdue.
  It is regrettable that we find ourselves in this position, after the 
Senate Banking Committee overwhelmingly by a 16-2 vote passed 
legislation. That is a fairly profound statement of the Senate Banking 
committee's willingness to move forward.
  Here we are again, notwithstanding the challenge of financial 
modernization, with too many Members having to say no to moving forward 
because of the extreme measures being applied to the CRA itself.
  That judgment is not ours alone. The Treasury Secretary, whose 
expertise and judgment over the last years, I think, has been without 
parallel, and the President of the United States, clearly on Secretary 
Rubin's recommendation, have stated that if the CRA measure stays as it 
is, this measure will be vetoed. Very simple: It is going to be vetoed.
  We have a choice. We can either take a look at the CRA and make a 
judgment about what it accomplishes or we can go through another Senate 
exercise, send the bill out for veto and accept failure in the end for 
our capacity to be able to recognize the importance of the vast changes 
that I referred to a moment ago.
  Let me say a few words about the CRA, if I may. The CRA is now more 
than 20 years old. It is very straightforward in concept. It is 
imminently reasonable. It says simply that banks have to provide credit 
to all the communities in which they take deposits. In other words, if 
a bank accepts deposits from a neighbor, that bank has some kind of 
responsibility to make loans available to creditworthy borrowers in 
those neighborhoods. That is common sense and it is fundamentally fair. 
This statement of reciprocity, of mutual responsibility, says an awful 
lot about the kind of country we want to be and the kind of country we 
are as a consequence of that kind of effort.

  Let me speak for a moment to what the CRA has accomplished. It has 
helped to make more than $1 trillion in good, profitable loans to low-
income areas, loans that bankers in my State and in States all across 
the country have said would not have been made without the law. It has 
given low-income communities of working families access to capital that 
is absolutely crucial to start a small business or to buy a home. And 
it has created new business opportunities for the banks themselves.
  I would say that CRA is a fundamentally conservative, procapitalist 
law because it is not a handout; it is not something for nothing. It 
requires responsibility. It broadens the tax base. It broadens the 
capitalization capacity of a community. It brings people into the 
economic mainstream. It is a law that provides that all Americans, low- 
and moderate-income Americans, very often African Americans or Hispanic 
Americans, with the opportunity to buy a home or build a business if 
they are creditworthy.
  The law is very clear on the last point, about creditworthiness. 
Loans have to be made with all of the normal concerns for safety and 
for soundness. The act itself could not have been more clear on that. 
It says that it has to help meet the credit needs of the local 
communities from which it is chartered, ``consistent with the safe and 
sound operation of such institutions.''
  So, when the chairman of the committee says it is just an extortion 
program, I think there is such a level of extreme exaggeration and 
rhetoric in that, measured against what happens --and I will speak for 
a moment later to the question of extortion--because any bank has the 
ability to prove that any particular request was not able to meet the 
requirement of safe and sound operation of that institution. It is 
clear there are plenty of ways of doing that. And the balance of the 
weight is on the bank; it is really against the person requesting the 
credit, based upon the normal standards by which banks do business.
  If you talk to most bankers, they will tell you the CRA loans perform 
as well as the rest of their portfolios. We are not looking at some 
enormous drag on banking institutions. In fact, some banks have begun 
to sell CRA loans on Wall Street in order to acquire more capital to 
make more CRA loans. Those are market forces that are being harnessed 
to expand opportunity and to grow our economy.
  Here in the Senate, lately, we have heard a lot of talk about the 
``opportunity society.'' The fact is, the Community Reinvestment Act 
exemplifies that notion. Credit is the economic lifeblood of every 
community, whether it is rich or poor. In our society, I think it is 
fair to say that historically we know that credit denied is also 
opportunity denied. When you deny hard-working Americans the chance to 
buy their own homes or start their own businesses, you are denying them 
the opportunity to share in the American promise.
  This is a country where we have demanded a lot of our citizens. We 
expect them to make the most of their own lives, to take responsibility 
for themselves and for their families--largely because of the kinds of 
public policy decisions we have had the privilege of supporting here in 
the Senate with respect to this kind of economic sharing, if you will. 
We say to Americans: If you take the effort to live by the rules, to 
show your creditworthiness, to stand up within the economic structure, 
then we have the ability to help provide some of the tools to build 
that decent life for yourself. CRA was built on that.
  But what we are considering today--and I heard the Senator from 
Wyoming and I have heard other Senators try to suggest this is really 
just a fixing of the CRA, that it doesn't really take it apart, it is 
going to leave it in place; we are just going to take, whatever, about 
38 percent of the banks out from under it--those are the banks under 
the $100 million mark--and then we are going to make it a lot more 
difficult to apply any real measurement because we are going to change 
the standard by which we measure a violation; and, we are also going to 
change--according to the chairman--we are going to exempt banks from 
protest based on a 3-year satisfactory CRA record no matter what. And 
of course for the new activities we are empowering in this bill, it 
doesn't apply at all.

  If ever there was a reason to make judgments about whether or not 
people are in compliance, it is when they are going to go out and 
engage in new activities that involve a whole series of new, larger 
roles within the economic community.
  It seems to me it is inconceivable that, when they are going to take 
on those new kinds of responsibilities, you are suddenly going to say: 
We are not going to apply it; we are going to hold it where it is based 
on the theory of what CRA is supposed to be.
  There is a reason that there is this kind of semi-subtle approach--I 
would not call it that subtle in the end. It is sort of a sledgehammer, 
but it is hidden enough in a way that people who are not completely 
familiar with it or with the process might say there are some redeeming 
factors here. But the fact is, the reason it is done in this sort of 
backdoor approach is that they learned they cannot do a frontal 
assault. They are not going to strike it altogether. It does not give 
people enough cover. So then you are left sort of analyzing: What is it 
that it is really going to do? What is going to happen here, in terms 
of this effort?

[[Page S4767]]

  I believe the Bryan amendment will preserve the appropriate 
relationships by simply requiring that banks have and maintain a 
satisfactory CRA rating as a condition of exercising the new 
affiliations allowed in this bill. The Bryan amendment also strikes the 
safe harbor language and the exemption from CRA regulations for banks 
with less than $100 million of assets.
  I listened to the chairman in the committee and I addressed this 
directly--raised this issue of extortion. I acknowledged at the time, 
and I will acknowledge on the floor, that I know of instances where 
people have come into a bank at the last minute, or at the moment of a 
merger, feeling the iron is hot, and of course when the bank wants the 
merger to move--carefully and without ruffled feathers. When the banks 
don't want the regulators suddenly getting their dander up at this 
critical moment of merger. So people take advantage of this 
opportunity.
  Let me say, I know of some instances where there have been some 
marginally meritorious requests. But the record of the numbers of 
challenges--and I will address that in a moment--is very clear. It is 
so de minimis that no one can come to the floor with anything except 
pure anecdote, sort of a story here or there, that suggests that 
somehow there is some massive problem. What bank does not deal with 
community groups, all the time--this is not some sort of a last minute 
thing where there are a bunch of unknown people sitting at a table who 
can walk into the bank and the newspapers and the local television are 
all going to take them seriously. We are dealing, after all, with 
communities in which there are sets of relationships which everybody 
understands.
  Most of the people within that community--the political leaders, the 
elected political leaders, the opinion leaders, the bankers, the 
businesspeople, the news people--understand the difference between 
legitimacy and extortion. They understand the difference between a 
community that is getting its fair share of community investment from a 
bank and a community that has been starved.
  The fact is, if somebody is walking in, in some sort of bald-faced 
``extortion effort,'' the bank can tell them no way and probably stand 
there with impunity and justification in doing so. If some banker is 
complaining about some illegitimate group coming in and holding them 
up, then that banker, frankly, ought to be fired for not having the 
courage and the guts to say: Look, we are meeting our standards. We 
have covered all the people who have made legitimate requests. Your 
request is not legitimate. It will not withstand the scrutiny in the 
light of day, and I am not going to be blackmailed, period.
  Moreover, there are laws in this country already on the books, 
Federal laws, State laws and local--within counties--which district 
attorneys can prosecute with respect to those kinds of extortion 
efforts.
  To suggest we are going to hold up the financial modernization 
efforts of the United States of America in a global marketplace over 
these anecdotal stories and not be able to find a common ground where 
we could fix or address the question of legitimacy--there are any 
number of language changes you could make in the standards or in the 
review process or in the process, all of which would be adequate to 
deal with the questions that the Senator from Texas has raised. But 
none of those is on the table, none of them. What is on the table is an 
entire exemption for a whole set of banks for whom this has worked very 
effectively. Moreover, what is on the table is an exemption of any 
consideration at all for these remarkable new powers that are going to 
be given to the banks which demand that you make some kind of judgment 
about what their commitment really is in their community.
  You can talk to most of the bankers in the country right now.
  The Wall Street Journal summed it up this way:

       Few Republicans share (the Chairman's) passion for the 
     (CRA) issue. Bankers don't love the CRA but have largely made 
     their peace with it. . . . ``CRA is part of the way we do 
     business--we don't have any problems with it,'' says Pamela 
     Flaherty, a vice president at Citigroup, Inc.

  It is not industry leaders or community leaders who are driving this 
effort to undermine the CRA; it is the tendency in this Chamber and in 
our politics for ideology sometimes to work against the needs of 
communities and the interests of good public policy. When you measure 
what we are doing against the broad-based effort of the House of 
Representatives and the House Banking Committee to develop a more 
broad-based effort, you have a real confrontation with that approach.
  If you look at some of the language we have heard about the CRA--
comparing it to slavery--that is the kind of statement that just 
ignores the reality of what the CRA has accomplished.
  The CRA, accepted by most bankers in this country, supported by 
people like Alan Greenspan, supported by major bankers in the country, 
has brought billions of dollars of credit into African communities, 
Hispanic communities, and Asian-American communities where thousands of 
banks have become active partners in creating opportunities for working 
families so they can become new homeowners and by providing the capital 
to budding entrepreneurs.
  Slavery? That is an extraordinary comment. Too many of our colleagues 
are willing to forget the redlining and the racism that plagued lending 
in too many low-income communities in previous years. Before 1977, when 
the Community Reinvestment Act became law, many financial institutions 
believed they had absolutely no responsibility to the communities they 
served. Some financial institutions accepted racial and economic 
discrimination as part of their mortgage credit and business lending 
policy. It is because we found that too many banking institutions saw 
an ease to the profit line by moving into certain areas and an 
unwillingness to do business and reach out to Main Street with access 
to credit that we put the CRA in place.
  Studies from that time period show that some financial institutions 
routinely invested more than 90 percent of their deposits that they 
received from low-income and minority neighborhoods into other areas. 
Ninety percent of the deposits that came from certain low-income 
communities went out to other areas. We have a fundamental 
responsibility not to start segmenting and dividing up the financial 
marketplace in a way that is going to allow people to turn away from 
that responsibility of inclusion that has benefited everybody in this 
country and has made this country a better place.
  In Roxbury, MA, a low-income minority neighborhood within the city of 
Boston, only 20 percent of home sales were financed by financial 
institutions between 1975 and 1976. But in the prosperous suburbs of 
Boston, 83 percent of home sales were financed by financial 
institutions in the same time period.
  The residents of Roxbury who were able to obtain financing were 
forced to use private mortgage companies, often at substantially 
greater expense than at financial institutions. The cost of denying 
private mortgage credit and business lending was literally devastating 
to the social and economic growth of Roxbury and other low-income 
neighborhoods in the inner city and in rural areas. Over time, property 
values and small business activity plummeted, and then crime and 
poverty escalated.
  We can recreate that cycle if we want to go backward in time, Mr. 
President. Activities like that are exactly what brought the Congress 
to pass the Community Reinvestment Act in 1977, to encourage bank and 
thrift regulatory agencies to help meet the credit needs in all areas 
of the communities that they serve.
  I don't think we can afford as a nation to roll ourselves back to 
those days when it was more power to the powerful, more money to those 
who already had the money, and less concern and less effort to try to 
be the country that all the speeches are about and all our days of 
celebration are about.

  CRA has worked in Massachusetts where there has been more than $1.6 
billion in commitments made by financial assistance institutions to 
assist low-income neighborhoods. These funds have been invested in home 
ownership, affordable housing development, minority small business 
development, new banking facilities and services, and it has made a 
difference in our inner-city neighborhoods from Roxbury to Jamaica 
Plain to the South End. Let me give a direct example.

[[Page S4768]]

  Stacy Andrus, from Jamaica Plain, Massachusetts, was a restaurateur 
struggling to make ends meet and retain her clientele in a competitive 
environment. She knew she had to be creative just to keep pace. She 
began toasting chips out of pita bread to serve as finger food before 
meals. As one might expect, those chips soon became the most popular 
item on the menu.
  Like so many businessowners who know they have latched on to a great 
idea, she wanted to expand the operation. She tried to bring the 
concept to scale, but capital and credit were not available to her; 
they were not available in Jamaica Plain. Even though their deposits 
went into the bank, they did not come back into the community.
  She could not find the help she needed until finally she started 
working with the Jamaica Plain Neighborhood Development Corporation. 
This corporation works within a network of small business providers 
that use CRA programs at local banks to secure funding for small 
businesses. With their help, Stacy obtained a $60,000 loan from 
BankBoston. As a result, her business expanded rapidly: She has leased 
a production plant in Jamaica Plain; she has residents of the low-
income community working for her; she has put former welfare recipients 
on the payroll; she has 900 bags of chips rolling off the assembly line 
every single day. Thanks to CRA she has now made them one of the top 
selling gourmet snack foods in all of Boston, and she has major 
airlines interested in serving her chips to first-class customers. 
Without the CRA, Mr. President, the community of Jamaica Plain would 
not have received those kinds of benefits from economic development 
that has been generated. In addition, it is also giving low-income 
communities a shot at home ownership.
  Julie Orlando is a single working mother of three. She wanted to buy 
a home for her family in Leominster, MA, which is Northwest of Boston. 
In the days before CRA, she would not have possibly been considered a 
likely candidate to own a home, but because the Fidelity Cooperative 
Bank was involved in the CRA coalition, she was able to obtain a 
$72,000 mortgage with no points. The city of Leominster provided 
additional assistance to Julie and her family. Because the Fidelity 
Cooperative Bank participated in the CRA coalition, she and her 
children can live with their first home, which is, after all, Mr. 
President, not just the American dream, but it is good for the 
community.
  How many times have we heard of the problem of crime that comes from 
transient members of the community, people who do not have a stake in 
the community. That is exactly the type of assistance that CRA was 
designed to provide.
  It is my hope we are not going to take measures here that deny a 
whole generation of CRA success stories in the future. The CRA and the 
Home Mortgage Disclosure Act data continue to show that blacks and 
Hispanics face significantly higher mortgage rejection rates.
  The Boston Federal Reserve showed conclusively that African Americans 
get turned down for a mortgage 1.6 times more often than whites, even 
after you control for many of the economic income and creditworthiness 
differences.
  A New York Newsday study, looking at 100,000 mortgage applications on 
Long Island, showed that blacks' applications were rejected three times 
as often as whites', even when they had the same income.
  In a study right here in the Washington, DC, area, completed last 
year, we found that significant lending discrimination exists against 
blacks and Hispanics.
  Mr. President, the need for the CRA remains very much alive in the 
United States. Let's put the rhetoric aside. Let's put the ideology 
aside. Let's find the common ground within the Senate whereby we can 
guarantee that we can build a coalition that will support the best of 
financial modernization and the best of our effort to broaden the 
economic base of this country.
  I might add, some have suggested there is sort of a legalized concept 
to what has been called the ``legalized extortion.'' In fact, some 
people have suggested that the regulators have assisted that process.
  Let me say, Mr. President, I find it very hard to believe that people 
would suggest that Alan Greenspan, the Chairman of the Federal Reserve, 
for whom we have--all of us--such respect for, is complicitous in that 
process. This is what he said about the CRA:

       . . . the CRA process is something that we clearly have 
     been supportive of and think is crucial and necessary to the 
     development of communities. We think that it's in the 
     interest of the banks. We think that it's in the interest of 
     communities.

  Mr. President, the data from the regulators--let me just close on 
this--the data from the regulators is clear. The chairman of the 
Banking Committee wants the Senate to fundamentally weaken CRA. He will 
stand up and argue, this is not taking it away. He is going to try to 
point to the exemption for the small banks. And he will come back to 
the notion that it somehow is still in effect, even though it does not 
apply to the new services that will be provided, and even though the 3-
year safe harbor provision is included.
  But the fact is, that fewer than 1 percent of bank applications have 
been receiving an adverse CRA comment. Fewer than 1 percent of the 660 
applications that received the adverse comment were denied on CRA 
grounds--1 percent of the 1 percent. Not a single application receiving 
adverse comments has been denied since 1994.
  So here we are with the entire regulatory structure of our 
modernization effort of the financial services of our country held 
hostage to a few people's perceptions, based on ideology, of 1 percent 
of 1 percent, notwithstanding that all of the banks in the country have 
learned that this is, in fact, good economic policy, good banking 
policy, and they have accepted the CRA.
  It is my hope that our colleagues will recognize that, even as this 
country has grown strong and the economy and the marketplace has grown, 
even as the stock market is reaching the extraordinary 11,000 level, 
the fact is that there are more Americans who are poor, there are more 
Americans who are living on 1989 wages, there are more children in 
poverty today than there were 3 years ago or 4 years ago in this 
country, by a figure of about 400,000, and the fact that too many 
families are working too hard at the bottom level just to make ends 
meet.

  For us to backtrack on a fundamental commitment about the 
relationship of financial institutions within the communities in which 
they do business, would be to turn our backs on what has made America 
stronger and better. And I hope my colleagues will not do that. I yield 
the floor.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER (Mr. Sessions). The Senator from Texas.
  Mr. GRAMM. Mr. President, you will hardly know where to begin when 
you have listened to these speeches for a couple hours, and most of 
them have nothing whatsoever to do with what we are talking about on 
the floor.
  It reminds me of the old Lincoln adage, where Lincoln was engaged in 
a debate, and the guy debating Lincoln got up and gave a wonderful 
speech that had nothing to do with the subject being debated; and 
Lincoln got up and said that his colleague had given a wonderful speech 
that would be appropriate for another day and another occasion.
  I want to go through, roughly, 10 points that have been raised in all 
these speeches, and then go back to what we are debating.
  No. 1, we have had a lot of speeches for CRA. And one would get the 
idea in listening to these speeches that someone is proposing to repeal 
CRA. In fact, as far as I am aware, no one has ever offered an 
amendment or bill since 1977 proposing repeal of CRA.
  Whether the record for CRA is as wonderful as our colleagues have 
claimed, have we built more houses because the economy is better or 
because of CRA? Who wants to get into that debate? Because it is not 
relevant to what we are talking about, nobody is talking about 
repealing CRA.
  No. 2, nobody is talking about ``turning back the clock.'' What we 
are talking about is dealing with abuses that exist in the current 
system, and that can and should be fixed. One of those abuses basically 
has to do with extraordinary power that protesters and protest groups 
have at critical moments when banks are trying to make

[[Page S4769]]

decisions. The second has to do with the relevancy of CRA, and which 
banks under what circumstances have relevant requirements, and what are 
the regulatory burdens and costs involved.
  In terms of a point that was made way back so many speeches ago--I 
forget which one it was--that in 99 percent of the cases where banks 
apply to do something that requires CRA evaluation, nobody challenges 
that action, that is a very misleading number, really, for a number of 
reasons.
  First, most of these applications concern the opening or closing 
branches. They are not very relevant. It is basically the mergers and 
acquisitions that are relevant to CRS protests.
  Second, as I have pointed out on many occasions, most of the CRA 
action takes place not in the formal complaint, but basically when the 
protester goes to the bank threatening that unless the bank takes 
certain action, often giving that person money, that they are going to 
file a complaint. So it never shows up in the statistics. So that is 
all interesting but largely irrelevant.
  One of our colleagues said that I said, or someone had said, that CRA 
is just an extortion program. No one ever made that statement. What I 
have said is that CRA has become a vehicle where a tremendous number of 
actions occur that certainly look like extortion. When you look at 
contracts that are being signed, these individuals and groups are given 
large sums of money, and then they sign a commitment that they will 
withdraw their objection. That is a classic quid pro quo, that is the 
essence of extortion or bribery or kickbacks. There are a lot of names 
you can use. But no one has suggested any of them in this debate. Many, 
most, almost all of the people involved in CRA are conscientious and 
honest.
  We are talking about people here who are abusing the system. And even 
spokesmen for CRA, even spokesmen for community groups, say there are 
abuses, that the abuses undercut the system. As everybody who is on the 
Banking Committee knows, when the CRA advocates testified before the 
Banking Committee, a clear point was made that abuses do occur. They 
called the abuses ``greenmail.'' I think the standard term is 
``blackmail,'' but nobody disputes that they occur. What we are trying 
to do is to deal with them.

  In terms of half the banks being out of compliance, half the banks 
being affected, there isn't any proposal that would let half the banks 
out of CRA. Basically, the proposal in the underlying bill is that 
banks with less than $100 million in assets and which are also in 
nonmetropolitan areas, in rural areas, that these banks be exempt from 
CRA. Now, why?
  First of all, since 1990, over a 9-year period, there have been 
16,380 examinations of these small rural banks; 16,380 times Federal 
regulators have gone to these rural banks. They have sat down for days 
and weeks, looking through their records. They have done reports to 
determine whether these rural banks are lending in their community and 
meeting their community reinvestment requirements.
  After 16,380 examinations, only 3 banks have been found to be 
substantially out of compliance. The cost of complying with CRA for 
these examinations to the small banks has been roughly $80,000 a year, 
according to the 488 letters we have received from small banks on this 
subject.
  That is $1.3 billion of cost imposed on small banks. I have read at 
great length letters about how small banks can't serve their customers 
because they have to do all this paperwork and how it is interfering 
with community lending. I have read some passionate letters on this 
subject on the floor of the Senate in this debate. I am not going to 
reread them now.
  The point is, $1.3 billion later, 16,380 examinations later, crushing 
paperwork, cost burden on very small banks, many of them between 6 and 
10 employees, $1.3 billion of costs banks have paid, and only 3 small 
rural banks have been found to be substantially out of compliance.
  What does our bill do? It exempts from CRA very small, very rural 
banks. In total, in terms of the number of banks, that is about 38 
percent of the banks in America. In terms of available capital, as you 
can see from this chart, that is 2.7 percent of all the assets in all 
the banks and S&Ls in America.
  Now, the logical question is this: 44 percent of our auditing effort 
is going into banks that have only 2.7 percent of the assets, and they 
have been found to be substantially out of compliance only 3/100 of 1 
percent of the time. Is this not massive regulatory overkill? What does 
this have to do with meeting community needs for loans? If there has 
ever been an overreach in regulatory terms, imposing $1.3 billion of 
cost on little banks and little communities to turn up three banks in 9 
years that have been substantially out of compliance, this is 
regulatory overkill. We are trying to fix it.
  In terms of exemption based on a 3-year record, one of my 
frustrations in debating on the Senate floor--and I guess all of us can 
be accused of doing it; I try to, at least within my own mind, be 
careful about things I say. I try to put my argument in the best light 
I can. Everybody else does. I try not to say things I don't believe to 
be true. But we continue to hear these things like, if a bank has been 
in compliance three times, they are exempt from CRA. That is not what 
our bill does.
  Here is what our bill does. Let me explain the problem. In fact, let 
me have that quote from the law professor at Cornell. This quote is 
from Cornell law professor Jonathan Macey. Jonathan Macey is one of our 
Nation's premier experts in banking law and is very knowledgeable in 
this whole area of application of CRA. In evaluating what is happening, 
this is basically what he says:

       You see really weird things when you look at the code of 
     Federal regulations . . . like Federal regulators are 
     encouraged to leave the room and allowing community groups to 
     negotiate ex parte with bankers in a community reinvestment 
     context. . . . Giving jobs to the top five officials of these 
     communities or shake-down groups is generally high up on the 
     list (of demands). So, what we really have is a bit of old 
     world Sicily brought into the U.S., but legitimized and given 
     the patina of government support.

  Let me see those CRA agreements, if you will stack all those back up 
there one more time. I am going to zip through them real quickly.
  One of our problems in evaluating what happened to the $9 billion of 
cash payments that were made under CRA--something never contemplated; 
nobody on the Banking Committee in 1977, I don't believe, thought CRA 
would ultimately produce cash payments being made to individuals and to 
groups; they thought, as we have heard arguments all day, that CRA is 
about lending--we don't know where all this money goes. We don't know 
what percentage of rake-offs, for example, these groups get on loans 
banks make, because we don't have the records. These CRA agreements are 
confidential; they are not made public. That is something later that we 
hope to change.
  But let me just say, I have three pieces of CRA agreements. These are 
all private agreements where the parties have agreed not to make them 
public. We have redacted the names to protect the people who committed 
not to make them public.
  The point I am trying to make here is how far away from lending, as 
we conventionally know it, this is.
  This is from Bank A: Provide blank--this is the CRA group--with a 
grant of up to $20,000. Provide blank with a grant of up to $50,000. 
Provide blank with a grant of up to $25,000. And on this one they say 
why: to pay reasonable and necessary soft costs incurred. Provide blank 
with a grant of a reasonable amount.
  And then after they agree to pay that money, look at this provision: 
Blank agrees to withdraw on the date hereof the comment letter, dated 
blank 28, 19 blank, and any related materials filed by blank with the 
Office of the Comptroller of the Currency, the Federal Reserve Bank, 
and the board--and it goes on.
  The point is, on one page they give all these grants to groups, and 
then on the second page the groups agree to withdraw the complaints 
they filed against the action the banks want to make.
  Here is the point: Did the groups file the complaints to get the 
money? What about the legitimacy of the complaint? Did it go away when 
they got the money?
  It goes on. We are getting more and more of these every day. Then, in 
every one of these agreements we have seen,

[[Page S4770]]

there is an agreement by the community group or the individual and the 
bank not to disseminate or otherwise make available to the public 
copies of this agreement.
  Here is a second bank agreement, Bank B: Blank will receive a fee of 
2 and three quarters percent of the face amount of each program loan 
made by blank.
  Now, I wonder if people in that community realize that this 
undisclosed individual, or group, is getting a rake-off of 2.75 percent 
of the face value of every loan that is being made by this bank. Blank 
will receive a $200,000 fee as reimbursement, $100,000 payable fund, 
execution and delivery, $100,000 6 months from now. That is the quid. 
Here is the quo: The group commits to withdraw all pending protests of 
regulatory applications and related matters, but not to sponsor, either 
directly or indirectly, to protest or supply information in connection 
with any protest relating to the pending or future blank applications 
with bank regulators.
  In other words, it doesn't matter what abuses the bank might do in 
the future. They are never going to protest again because of this. At 
the request to send letters to the customers of the bank--well, let me 
go on. Not only do they agree never to protest again on any issue, but 
they agree to purge the files and data bases of all information 
relating to the bank's customers.
  Now, it goes on: to immediately cease all activities directed against 
the bank; to maintain the confidentiality of this agreement--they have 
confidentiality again here--and then: to cooperate with the community 
group, to help them use this agreement to leverage other financial 
institutions to get money from them. In other words, not only are they 
paying this money, they are going to help them get other banks to pay 
it.
  It is funny how little things grab you. Maybe it is just me, but this 
one hits me the hardest. I was wondering why we were getting these 
letters from banks in favor of CRA when the bank officers were telling 
me--and in some cases saying publicly--that CRA was blackmail. Yet, I 
was getting letters from these banks saying CRA is great. Well, here is 
the reason:
  Blank will work with the blank to establish a clear, written 
declaratory statement indicating support for the Community Reinvestment 
Act and the Home Mortgage Disclosure Act, and the party's opposition to 
any attempts to weaken the law. Blank will send the final copy of this 
statement to the blank.
  In other words, they will let them go over and rewrite the letter 
they are going to send. And they are going to send the letter to the 
American Bankers Association, Federal Reserve Board, Office of the 
Comptroller of the Currency, the whole congressional delegation of 
their State, and to all members of the House and Senate Banking 
Committees.
  So, Senator Bennett, when you got a letter from this bank telling you 
that CRA is the greatest thing that has ever been, you probably did not 
know that was the result of a CRA agreement so that a bank could do 
business in America. And we are not talking about Honduras; we are not 
talking about Thailand. We are talking about the United States of 
America, and we have banks--some of the richest and most powerful 
institutions in America--that are having dictated to them at this very 
moment that they have to write us letters telling us things they do not 
believe. How is that happening? How can that be happening in America? I 
ask you, how can it happen?
  Not only is it happening, it is being condoned because, as the law 
professor from Cornell said, we have given the patina of Government 
support to something that if it happened to an American bank in 
Thailand, we would file an unfair trade practice against them.
  So when you are getting all these letters telling you how wonderful 
CRA is from banks, remember this agreement. In fact, I received such a 
letter from a particular bank. Fortunately, to show you this is a very 
good and honorable bank, they say in their letter they have been forced 
to send this letter as a result of a CRA agreement.
  I discovered this letter because there was an editorial written 
attacking the bill quoting this bank, or this letter, interestingly 
enough. There was an editorial written quoting a letter from First 
Union Corporation, a wonderful, great bank. They were quoted in the 
editorial as saying how great CRA was and why we should not be making 
any changes to the bill. Well, I said I want to see this letter. So we 
got the letter. Let me read the first paragraph:

       As part of a CRA pledge we made during our merger with 
     CoreStates, First Union National Bank committed to send a 
     written statement to certain individuals or organizations 
     clearly expressing our position on CRA and HMDA regulations. 
     We, as an organization, are very committed to serving all of 
     our communities, including underserved areas. We are happy to 
     provide this statement.

  Then they go on to say that nothing in the letter is meant to be an 
endorsement or opposition to any particular bill. I know we have one of 
the most distinguished former prosecutors in America sitting in the 
Chair. I have to say--not to speak for him, because in his role as 
Presiding Officer, he can't speak until he comes down here--what is the 
difference between this and the old protection racket that existed when 
I was a child? I am proud to say that my uncles, as sheriffs and police 
officers, broke up some of those protection rackets. But the only 
difference is that this is Government; this is the Federal Government 
that is basically allowing this to happen.
  Now, we are not talking about repealing CRA. We are not talking about 
ending a program that obviously has had many successes. We are talking 
about trying to deal with abuse. So what are the two things we do? No. 
1, we say that if a bank has a history of being in compliance with the 
law, if they have been evaluated 3 years in a row and been found to be 
in compliance with CRA, and if they are presently in compliance with 
CRA, then any individual or group can protest, file a complaint; and 
under the existing regulations of the Comptroller of the Currency, 
there has to be a hearing for any complaint that is lodged.
  But what our amendment adds is the requirement that if this bank has 
a long history of being in compliance, before the regulator can stop 
the action that they have earned the right to undertake, the protester 
must present some substantial evidence. In other words, if you are a 
good actor and you have been evaluated 3 years in a row and were found 
to be in compliance, you are innocent until proven guilty. Somebody 
can't just walk in and say a banker is a racist and a loan shark.
  Some protesters have done exactly that. There is a CRA protester who 
calls himself an ``urban terrorist,'' who used those charges against a 
bank, harassed them for 4 years, went to a speech of the president of 
the bank at Harvard University, disrupted the speech, made this man's 
life miserable for 4 long years, until the bank gave him $1.4 million 
and a $200,000 grant and set up an organization that now lends $3.5 
billion, totally unregulated by the Federal Government. He gets a 2.75-
percent rake-off of each one of those loans, and nobody knows what he 
does with the money. He is not accountable to anybody.
  Now, all we want to do is say if a bank has consistently been in 
compliance and you want to stop them from merging with another bank, or 
opening a branch, you have to present some evidence. Now, what is the 
standard we have used? The Presiding Officer, as a distinguished 
attorney and former prosecutor, knows that substantial evidence is the 
most defined term in American law. It is referred to over 900 times in 
the United States Code.
  There have been 400 court decisions that have defined ``substantial 
evidence.''
  So what standard do we require a protester to meet if he tries to 
impose potentially hundreds of millions of dollars in costs on a bank, 
and to stop a bank from doing what it appears to be qualified to do? 
They have to present evidence.
  Here are four standards set by the Supreme Court as to what 
``substantial evidence'' means:
  They have to present evidence that is understood to mean ``more than 
a mere scintilla.''
  That is a standard we are setting. You can't come in and stop a bank 
with a consistent record of CRA compliance. You can't automatically 
stop, shut down, and delay the process unless you present evidence that 
is ``more than a mere scintilla.''
  Unless you present such relevant evidence as a ``reasonable mind 
might''--

[[Page S4771]]

notice it didn't say ``would,'' but ``might''-- ``accept as adequate to 
support a claim.''
  You have to present evidence that is real, material, not ``seeming or 
imaginary,'' and considerable in amount, value, and worth.
  Why in the world would we stand by and allow a bank that has complied 
with the law of the land and been evaluated three times in a row as 
being in compliance to be prevented from exercising a right they have 
earned unless somebody presents credible evidence, substantial 
evidence, to the contrary? I don't understand. Why would anybody be 
against this change?
  I continue to be stunned that our colleagues talk about CRA and how 
wonderful it is. That is not what we are talking about.
  Should you have to present some evidence if you are going to try to 
deny people the rights they earned under the law? How can that be 
unfair? How can that be reaching? How can that be burdensome? Who could 
be against that?
  The second provision of the bill provides relief to small banks in 
rural areas. I have gone through the figures: $1.3 billion later, in 
this decade of audits and costs imposed on the banks, three small rural 
banks--three one-hundredths of 1 percent--are bad actors. Is that not 
regulatory overkill?
  We have forced little banks, many with just 6 to 10 employees, to pay 
$1.3 billion in compliance costs, and in 16,380 examinations, only 3 of 
them have been deemed to be substantially out of compliance. Does that 
make sense? Is that crazy? Did I miss something?
  I could read to you letter after letter. We have had 488 letters from 
banks urging the committee to take this action. I have read them 
before; I will not do so again.
  Finally, let me remind my colleagues that the amendment that is 
pending doesn't just strike these two provisions--the ``integrity and 
relevance'' provisions--it does far more than that. It would create a 
situation where individual officers and directors of a bank could 
potentially be fined up to $1 million a day for noncompliance.
  Remember, in these little banks you have 16,380 examinations over the 
decade, and just 3 banks have been found to be substantially out of 
compliance. What is the justification for this $1-million-a-day fine?
  I have letters from the American Bankers Association, and from the 
Independent Bankers Association, pointing out the obvious.
  This provision that has been offered by our colleague from Nevada, 
and was offered in committee by Senator Sarbanes, will make it 
virtually impossible for small banks to get quality directors, because 
who can afford that potential liability? It will make it virtually 
impossible for small banks, who can't buy the insurance to protect 
people from liability, to hire quality bank officials.
  The bill goes on and on and on in the most massive overkill of 
expanding CRA to nonbanking activities. Currently, a bank can sell 
insurance without CRA approval. This substitute that is now pending 
would require CRA approval for that. Banks can sell securities without 
CRA approval. This takes CRA out of banking and into other areas.

  What is the justification for that? The justification for requiring 
CRA was that banks have a federal subsidy through deposit insurance. So 
that is public insurance, and making banks do things in the public 
interest could be justified. But how does expanding that requirement 
outside banking make any sense? Are we simply going to keep writing 
laws telling people what to do with this money?
  Basically we have a choice. The choice is the following:
  Both of these provisions concern CRA. The bill that was adopted by 
the Banking Committee has two reforms--one an integrity provision, and 
one a relevancy provision. The amendment that has been offered strikes 
both of those reforms and imposes all of these new regulations.
  So I think it is as clear a choice as you can make.
  Just a couple of other points, and I will stop, because I know that 
others want to speak. One of our colleagues quoted the Wall Street 
Journal. The Wall Street Journal has editorialized not once but twice 
in favor of the position the committee has taken here.
  I urge my colleagues again to look at the debate--not get carried 
away or be confused by people who say the committee has gutted CRA, is 
killing CRA, or is repealing CRA. We are not doing any of those things. 
But we are dealing with abuses of CRA. They need to be dealt with. They 
scream out to be dealt with.
  If I could make a plea to the other side, it would be a simple and 
short plea: If we don't fix the abuses of CRA, by the time we are 
through letting people know what is happening in terms of these $9 
billion of cash payments, and by the time we finally do run down and 
know where all of this money is going, and we find that much of it--or 
some of it--is not being used to benefit people who are supposed to be 
benefiting from community loans, I think it is going to undercut CRA.
  If I were a strong proponent of CRA, I would be for these reforms, 
because they clean up a program that clearly has had an impact. But our 
colleagues--as they did on welfare--it was abused and abused and abused 
and abused and abused. But they would never ever, ever, ever say that 
it should be fixed. Finally, the American people rose up and elected a 
new Congress. We are probably in the majority because of their 
intransigence. So God does provide His services from time to time. And 
then it was fixed. They probably could have had it closer to what they 
wanted had they been willing to fix it.
  But the position we have heard today over and over is, never ever, 
ever, ever will we allow any change whatsoever, no matter how bad the 
abuse is in CRA.
  I don't understand it. I think it is an extreme view. I hope that 
even yet, by the time we get through conference, by the time we have 
had a chance to discuss this over many more times, perhaps there can be 
a compromise.
  I yield the floor.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.


                         Privilege Of The Floor

  Mr. DODD. Mr. President, I ask unanimous consent that Karen Brown of 
my office, a fellow, be granted floor privileges during the 
consideration of S. 900.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, will the Senator yield to me for 2 
minutes without losing his right to the floor?
  Mr. DODD. Fine.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I have refrained from taking a lot of 
debate time this afternoon, because a lot of our colleagues want to 
speak. I recognize that. Of course, the temptation is very great to 
sort of rise every time the chairman of the committee speaks. He has 
done that at some length here this afternoon. So I am not going to do 
it now, because I have colleagues here. I hope before we get to 7 
o'clock I will get a chance to have a few minutes to make a statement.
  But I want to say that there is kind of an Alice-in-Wonderland 
quality to this debate. The chairman pulls these figures out of the 
air. I don't really know where they come from. I asked him where they 
come from. He says there have been 16,000 something examinations of 
banks under $100 million in nonmetropolitan areas.

  I don't know where he gets that figure. The figure from the Federal 
Deposit Insurance Corporation is 11,445. He says only 3 have been found 
in substantial noncompliance; the figure is 18, and another 320 have 
been found a need to improve. This chart is from the FDIC.
  The Chairman says only three--it is not only three. I want to make 
that point.
  Mr. GRAMM. Will the Senator yield?
  Mr. SARBANES. I yield.
  Mr. GRAMM. These are figures from the interagency CRA rating.
  Mr. SARBANES. The Senator said earlier today that the cost this is 
imposing on small banks is $1.3 trillion.
  I am thinking to myself, $1.3 trillion from these examinations? So I 
asked him, How did you get that figure? He took the number of 
examinations--about which we have just disagreed--and he multiplied it 
by 80,000. I am not sure where he got the 80,000 figure. Someone must 
have written in and said: That is what it costs our bank.
  Mr. GRAMM. That is right, a small bank said that.

[[Page S4772]]

  Mr. SARBANES. I don't know any study that validates that figure as 
the right figure.
  Even assuming for the purpose of this Alice-in-Wonderland discussion 
that both the number of exams and the costs which we were then told 
came to a $1.3 trillion burden, the fact is, it is $1.3 billion. That 
is still a lot of money. I don't pretend to the contrary, but it is a 
lot different from $1.3 trillion. It was escalated 1,000 times.
  Let me give one other example. We were told the CRA is allocating 
more money each year than the gross domestic product of Canada. The CRA 
commitments are over a 10-year period. Those commitments, factored out 
over a 10-year period, do not begin to approach the gross domestic 
product of Canada.
  These are only a few examples. We could give a lot more. I want to 
underscore these figures that come floating in out of the air, and we 
hear this long disquisition. When we start probing these figures, we 
discover it is not there; it is Alice in Wonderland.
  I thank the distinguished Senator.
  Mr. DODD. Mr. President, I rise in support of the Bryan amendment. My 
fervent hope is that we can adopt this amendment and move on with 
passage of this bill. There are other outstanding issues that need to 
be resolved. No issue is as galvanizing or as important as this issue 
of the Community Reinvestment Act and how it is to be handled.
  My friend from Texas, the chairman of the committee, and I have 
worked very closely together over many years. We have been each other's 
chairman and ranking minority member, depending on who was in control 
of this August body. We have dealt with securities matters, we have 
written legislation together, passed it together here on the floor, 
carried it through conference, overrode the President's veto--the only 
time a veto by this President has been overridden.
  It is not easy for me to disagree with a man with whom I have agreed 
on many occasions in dealing with financial issues. However, on this we 
have a fundamental disagreement. I listened for a good part of the 
chairman's presentation, especially the last part of the presentation 
dealing with the alleged abuses that have occurred. I know of nothing 
in the bill violating existing federal laws on extortion. We may do 
some things in this bill Members do not want, but to the best of my 
knowledge the criminal code is left intact. Nowhere in this bill do we 
touch on the issue of whether or not people are going to be excused 
from engaging in extortion, blackmail, green mail--call it what you 
will.
  The suggestion that there are serious violations of law--State and 
Federal that I know of--ought to be brought to the proper authorities. 
If someone believes they have been extorted, then we have Federal 
prosecutors and State prosecutors to bring those matters to the light 
of day and those accused can be brought to the bar of justice.
  Second, I have never known the banking community to be terribly shy 
about things that they want. They are usually pretty vociferous. They 
are never reluctant to tell us how they want us to vote on matters that 
affect their institutions. They lobby quite effectively. They do a good 
job. The idea that the banking constituency, the thousands of banks all 
across this country, are somehow afraid of some community-based groups, 
and would not bring to light their concerns because of fear of some 
retribution, just doesn't hold up when it comes to how the banking 
community generally makes its concerns known.
  The fact of the matter is, here on this issue there really is not a 
constituency for the provisions in this bill dealing with CRA. Usually 
we have a litany of organizations that are in favor of or against a 
provision, organizations and groups which have felt outraged or 
discriminated against in some way and will stand up and defend in a 
very loud and clear voice their rights or how their rights are being 
infringed upon.
  In the last almost 6 hours of debate, I defy anyone to show me a list 
of organizations here across the country that feel as though the 
Community Reinvestment Act is somehow a great infringement on their 
ability to conduct their business. It is nonexistent. In fact, the only 
time we have ever actually voted on these matters prior to today is 
when the House Banking Committee recently voted--51-8, Democrats and 
Republicans, voted for provisions we are seeking here contained within 
the Bryan amendment. The Banking Committee last year voted 16-2, 
Democrats and Republicans, in favor of the provisions that we are 
trying to reinsert into this legislation. There is overwhelming 
evidence from the Federal Reserve Board, the banking regulators, banks 
all across the country, that the Community Reinvestment Act is working, 
and working well.
  Let me quickly add I have never met any institution which was overly 
enthusiastic about any regulation--State, local or Federal. They 
usually do not welcome these and I understand why. There is a cost 
associated with it. I appreciate that they try to keep their costs 
down.
  Most banks, certainly in my State, have been active in our community 
and do a great deal of good. However, as the Presiding Officer who has 
been identified as a distinguished scholar of the legal codes of our 
country knows, we do not write laws for the overwhelming majority of 
Americans who obey the law, who try to do the right thing. Laws are 
written for those who try to abuse what we believe is proper behavior. 
Only a small percentage of Americans violate the law. But that is not 
an excuse for not writing laws, because, unfortunately, some do in fact 
break the law.
  So when it comes to the Community Reinvestment Act, we seek here not 
to lay a burden on the overwhelming majority of banks who do a good 
job. We must recognize that there are institutions which have 
discriminated against various groups in this country based on race, 
religion, ethnicity. So several years ago, we decided to enact the 
Community Reinvestment Act to require that lending institutions, 
depository institutions, pay attention to our nation's underserved, pay 
attention to our small farmers, and pay attention to our small 
businesses. If you are going to do business in Alabama or business in 
Connecticut as a depository institution, we do not want you to neglect 
the people in your communities, in your States, on any basis.
  So we passed CRA and it has worked well. My colleague from Texas has 
said that there are extortionate practices ongoing. Let me quote him, 
from a statement made last October. The chairman of the committee said:

       It has now become common practice in CRA for professional 
     protest groups to protest a bank's community service record 
     and in turn to use the leverage of those protests to extract 
     bribes, kickbacks, set-asides in purchases, quotas, hiring 
     and promotion, none of which has anything to do with CRA and 
     the lending practices of banks in the communities that they 
     serve.''
  It is a pretty broad statement. Now, let me give you the facts. Mr. 
President, four-tenths of 1 percent--let me repeat that, four-tenths of 
1 percent of applications have resulted in agreements with community 
groups; four-tenths of 1 percent have resulted in these agreements. We 
have had them up here on placards and the easel here today. A great 
amount of time has been spent talking about these outrageous provisions 
in these agreements. If one sort of casually tuned into the debate the 
assumption would be, as the Senator from Texas has said: It is common 
practice. Common practice? Four-tenths of 1 percent of all the 
applications? Under any estimation that is not a common practice, less 
than 1 percent of all the applications.
  During the past 21 years, there have been approximately 360 
agreements reached. How many applications do you think there have been 
in the past 21 years? Mr. President, 86,000; 86,000 applications and 
360 agreements. When you stand up here for an hour and a half or so and 
list these agreements that have been reached, you leave our colleagues 
and others with the impression that this has, to quote my friend from 
Texas, ``become common practice in CRA.'' That is an exaggeration. That 
is an extreme exaggeration.
  I do not like what I heard in these agreements. It bothers me a bit. 
I would like to know more about it. A great deal of information was 
redacted. We do not have the whole agreement. But I tell my friend from 
Texas, I am concerned about it, too, and we ought to take a good look 
at this. Let us remember, however, that we ought to take a look at the 
360 agreements, and

[[Page S4773]]

many of those probably are proper and worthwhile agreements. In fact, 
many lenders also require counseling for certain loan practices because 
they improve the quality of loans. To meet commitments, banks sometimes 
provide payments to community groups for services provided. It is not 
some outrageous behavior. It goes on all the time. But, nonetheless, if 
problems exist, let's look at them.
  But with all due respect to my good friend from Texas, it appears as 
though we were sort of squirrel hunting with a machine gun here. That 
is not what his amendment or the language of the bill does. All we are 
saying here is we want to preserve the Community Reinvestment Act in a 
new financial framework. This modernization bill allows for the 
consolidation of financial services. If we are going to do that--and I 
think we should, I am a strong supporter of it--then it seems to me we 
should be preserving the Community Reinvestment Act to ensure that we 
do not have discrimination in lending. We must ensure that Hispanics, 
African Americans, Asian Americans, and Native Americans, as well as 
small businesses and small farmers, are not going to get short shrift. 
We are going to have a lot of large institutions, a lot of large banks. 
We want to make sure the average citizen is not going to find himself 
or herself denied fair access to credit. That is what the Community 
Reinvestment Act has been able to do for millions of Americans.
  I listened to my colleague from Massachusetts and others here today 
go over the statistics of how vastly the availability of credit has 
increased to groups who in the past were denied those opportunities. We 
in this country cherish the notion of equal opportunity. We have never 
achieved the perfection that our Constitution and our Founding Fathers 
sought in creating equal opportunity for every citizen in this country, 
regardless of where they come from or the color of their skin. We all 
know, painfully, the discrimination that existed for a long time in all 
parts of our country.
  Let me reiterate--all parts of our country. I could take you to the 
Northeast. You do not have to go to the home of my friends from the 
South in this country to find discrimination in lending. In 
Connecticut, a year or two ago, you could see the redlining that went 
on. People talked about this being a southern issue. That is untrue. I 
could take you to places all across this land where redlining occurred, 
where neighborhoods and communities were denied equal opportunity. If 
they are creditworthy people, they ought to get the credit and 
financing to buy a home, start a business, and get on their feet. 
Because of these discriminatory practices, we passed the Community 
Reinvestment Act. It has made quite a difference in our country. It is 
not a perfect condition yet, but we have reached into the communities 
of people who never had a chance before and they have a chance today.

  Now we are going to allow these institutions to affiliate, and engage 
in new financial activities. With this legislation, are we now going to 
deny them the very benefit that the Community Reinvestment Act has 
afforded during the past 22 years? I do not think we ought to deprive 
them of that.
  That is what the Bryan amendment attempts to address in part. It says 
we ought not to exclude certain creditworthy consumers in the process 
of allowing banks to expand in these new financial areas. To suggest 
that the extortion of banks by community groups is somehow a common 
practice--again, four-tenths of 1 percent, 360 applications out of 
86,000, is not legitimate. Under anyone's estimation, that is not 
justification for weakening the Community Reinvestment Act in the 21st 
century.
  Again, there is no constituency here. Most people, I think most of my 
colleagues from all across this country, believe the Community 
Reinvestment Act is doing a good job. Nobody here wants to be on the 
side of an equation that says: Having made these gains now we are going 
to turn back the clock. We should not do that. I do not believe the 
people who have communicated with us, who write us--bankers, 
consumers--said that.
  One of the things we need to keep in mind as we talk about banking 
legislation and financial institutions in general, is that one of our 
major responsibilities is to ensure that our nation's financial 
institutions are going to work well. So we pay a lot of attention to 
their needs, as we should. But we also need to pay attention to the 
people who do business with our financial institutions. They are an 
important part of the equation here as well. Let us not forget the 
people who show up at that bank window, who go in nervous about whether 
or not they can get a home loan. Let us not forget the person with a 
good idea to start a business who needs to know if that local banker 
will take a chance on him, back him, give him a chance to get on his 
feet. Those are our constituents, too. They are a fundamental part of 
this equation.
  It is not just the person behind the grate; it is the person in front 
of the grate, too, who we have an obligation to watch out for when we 
pass financial services modernization legislation. It is those people 
out there tonight who would like to start a new business, buy a new 
home, get a chance to share in the American dream. And the Community 
Reinvestment Act has been the engine for many achieving those desired 
results.
  Again, in the past, we have seen votes of support on CRA by our 
colleagues, Democrats and Republicans. It would be a great pity, 
indeed, for this bill to fail over this issue.
  It would be a great pity, indeed. This issue ought not to be the one 
that causes this bill either to be defeated or to be vetoed by a 
President and sent back after all the years we tried to get this done.
  We are 240 days away from the next millennium, the year 2000. The 
world and its financial markets are getting more complicated. The 
United States of America has always been a leader in financial 
services. I do not want to see us lag behind because we couldn't come 
to terms with what is essentially a fundamental civil rights issue. I 
do not want to see us lose our leadership role in the global 
marketplace because we decided we were not going to expand the equal 
opportunities that are so much a part of this country's heritage. I am 
concerned that we are willing to give up all the other things we are 
trying to achieve in financial modernization over CRA provisions that 
are not supported by the banks they purport to help.
  In fact, Mr. President, I will include in the Record, and others have 
already, countless statements from many others-- the Federal Reserve 
Chairman, the Treasury, and major banks in all parts of this country 
who have said the Community Reinvestment Act is working. Sometimes 
conflicts occur; it is difficult. Sometimes we have two groups we 
admire and support, that are fighting hard for their points of view, 
and we are asked to make a choice between them. That can be a hard 
decision.
  This is not a hard decision. There is no one on the other side of 
this equation. Yet we are dangerously close to killing an otherwise 
great bill that does a lot of good things.
  As I said a moment ago, we have an obligation to make sure our 
financial institutions are strong. We have an obligation as well to see 
to it that the users of these financial institutions are not going to 
be adversely affected by legislation we pass.
  Let me focus for a second on the small, rural bank exemption that is 
included in this bill. The bill exempts rural banks with less than $100 
million in assets from the requirement of CRA. This exemption addresses 
that there is some undue burden imposed on small banks complying with 
CRA, and there may be some merit in that. But the provision in this 
bill which the Bryan amendment would take out exempts 76 percent of 
rural banks from CRA, 38 percent of all the banks and thrifts in the 
United States.
  Again, I can understand if you just hate CRA, you just think it is a 
bad idea and we ought to get rid of it. Then I accept that--I disagree 
with it, but I accept your position. But if you believe CRA makes a 
difference and it actually helps rural people have greater access to 
fair credit, then you must acknowledge that this bill exempts 76 
percent of rural banks in this country. Virtually one out of every 
three banks in the country will be exempt from CRA. That seems to me to 
go too far.
  CRA loans in rural areas assist small farmers in obtaining credit. 
Small bankers have historically received

[[Page S4774]]

lower CRA ratings, quite candidly, than larger banks and have invested 
less in their communities. On average, 50 percent of large banks have a 
loan-to-deposit ratio below 70 percent. 25 percent of small banks have 
a loan-to-deposit ratio of less than 58 percent.
  The supporters of the small bank exemption contend the CRA creates an 
onerous regulatory burden. However, the federal banking regulators 
specifically reduced the regulatory burden on banks when the new CRA 
enforcement rules went into effect 3 years ago. These efforts 
streamlined CRA, facilitated easier compliance by lenders, and reduced 
paperwork requirements.
  Addressing the specific point the Senator from Texas made that 
sometimes these banks have a few employees--and, again, I do not want 
to overload that small bank--in 1996 we streamlined that process 
considerably for them.
  If there are some other ideas that will help achieve that, I think we 
ought to listen to them. Again, think not only about the 8 or 10 
employees of that small bank, but think about those small farmers who 
do not have any other choice but to do business at that bank. Small 
communities do not give you much of a choice. Your local farmers in 
Alabama or Connecticut have one bank to go to. It is not like living in 
New York City or Washington, DC, where you can walk down the street and 
compare which bank will give you the better deal.

  Under this bill, if you have only one bank window to go to, and you 
are living in rural America, you will be told that your bank is exempt 
from having to see to it that you are going to be dealt with fairly. 
There is something seriously wrong here.
  Streamlining the process for rural small banks is something I 
applaud; it is something we ought to move ahead on to make it easier. I 
do not want people to be denied options, denied choices, and to be 
discriminated against when it comes to getting the credit they need.
  According to Christopher Williston, the president of the Independent 
Bankers Association of Texas:

       Most small banks are really very accustomed to complying 
     with CRA. . .. Now they know exactly what the regulators are 
     looking for, many of my members would say CRA is here and I 
     can live with it.

  Mr. President, again, if there are specific problems with the 
implementation of CRA, if there are certain activities that should be 
considered that are not considered, then the appropriate way to address 
those specific concerns is to work with the regulators or come up with 
a specific legislative approach.
  The Senator from Texas, our distinguished chairman, should remember 
our conversations to address this and have some hearings to look into 
the issues he raised.
  Again, don't exaggerate and turn four-tenths of 1 percent of the 
applications into a common practice, and then miss the opportunity to 
include reasonable CRA provisions in this consolidation of financial 
services.
  I hope there will be enough votes on the other side to support the 
Bryan amendment. I am fearful if we do not do so, this bill is doomed. 
I mentioned at the outset of my remarks the other day that my colleague 
from Maryland and I have been at this together for the full 18 years I 
have served in the Senate. He has been at it longer than that, having 
served a bit longer than I have in the Senate. Nothing--nothing--would 
make me happier than to pass this bill and expand and consolidate 
financial services to serve consumers' needs and keep America in a 
leadership position on these issues.
  However, I cannot support a bill that turns its back on my 
constituents at home. I want to help my financial institutions in 
Connecticut. I want to help banks across the country. But I cannot, in 
doing so, turn the clock back on the gains, on the strengthening of 
America that we have made with the Community Reinvestment Act.
  Whatever shortcomings it has--and I am certain they are there, CRA is 
not perfect--let's fix the shortcomings. Let's deal with those, but do 
not deprive people in this country of the increased opportunities. We 
have a CRA bill on the books that has worked well, even by those who 
must bear the burden of implementing these regulations. We must no 
place in jeopardy an otherwise fine bill that, in my opinion, deserves 
broad-based support in this Chamber and the other body.
  I hope that we will stand at 7 p.m. tonight when the votes are cast, 
in what may be the only civil rights vote of this Congress, and the 
Bryan amendment will be adopted. Maybe other civil rights votes will 
come along, but as of right now, this will be the only test as to where 
people stand when it comes to seeing that equal opportunity in America 
is going to be at least preserved in this Congress and not set back.
  I hope at 7 o'clock, when the vote begins and as Members come to the 
Chamber to cast their ballots, they will keep in mind the importance of 
this bill. And to a far greater extent, keep in mind those who depend 
upon us to see to it that they are going to have equal opportunity in 
America, a chance to participate in the American dream in the 21st 
century, and will not be denied because of an action we take tonight by 
denying the preservation of CRA in a new financial services framework.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The Senator from Utah.
  Mr. BENNETT. Mr. President, I have listened to this debate with some 
interest. I have enormous respect for members of the Banking Committee 
on which I have served since I came to the Senate. I know there is good 
intention on both sides of the issue, on both sides of the aisle.
  I echo the comments of the chairman of the committee in that much of 
the debate that I have heard has been focused on the wrong issue; that 
is, you would think that this was an attempt on the part of the 
majority in the committee to repeal CRA. I do not condone redlining. I 
recognize that the decision which was made by the Congress in 1977 to 
create CRA was motivated by a genuine abuse that required a genuine 
Federal fix.
  At the same time, I recognize also that under Secretary Rubin's 
leadership, attempts have been made to alleviate the regulatory burden 
of CRA, that there has been a recognition on the part of this 
administration--I think belatedly, but nonetheless I will accept it 
whenever I can get it--a recognition that CRA has gotten out of hand 
and has become, in some instances, a paperwork burden that is 
nonproductive and anticompetitive and puts an undue burden on places 
where it should not be.
  The question is not, Should we abolish CRA? The answer to that is 
clearly no. The question is not, Should we turn our backs on those 
people who have been benefited by CRA? The answer to that is no.
  The question is, Can we streamline CRA, as we are going through the 
process of modernizing our financial institutions, in a way that 
recognizes the reality of the marketplace? And there the answer is yes.
  One of the criticisms which has been made, and I think with some 
justification, is that a good part of the debate has been anecdotal; 
that is, one situation has been described, and we extrapolate from 
that, and then another has been described, and we extrapolate from 
that.
  I agree with those members of the committee who have suggested at 
some point it would be well for the committee to have hearings on the 
whole CRA matter and examine it at great detail. I think that is a 
salutary thing to do.
  But we have an opportunity here in this bill to take some steps which 
I consider to be relatively modest and relatively straightforward. The 
one I want to focus on is the exemption of CRA, the CRA requirement for 
institutions that have $100 million or less in aggregate assets.
  I want to share with the Senate the reaction of banks from my home 
State that have been contacted about this. And this is their 
information. This is not some professor at some university. This is the 
everyday banker doing business in the everyday community. And I will go 
beyond simply quoting the letters because I want to put it in context 
so you can understand the market.
  I have said around here before--and undoubtedly in the spirit of the 
Senate where there is no such thing as repetition--I will say, again, 
that if I could control what we engrave in the marble around here to 
remind us of our duty--not to denigrate the marvelous phrases

[[Page S4775]]

that are here--I would have engraved in stone, at least in our 
committee rooms, the phrase: ``You cannot repeal the law of supply and 
demand.''
  We try to do that continually in Congress. We try to think that 
markets do not matter, that governments are smarter than markets, that 
governments can make decisions that interfere with the law of supply 
and demand and produce beneficial results with no side effects. People 
have been trying to do that in government not only for centuries but 
for millennia. And they always fail.
  Here are the market realities with respect to CRA.
  I first quote from a letter of the Cache Valley Bank. No one in this 
Chamber knows where Cache Valley is; but I know where Cache Valley is. 
I have spent a lot of time there. My family has done business there. We 
have owned a business there. The president of the Cache Valley Bank 
says in his letter:

       Our community is a middle class farming community with a 
     university. Most all of our customers are of modest income, 
     small businesses and small farms. The rich professionals have 
     gravitated to the local credit unions where they know they 
     can get something for nothing.

  That last sentence indicates how he feels about the competitive 
impact of credit unions in Cache Valley.
  He says:

       We are chartered to serve our community. We have no 
     business going outside our community. We live off the ability 
     to say we are a hometown institution.

  Let me underscore that last sentence again. ``We live off the ability 
to say we are a hometown institution.''
  In Cache Valley, there are branches of large banks, large banks that 
are located someplace else. There are, as an earlier somewhat sarcastic 
comment indicated, credit unions. They happen to be very large credit 
unions. We have some of the largest credit unions in the United States 
in Utah because of Utah's law. There is competition in Cache Valley for 
the banking customer.
  How does he deal with that competition? He says:

       My bank is . . . a $90 million institution operating from 
     one office . . .

  One office--so he does not have branches around the city. The credit 
union does. He does not have the reach of advertising that the large 
banks which are there as his competition do. He has one office. And he 
makes his living advertising himself as a hometown institution.
  This, in marketing, is what is known as a marketing niche. He 
recognizes that he cannot compete with the big banks throughout the 
entire city. He recognizes that he has a particular niche in the market 
that he can fill, and he goes after it and he fills it.
  He says:

       We do what the CRA regulation intended us to do because it 
     makes good sense. The documentation and time spent telling 
     the regulators that that is what we do is just wasted by both 
     us and the regulators. I have never had a customer come in 
     and ask to see our CRA file.

  Then, with the optimism that comes from every small businessman, he 
says:

       As I will probably [pass] the $100 million proposed limit 
     some day, I can see that not having to comply would give 
     smaller institutions a slight advantage from costs they would 
     save. The real issue is if the whole rule for community 
     oriented institutions makes any sense. It doesn't and no one 
     has provided any evidence that it does.

  He is not operating in a vacuum. He is not operating in a situation 
where there is no credit available to anybody else if he does not serve 
his niche. He is operating in a highly competitive situation, and yet 
he is examined as if he is the only institution, and he is looked at in 
terms of his lending to his market niche.
  All right. Let me go down the highway a little from Cache Valley to 
the First National Bank of Morgan. This is a smaller bank. This is a 
smaller community. The president of this bank says that they have $37 
million in current assets. They serve a county, the population of which 
is approximately 7,000. In Utah, given our family size, a total 
population of 7,000 means that there are probably about 2,000 families 
there. I do not know how many of those are borrowers. This is a 
relatively small base for him to serve.
  Once again, while it is an isolated farming community, in today's 
modern world there is competition there. The big banks can go after his 
customers on the Internet if they want. They can open ATM stations or 
put branches there, if they want. There is a big bank just down the 
highway, within 20 miles of this small institution. How does he survive 
under these competitive conditions? He survives by serving the 
community. This is what he has to say:

       Exempting our institution from CRA requirements would allow 
     bank personnel to spend more time with our customers in 
     developing new products rather than gathering information to 
     satisfy CRA documentation requirements. Competition is the 
     greatest enforcer of CRA. The delivery of financial services 
     is a highly competitive business. If my institution is not 
     offering free checking or mortgage loans, then my competitor 
     down the road will be taking advantage of my financial 
     institution's shortcomings.

  I think he is absolutely right. In today's competitive world, you do 
not operate in a vacuum. If he wasn't doing his job, even though he is 
in a small, rural community, with Internet banking and advertising over 
television, the large institutions would come in.
  It is interesting, again, referring to Utah's somewhat unique 
situation, in many communities where the local bank was perceived as 
having something of a monopoly or a free ride in the community because 
of the physical isolation, it was not another bank that came in to 
offer competition; it was a credit union, operating under Utah's credit 
union laws. The competition produced the kinds of challenges that 
competition always produces. Once again, you cannot repeal the law of 
supply and demand. If there was demand in that community that was not 
being met by the local institution, competition came in and met it.
  Now, a little further down the highway, I want to refer to the 
Frontier Bank of Park City. Here the president of the bank says:

       As president of a nonmetropolitan community bank, I am of 
     the opinion that existing CRA regulations are largely 
     superfluous for both my institution and its direct 
     competitors. The fact remains that we have and will continue 
     to lend to all segments of our community because it is good 
     business, not because it has been defined by regulation. 
     Additionally, the time spent documenting our community 
     lending efforts for regulatory purposes is in itself 
     counterproductive as we could instead redirect our energies 
     towards additional lending and community development 
     activities.

  An interesting quote, Mr. President. He feels that CRA gets in the 
way of community developing activities that he would otherwise engage 
in.
  When I first went on the Banking Committee, some 6 years ago, I had 
never heard of the CRA. I heard at that time institutions coming in and 
complaining that the CRA documentation burden was overwhelming and that 
CRA had become more of a documentation issue than it had been a lending 
issue, that if they could fill out the documents in such a way as to 
satisfy the regulators, it didn't matter what their lending practices 
were.
  We had some testimony--I can't go back and put my hand on it now--
that made it clear that CRA was failing in its purpose to produce a 
meaningful impact for those in need in communities where they were not 
getting served.
  I am hoping that the reforms established by Secretary Rubin have 
begun to lift that burden and change that situation, but I am satisfied 
now that we have enough evidence that indicates that the vast majority 
of small banks with capitalization under $100 million are spending 
their time on CRA, filling out documents and meeting with regulators, 
spending their time performing the bureaucratic chores necessary to 
file a report, where they could be spending their time better serving 
their communities.
  Therefore, I will vote to see to it that the language that was 
adopted in the committee report remains there. I will oppose the Bryan 
amendment.
  Mr. LEVIN. Mr. President, I rise to speak about the Community 
Reinvestment Act. The CRA was enacted in 1977 to encourage banks to 
serve the credit needs of the entire community including low and middle 
income areas. The obligations that banks owe to the entire community 
stem from their charters and the public benefits they receive through 
the Federal Reserve. The CRA is a way to encourage banks to live up to 
their public obligation.
  Nationwide the CRA has been recognized as an effective way to 
increase credit availability in underserved

[[Page S4776]]

areas. In his testimony before the House Banking Committee in February, 
Federal Reserve Chairman Greenspan remarked, that the CRA has ``very 
significantly increased the amount of credit in communities'' and the 
changes have been ``quite profound.'' In 1997 alone, almost 2,000 banks 
and thrifts reported $64 billion in CRA loans, including 525,000 small 
business loans worth $34 billion; 213,000 small farm loans totaling $11 
billion; and 25,000 community development loans totaling $19 billion. 
Those loans went to affordable housing projects, economic development 
through financing small businesses or farms, and activities that 
revitalize or stabilize low or moderate income areas. CRA has also 
encouraged a dramatic increase in home ownership by low and moderate 
income individuals. Between 1993 and 1997, private sector conventional 
home mortgage lending in low and moderate income census tracts 
increased by 45%.
  And the CRA has done so without forcing a large paperwork burden onto 
banks and without forcing banks to make bad loans. During the same 
House hearing, Chairman Greenspan alluded to the mutual benefit of the 
CRA to consumers and banks when he said, ``CRA has helped financial 
institutions to discover new markets that may have been underserved 
before.''
  While there are countless examples of the Act's effectiveness in 
encouraging lending in underserved areas all over the country. Here's 
some examples from Michigan. Lake Osceola State Bank in Baldwin just 
completed their CRA exam under the reformed 1996 regulations. They said 
it was not a burden, and they received a rating of outstanding. Under 
the terms of S. 900, the bill before us today, Lake Osceola State Bank 
would qualify for an exemption from the CRA because of their size and 
location, but the bank has told my office that they are not seeking a 
CRA exemption. To the contrary, they are justifiably proud of the 
contributions they are making to community development in the Baldwin 
area.
  We Care, Inc. is a small non-profit that rehabilitates a few houses a 
year in Detroit's Van Dyke and 7 Mile area. They say the CRA and 
National City Bank have been their life-line for credit.
  Northwest Detroit Neighborhood Development, Inc. is yet another 
nonprofit organization that has contacted me in support of the CRA. 
They praised the National Bank of Detroit and Comerica for extending 
credit to them and supporting their mission of homebuilding in the 
Brightmore area of Detroit.
  The Local Initiatives Support Corporation (LISC), a nationally 
prominent community development group that operates in five Michigan 
cities, considers the CRA critical to their efforts. In an effort to 
boost their CRA scores, lenders have sought out groups like LISC and 
the Neighborhood Reinvestment Corporation to develop ``shared risk'' 
loan pools that offer financing to first time home buyers. Over the 
past 5 years, more than 400 mortgages were written in six Michigan 
cities. This has generated over $16 million in direct public and 
private investment in central city neighborhoods. According to LISC, 
without the CRA ``these types of programs would not have been 
established.'' Other Michigan community development groups like U-SNAP-
BAC, SWAN and New Hope also rely on loans encouraged by the CRA.
  Many Michigan mayors have expressed their support for the CRA. They 
praise the CRA for encouraging private business investment and creating 
new jobs and businesses in their communities. In addition, money from 
federal grants is leveraged to obtain millions of dollars in private 
investment. There are twelve mayors from all over Michigan on this 
letter from the U.S. Conference of Mayors supporting the CRA. I oppose 
the provisions weakening the CRA included in S. 900, a bill intended to 
modernize the financial sector of our economy. Both small and large 
banks in Michigan have received outstanding CRA ratings. The community 
groups and nonprofits make great use of the resources which are made 
available through the CRA. The federal independent agency that oversees 
the nation's banking system says its not onerous and has been very 
successful. Therefore, I will not support a bill that weakens a program 
that has been so important to community development efforts in Michigan 
and nationally.
  Mr. KOHL. Mr. President, I rise in strong support of the Bryan 
amendment. While my comments today will be brief, my conviction on the 
issue of the Community Reinvestment Act (CRA) is strong.
  CRA came into being in 1977 thanks to my Wisconsin colleague, Senator 
Bill Proxmire. While there's been talk of CRA as merely an urban 
concern, in fact, it has enriched and addressed inequities in both 
urban and rural areas in Wisconsin and across the country. We are all 
familiar with the numbers--more than $1 trillion in community 
development, small business and home mortgage loans--to communities 
that were once deemed unworthy.
  CRA has been, and remains, vital to our common efforts of ensuring 
that credit is extended to all Americans without prejudice. But CRA 
lending has also proven that the ability and willpower of a borrower is 
often just as important, if not more important, than a loan 
determination based solely on income or economic history. In other 
words, new and innovative lending inspired by CRA has promoted 
fairness, but also made good business sense and delivered profits to 
lending institutions. And, fortunately, we've made substantial progress 
at making CRA compliance less burdensome.
  While impressive, this progress has not reduced the need for an 
effective CRA. In 1977, Senator Proxmire's legislation was timely and 
appropriate, but in 1999, it has proven timeless and visionary. We are 
contemplating an era of more diversified, and potentially bigger, 
actors in the financial marketplace--one in which vigilance to ensure 
fair lending is all the more important. Overall, with adequate safety 
and soundness protections and an effective CRA, this new financial 
marketplace will yield benefits for consumers--more financial products 
delivered more conveniently and rapidly and at a better price.
  I strongly support financial modernization and want to help send a 
signable, bipartisan and well-balanced piece of legislation to the 
President's desk. Last year, we secured a compromise bill that passed 
out of Committee by a vote of 16 to 2 that would have had my support. 
It is regrettable that this year we find this legislation and the 
financial industry held hostage to a counterproductive agenda to scale 
back CRA.
  Financial modernization is about moving forward, paving the way for 
marketplace innovation and consumer benefits. But Senator Gramm's bill 
and his proposed CRA restrictions move us backward. I urge my 
colleagues to support the Bryan amendment and ensure that CRA will 
remain strong and viable for all American communities, whether urban or 
rural, in the new financial era that we hope to create.
  Mr. HARKIN. Mr. President, I rise today in strong support for 
preserving current law with regard to the Community Reinvestment Act 
(CRA) and striking the provisions of S. 900 which will harm this 
important and worthwhile program. CRA was enacted in 1977 to help 
prevent ``redlining'' of poor neighborhoods by banks, which denied 
loans to residents and businesses in those areas.
  For more than twenty years, CRA has been a key means of increasing 
capital and credit to underdeveloped areas through market based loans. 
CRA has created jobs and contributed to the economic revitalization of 
many depressed urban and rural areas. It has been a force for the 
capital needed to increase home ownership and business development. CRA 
has contributed greatly toward the revitalization of many areas, 
helping to generate an estimated one trillion dollars in lending over 
22 years. Put simply, CRA is good public policy.
  Mr. President, community groups, housing groups, farm groups, 
minority groups, civil rights groups, mayors and rural organizations 
all support a vibrant CRA and are opposed to S. 900's CRA provisions.
  In my State of Iowa, many rural residents remain in desperate need of 
affordable capital, especially during the farm crisis gripping the mid-
West. Under S. 900, as it is now written, 276 of the 325 banks and 
thrifts in rural Iowa counties would be exempt from CRA requirements. 
That's 85 percent of all the

[[Page S4777]]

rural banks in Iowa. If the provision exempting banks under 100 million 
dollars in assets remains, the benefits of CRA would not be available 
to a large share of the rural communities in Iowa.
  I have here a letter from the Iowa Coalition for Housing and the 
Homeless, which describes the importance CRA has for our communities. 
It reads, in part, ``Through increasing the access to capital and 
credit, CRA provides a market-based solution for economic 
revitalization and even job creation. A strong and vibrant CRA has 
meant that hundreds of billions worth of new home mortgage loans and 
small business loans have been made in low and moderate income, urban 
and rural communities throughout the country in the past several 
years.''
  I ask unanimous consent that the text of this letter be printed in 
the Record.
  The PRESIDING OFFICER. Without objection, so ordered.
  (See Exhibit 1.)
  Mr. HARKIN. Mr. President, I would just like to mention briefly the 
CRA reforms already in place to protect small and rural banks. In 1995, 
new regulations dramatically simplified the CRA exam process for small 
banks under 250 million dollars in assets. Under the new rules, small 
banks are not subject to the lending, investment and service tests 
applied to large institutions. Additionally, for small banks, examiners 
look at only five factors: loan to deposit ratio; percentage of loans 
inside bank's CRA assessment area; record of lending to borrowers of 
different income levels and businesses of different sizes; geographic 
distribution of loans; and a bank's record of taking action in response 
to written complaints about its CRA performance. Finally, small banks 
are not subject to any data collection requirements for CRA. So, we 
have already addressed these issues. This Senator would certainly 
welcome hearings on the current state of those reforms and their 
effectiveness. In fact, I would ask the Banking Chairman to consider 
holding such hearings on CRA before we make changes to an important and 
effective program.
  Mr. President, CRA has provided jobs, helped our economy to grow, and 
ensured all of our citizens are considered for loans based on their 
financial history, not their address. I urge all my colleagues to 
support removal of these provisions.

                               Exhibit 1

                                        Iowa Coalition for Housing


                                             and the Homeless,

                                      Des Moines, IA, May 3, 1999.
     Rep. Tom Latham,
     Cannon House Office Building,
     Washington, D.C.
       Dear Congressman Latham: As organizations that work with 
     and on behalf of low-income and homeless individuals, we join 
     today to share our concerns regarding the proposed financial 
     modernization legislation currently being considered in 
     Congress. By combating discrimination and promoting bank-
     community partnerships, the Community Reinvestment Act (CRA) 
     extends the American dream of home and small business 
     ownership to millions of Americans. Without this sustained 
     access to capital and credit, our neighborhoods die. We ask 
     that you support a strong CRA and the benefits it has brought 
     our communities.
       Through increasing the access to capital and credit, CRA 
     provides a market-based solution for economic revitalization 
     and even job creation. A strong and vibrant CRA has meant 
     that hundreds of billions worth of new home mortgage loans 
     and small business loans have been made in the low- and 
     moderate-income urban and rural communities throughout the 
     country in the past several years. Any bill that threatens to 
     eviscerate the effectiveness and application of CRA will only 
     destroy this promotion of wealth creation and entrepreneurial 
     development in minority and working-class neighborhoods. 
     While the various versions of financial modernization that 
     have been introduced and contemplated may not directly attack 
     CRA, they will eventually undermine the law by preventing its 
     evolution with the rapid changes in the financial industry.
       The current versions of financial modernization only 
     demonstrate its fundamental problem: the ability of financial 
     conglomerates to offer loans through their holding company 
     affiliates, without having to conform to CRA requirements. 
     Stated simply, holding companies will be able to shift assets 
     from CRA-covered banks to mortgage and insurance companies, 
     securities firms, and other institutions exempt from CRA-like 
     requirements. Banks, therefore, will be left with fewer 
     resources with which to make affordable housing economic 
     development, and small business loans. If any financial 
     modernization bill fails to extend CRA to the lending and 
     bank services activities of  mortgage companies and other 
     non-depository affiliates, CRA will cover an ever-
     shrinking amount of traditional banking products and 
     services.
       In addition to the expansion of CRA, financial 
     modernization could further serve low-income consumers if it 
     improved upon data disclosure requirements. Such data 
     disclosure requirements help communities identify missed 
     market opportunities and eliminate discriminatory practices. 
     These requirements help leverage reinvestment by making 
     financial institutions publicly accountable to serve all 
     borrowers in a fair and equitable manner. Insurance companies 
     and others affiliating with banks should be required to 
     report data on policies and services issued by income and 
     race and small business data should include the race and 
     gender of the borrower as well as the neighborhood in which 
     the business is located.
       We would also urge you to fight attempts to directly attack 
     or weaken CRA; specifically, proposals such as safe harbors, 
     small bank exemptions, and ``anti-greenmail'' bills or 
     amendments. Mergers and acquisitions can disrupt the lives of 
     thousands of citizens in a community through job losses, 
     closing of offices, decreases in lending, and higher fees. 
     CRA reviews are critical to ensure that lenders involved in 
     mergers can preserve their CRA performance after such 
     enormous institutional changes. Moreover, affected citizens 
     ought to have the right to speak up and have their concerns 
     addressed before a merger application is approved, regardless 
     of the pre-merger CRA ratings.
       Small bank exemptions would also be extremely harmful to 
     communities because they eliminate community reinvestment 
     requirements for most of the banks in the country. Small 
     towns and rural areas that depend on these banks for home and 
     small business lending would only suffer a new round of 
     credit and capital flight. as proposed, the current 
     legislation would exempt small rural banks under $100 million 
     in assets from CRA altogether. Almost 40% of all lenders in 
     the country will then have no obligation to serve minority 
     and working-class neighborhoods. Seventy-two percent of all 
     rural banks would be exempt from CRA. In Iowa, this exemption 
     would include 85% of the lenders in non-metropolitan areas, 
     many of whom enjoy a near monopoly in their service areas.
       It would be detrimental to the wealth-building efforts in 
     this country to pass a financial modernization bill that 
     would halt community reinvestment progress by failing to keep 
     CRA on pace with the evolution in the financial industry. 
     Congress has required that banks serve ``the convenience and 
     needs'' of the communities in which they are chartered 
     because of the vital role they play in our lives. We believe 
     that this same standard should be applied to the entire 
     financial industry. A financial modernization bill that 
     carefully modernizes the Community Reinvestment Act to the 
     entire financial industry could have a profound effect in 
     democratizing access to credit and capital accumulation tools 
     in our society. Clearly, that would be good for America.
           Sincerely,
                                                     Sandi Murphy,
                                                  Policy Director.
       The organizations listed below support the position of the 
     Iowa Coalition for Housing and the Homeless and strongly 
     encourage you to oppose the current financial modernization 
     legislation and demand a strong, and protected, CRA.
       John Boyne, United Action for Youth, Street Outreach, Iowa 
     City.
       Crissy Canganelli, Emergency Housing Project of Iowa City.
       Jan Capaccioli, Domestic Violence Intervention Program.
       Amy Covreia, Iowa City, Iowa.
       Mike Coverdale, Iowa Community Action Network.
       Bill Holvoet, Southeast Iowa Community Action.
       Greg Jaudon, Iowa Homeless Youth Centers.
       Gene Jones, Des Moines Coalition for the Homeless.
       Mike Kratz, Veteran Affairs Medical Center.
       Lora J. Morgan, Goodwill Industries of S.E. Iowa.
       Mark Patton, Muscatine Center for Strategic Action.
       Linda Severson, Johnson County LHCB.
       Lisa Wageman, Operation Threshold, Waterloo.
                                  ____

  Mr. REED. Mr. President, I rise in strong support of the Bryan CRA 
amendment. This amendment would strike the small bank exemption and the 
CRA safe harbor provisions included in S. 900 and require banks to have 
a ``satisfactory'' CRA rating as a condition for engaging in the 
expanded powers allowed under this bill.
  The language of this amendment is similar to language that was 
included in the financial modernization bill which passed the House and 
Senate Banking Committee by a vote of 16 to 2 last year and which 
enjoyed broad industry support. Similar language has also been 
incorporated in the H.R. 10 bill that recently passed the House Banking 
Committee and is pending in the House Commerce Committee.
  In short, the Community Reinvestment Act requires financial 
institutions to meet the credit needs of the

[[Page S4778]]

local communities in which they are chartered, including low- and 
moderate-income communities, consistent with safe and sound practices. 
Let me reiterate, CRA requires banks to make credit-worthy loans. It 
does not require banks to make bad loans.
  Despite this fact, some have argued that CRA is tantamount to 
government-mandated credit allocation. Nothing could be further from 
the truth. Neither the Act nor its regulations specify the number of 
loans, the type of loans, or the parties to CRA loans. To the contrary, 
CRA relies on market forces and private sector ingenuity to promote 
community lending. This is evidenced by the tremendous flexibility that 
financial institutions have in satisfying CRA. For example, loans to 
low-income individuals; loans to nonprofits serving primarily low- and 
moderate-income housing needs; loans to financial intermediaries such 
as Community Development Financial Institutions; and loans to local, 
state, and tribal governments may qualify for CRA coverage. Moreover, 
loans to finance environmental clean-up or redevelop industrial sites 
in low- and moderate-income areas also qualify as CRA loans.
  In addition to lending, CRA is satisfied through investments by 
financial institutions in organizations engaged in affordable housing 
rehabilitation, and facilities that promote community development such 
as child care centers, homeless centers, and soup kitchens.
  Even Federal Reserve Chairman Alan Greenspan has weighed in on this 
issue, arguing, ``The essential purpose of the CRA is to try to 
encourage institutions who are not involved in areas where their own 
self-interest is involved, in doing so. If you are indicating to an 
institution that there is a foregone business opportunity in an area X 
or loan product Y, that is not credit allocation. That, indeed, is 
enhancing the market.''
  As illustrated by these examples and Chairman Greenspan's comments, 
it is clear that CRA is a far cry from government-mandated credit 
allocation. To be sure, CRA is predicated on two simple assumptions 
that were well-articulated by the legislative architect of CRA, former 
Senate Banking Committee Chairman Proxmire, who stated, ``(1) 
Government through tax revenues and public debt cannot and should not 
provide more than a limited part of the capital required for local 
housing and economic development needs. Financial institutions in our 
free economic system must play the leading role, and (2) A public 
charter for a bank or savings institution conveys numerous benefits and 
it is fair for the public to ask something in return.''
  In the words of former Comptroller of the Currency Eugene Ludwig, 
``CRA is in many respects a model statute. It requires no public 
subsidy, no private subsidy, and no massive Washington bureaucracy.''
  It is this simple concept that has resulted in more than $1 trillion 
in loan commitments for low- and moderate-income borrowers since CRA's 
enactment in 1977. Indeed, the record home ownership rate that the U.S. 
is now enjoying--66.3 percent of Americans own their homes--is in large 
measure due to CRA lending to minorities and low-income individuals. 
Minorities have accounted for a disproportionately large share of home 
ownership growth since 1994--roughly 42 percent.
  Also, since 1993, home mortgage loans to low- and moderate-income 
census tracts have risen by 22 percent, which is more than twice as 
fast as the rate of growth in all home mortgage loans. In view of these 
statistics, it is clear that CRA has played a tremendous role in the 
home ownership boom.
  In addition to increases in home mortgage lending, CRA has also been 
responsible for an increase in community development lending. In the 
past four years, banks have invested four times as much in community 
development projects, as they did in the previous thirty years.
  This increased investment in community development by banks has also 
furthered the evolution of a secondary market for community development 
loans, which ultimately provides additional capital for community 
development. For many years, the development of a secondary market for 
community development loans had been limited. This development was 
limited for a number of reasons including the lack of conformity in the 
underlying loans, as well as the fact that community development 
securities typically do not receive a rating from a nationally-
recognized rating agency. Also, the underlying loans lacked long-term 
performance data, making them difficult to rate.
  However, because of CRA, a secondary market for community development 
securities is beginning to emerge. This is happening for two specific 
reasons: (1) The federal banking regulators have interpreted CRA to 
allow banks to get CRA credit for purchasing community development 
securities, even if they lack ratings or performance data, if the 
purchases are consistent with safe and sound banking practices, (2) 
Also, as banks have increased their community development lending, they 
have been able to draw on this experience to improve underwriting 
standards and create greater conformity in underwriting, which is 
important for investors in the secondary market. Also, this experience 
has provided banks with greater empirical data on loan performance, 
which is another important consideration for secondary market 
investors. These are trends that we should clearly be excited about and 
should seek to further.
  Instead, S. 900 would undermine this progress. Specifically, one 
provision of S. 900 would exempt rural banks with assets under $100 
million from CRA. Although this exemption is limited to the smallest 
institutions, over 76 percent of rural banks would be covered. This is 
of great concern since small banks have historically received the 
lowest CRA ratings. In fact, institutions with less than $100 million 
in assets accounted for 92 percent of institutions receiving ``non-
compliance'' CRA ratings in 1997-1998.
  I am also concerned about this exemption because smaller banks are 
typically the primary sources of credit in rural communities. Hence, 
absent CRA, it is likely that many rural communities could become 
credit-starved.
  The bill also includes a provision that would provide a safe harbor 
for banks with a ``satisfactory'' or better CRA rating. Specifically, 
institutions receiving a satisfactory CRA rating at their most recent 
examination would be presumptively in compliance with CRA, 
unless ``substantial verifiable information'' to the contrary was 
presented. I am concerned about this provision because it establishes a 
very difficult-to-satisfy burden of proof for individuals or groups 
wishing to protest a bank merger on CRA grounds. Indeed, I fear this 
provision will greatly inhibit the ability of groups to get the 
necessary information from banks to protest a merger. Also, when 
considering the fact that 97 percent of institutions receive a 
satisfactory or better CRA rating, it is clear that this provision will 
effectively eliminate CRA comment on a bank merger.

  If these provisions of S. 900 are not eliminated, I fear a return to 
the days prior to CRA's enactment when access to credit was limited for 
many minorities and those living in low-income neighborhoods. In fact, 
testimony before the Senate Banking Committee during the consideration 
of CRA in 1977 revealed how bad things were. Witnesses recounted 
stories of financial institutions that had previously been active in 
urban lending, that disinvested in those same urban neighborhoods as 
minorities increasingly moved in. Testimony before the Senate Banking 
Committee also brought to light a 1974 study of six Chicago banks. In 
the study, it was found that these banks, which held $144 million in 
deposits from low-income and minority communities, returned one-half 
cent on the dollar in home loans. Such was the deplorable state of 
lending in low-income and minority communities before CRA.
  While certainly we have come a long way since CRA's passage in 1977, 
lending discrimination, unfortunately, persists. In a study published 
earlier this year by the Fair Housing Council of Greater Washington, it 
was revealed that Washington area lenders discriminate against two out 
of five African American and Hispanic mortgage applicants. In one 
incident cited in the study, a Rockville lender advised a black tester 
that the lender did not make loans to first-time home buyers. The same 
lender later met with a white tester, also posing as a first-time home 
buyer, giving the tester an appointment and encouraging him to apply 
for a mortgage loan. Lending studies by

[[Page S4779]]

other organizations reveal similar findings. These studies have shown 
that minority borrowers receive fewer bank loans even when their 
financial status is the same as or better than white borrowers.
  By encouraging lenders to extend credit to all communities, CRA has 
been an important weapon in fighting lending discrimination. The Bryan 
amendment will ensure the potency of CRA in fighting lending 
discrimination and providing fair access to credit to low-income and 
minority communities.
  In closing, Mr. President, let me reiterate how important it is to 
include CRA in any modernization legislation that passes. It is very 
likely that if S. 900 is enacted, we will see increased consolidation 
in the financial services industry. As we know from recent experience, 
this consolidation will likely lead to layoffs and bank branch 
closings. Absent the CRA language included in the Bryan amendment, I 
fear that this consolidation could have a significant and adverse 
impact on access to banking services and credit in low-income and 
minority communities. By adopting the Bryan amendment, we will at least 
ensure that industry consolidation will not decrease access to credit 
in these communities.
  In fact, I feel so strongly about these provisions that I plan on 
opposing the bill if this amendment is not adopted. I would hope my 
colleagues can support this amendment.
  Mrs. BOXER. I have been a longstanding supporter of financial 
services modernization and affirmed such support in a letter to 
Secretary Rubin about two years ago, and last year, as a member of the 
Banking Committee, I voted in support of H.R. 10--the Financial 
Services Modernization bill reported out of the Banking Committee with 
strong bi-partisan support.
  I believe it is important that our financial services sector adapt to 
contemporary market conditions, marketplace innovations and to growing 
financial competition from abroad. Moreover, I understand and 
appreciate the desire of our financial services industries--banks, 
securities firms, and insurance firms--to further expand their 
traditional lines of business.
  I joined the Banking Committee in 1993 when I was first elected to 
the Senate, and I proudly served on that Committee until this year. So 
I realize the process of financial services reform has been long, 
tedious, and often quite contentious. I also realize that many 
financial services firms are looking forward to the Senate putting an 
end to that long process by passing a financial services modernization 
bill. And I would like to see us pass a good bill--a fair and balanced 
bill.
  Nonetheless, it is important to remember that the U.S. already has 
the best banking system in the world. It is the best capitalized, the 
most transparent, has the highest accounting standards, is very 
innovative and its safety and soundness is unsurpassed.
  Therefore, it is appropriate to ask, ``why is financial services 
modernization necessary?'' It is necessary because the financial 
marketplace has changed, brought on by, among other things, a 
combination of new and innovative products and services, as well as 
technological advances.
  Regulators must keep pace with these innovations, and we, as 
legislators must set the appropriate parameters for this changed 
financial services marketplace. We cannot leave it up to piecemeal 
regulation and legislation as, all to often, has been the case.
  Our goal should be to create a regulatory framework which provides 
measurable benefits to consumers and businesses, enhances 
competitiveness of the financial services sector on a global basis, and 
ensures the continued safety and soundness of our financial 
institutions. While the bill before us goes a long way toward achieving 
that goal, unfortunately I believe, it falls short.
  It falls short, principally in my opinion, because it fails to ensure 
the continued strength of the Community Reinvestment Act. CRA has been 
invaluable in helping to assure low and moderate income consumers, 
communities and small businesses have sufficient access to credit.
  The Community Reinvestment Act has been important to both urban and 
rural communities. Every CRA dollar is a loan--it is the leveraging of 
capital. Over the past seven years or so, approximately $400 billion of 
community development has been leveraged. It has proven to be 
an effective tool in my home state of California and in states 
throughout the country.

  CRA encourages federally insured financial institutions to help meet 
the credit needs of the communities in which they do business. As 
Senator Proxmire said in 1974, ``CRA is intended to establish a system 
of regulatory incentives to encourage banks and savings institutions to 
more effectively meet the credit needs of the localities they are 
chartered to serve, consistent with sound lending practices.''
  CRA does not, despite many implications to the contrary, impose any 
requirement upon banks to make unsound or unsafe loans. CRA does not 
require banks to engage in risky lending or investments. It does not 
require banks to make loans outside of the lending criteria they have 
established. I would suggest, in fact, that given how well banks are 
doing these days, one would be hard pressed to make a reasonable case 
that CRA has been detrimental to the bottom line of banks or to their 
safety and soundness.
  I think it is wonderful banks are doing so well, I appreciate the 
contributions they are making to our economy. I remember all too well 
when banks were not doing so well. Thus, I would not support CRA, or 
any other requirement, which encouraged banks to engage in unsafe 
lending practices.
  My specific concerns as relate to the CRA provisions in this bill are 
as follows. First, as I understand it, there are no enforcement 
mechanisms or penalties for failing to maintain a ``satisfactory'' CRA 
rating. By contrast, the bill passed last year by the Senate Banking 
Committee required all banks in a holding company structure to have a 
satisfactory CRA rating as a condition of affiliation, and maintain a 
satisfactory CRA rating in order to continue to engage in new financial 
activities.
  Second, this bill provides for a CRA ``safe harbor.'' Under this 
provision, all institutions which received at least a satisfactory CRA 
rating on their most recent examination, and received a satisfactory 
rating in each of the past 3 years, would be deemed to be in compliance 
with CRA. Such a safe harbor, I believe, would often effectively 
eliminate the opportunity for public comment. Banks and thrifts are 
usually examined every two to three years. CRA performance can change 
in the interim.
  Third, S. 900 exempts those banks with less assets of less than $100 
million, and those that are not located in metropolitan areas, from 
CRA. While I think we can all agree that institutions with assets of 
less than $100 million are small, the amendment would exempt more than 
75 percent of rural institutions from CRA requirements--that is almost 
40 percent of all U.S. banks and thrifts. Ironically, I would note, it 
has traditionally been these smaller institutions that have had the 
worst CRA records. Moreover, the new CRA rules, which went into effect 
in January 1996, provide a streamlined examination for banks and 
thrifts with assets less than $250 million. In fact, pursuant to the 
changes which took effect in 1996, small banks do not have any data 
collection or reporting requirements.
  I do not believe the CRA changes envisioned in S. 900 are 
appropriate, or needed at this time. If there are abuses or specific 
problems, let's deal with them--let regulators, and, if appropriate, 
law enforcement deal with them. Such abuses are hurtful to CRA and to 
those who can potentially benefit from CRA. These abuses, I would 
suggest however, are extraordinarily rare. On the whole, bankers have 
found CRA to be an extremely minimal intrusion at most.
  CRA has not been a problem to most bankers in my home state of 
California. BankAmerica, Wells Fargo and others have made important CRA 
commitments in my state.
  Between 1992 and 1997, BankAmerica made $3 billion in conventional 
small business loans and lines of credit for less than $50,000. In 
1997, it made more than $1 billion in loans and lines of credit for 
$100,000 or less. And BankAmerica has often noted their CRA loans have 
performed as well as other more traditional loans made by the bank. 
These loans have also been profitable for the bank. In fact, Hugh

[[Page S4780]]

McColl, the Chairman and CEO of BankAmerica Corp. has said, ``My 
company supports the Community Reinvestment Act both in spirit and in 
fact. We have had fun doing it. We've made a business out of it.''
  Moreover, in Los Angeles, as a result of CRA, loans to African 
American owned businesses increased a whopping 171 percent between 1992 
and 1997. However, it is important to note that small business owners 
of every race have obtained credit as a result of CRA-related programs. 
For example, in San Diego, at least 25 percent of the loans made by 
local community development organizations were to white business 
owners.
  So Mr. President, although I am a enthusiastic supporter of financial 
services modernization, I cannot support S. 900 if the CRA provisions 
contained in the bill are maintained. Access to capital and economic 
development, I believe, will potentially be some of the most important 
tools available to low and moderate income Americans in the coming 
century. Without such access to capital, far too many Americans, 
particularly those in urban and rural areas, will not be able to share 
in the economic wealth of our remarkably exuberant economy.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, I have refrained from speaking all day. 
I do need to speak for a brief period of time, but I want to try to 
accommodate colleagues as well. If I can inquire of Senator Schumer, 
how much time would he need to speak, 5 minutes or thereabouts?
  Mr. SCHUMER. Yes, that would be fine.
  Mr. SARBANES. And Senator Shelby?
  Mr. SHELBY. About 10.
  Mr. SARBANES. I would like to propound a request that Senator Schumer 
be allowed to speak and then Senator Shelby and then after Senator 
Shelby that I would be recognized.
  Mr. GRAMM. Could we add to it that, after the Senator from Maryland, 
I be recognized?
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from New York.
  Mr. SCHUMER. Mr. President, I thank my friend, the Senator from 
Maryland, as well as the Senators from Alabama and Texas for their 
courtesy here this evening.
  I also thank Senator Sarbanes for his indefatigable efforts to defend 
the Community Reinvestment Act.
  And I'd like to thank my Democratic colleagues as well as Secretary 
Rubin for their strong commitment to CRA.
  In 1977 when CRA was enacted, the thinking was that banks--though 
privately owned--receive public benefits in the form of deposit 
insurance and access to the Federal Reserve's discount window and 
payments system.
  And in return, they would have an obligation to ``serve the 
convenience and needs'' of their communities.
  Over 20 years later, banks still CRA as an obligation--but as an 
obligation that a minimum they can live with--and in many cases, that 
they endorse.
  Does CRA work?
  The answer has been a resounding yes.
  Since its enactment, CRA has resulted in $1 trillion of investments 
in underserved communities. It's been a driving force for community 
economic development; one of the best ways to bring people together, to 
bring poor people and people of color upward, which we all want to do.
  It's also driven a 30 percent increase in home ownership among low-
income families since 1990, making the American Dream of home ownership 
a more commonplace reality for our minority communities.
  And in 1997, large banks and thrifts made approximately 525,000 small 
business loans totaling $34 billion to entrepreneurs located in low and 
moderate communities.
  CRA works.
  And we know it works because banks who have never been shy in 
fighting what they view as burdensome or intrusive Federal regulation 
are not pushing to repeal CRA or even to roll it back.
  In fact, they're supporting it. Every major bank in my State has 
contacted me in favor of CRA.
  Some have been honest enough to admit that because of CRA they are 
reaching out to communities that they would not otherwise have served.
  And they're serving them profitably.
  Hugh McColl, Jr., Chairman and CEO of BankAmerica Corp., stated 
earlier this year; ``My company supports the Community Reinvestment Act 
in spirit and in fact. To be candid, we have gone way beyond its 
requirements * * *. We're quite happy living with the existing rules.''
  A Federal Reserve study showed that banks with higher volumes of 
loans to low-income communities were on average more profitable than 
those with a lower volume.
  And we know that banks have had some of their most profitable years 
even as CRA loans have reached record heights.
  Finally, our regulators, who are committed to ensuring the safety and 
soundness of our financial institutions, have been very vocal in their 
support of CRA.
  So there's more evidence that CRA has been effective in communities' 
edification than in any invidious exploitation of banks, as some of its 
critics have been charging.
  The question is, then, with everyone in support of CRA, why do we 
want to throw away our best chance to pass financial modernization 
solely to end a law that we know is working?
  The President has stated very clearly that with these CRA provisions, 
this bill will end in veto. His veto letter states:

       We cannot support the ``Financial Services Modernization 
     Act of 1999'' * * *. In its current form, the bill would 
     undermine the effectiveness of the Community Reinvestment Act 
     (CRA), a law that has helped to build homes, create jobs, and 
     restore hope in communities across America. The CRA is 
     working, and we must preserve its vitality as we write the 
     financial constitution for the 21st Century.

  Contrary to what many think, this amendment does not expand CRA. It 
simply maintains the status quo.
  First, it requires that banks have at least a ``satisfactory'' CRA 
rating as a precondition for affiliation with securities and insurance 
firms. Today our insured depository institutions have this obligation. 
And 97 percent of them meet it. They meet it precisely because it is 
not a tremendous burden.
  Second, this amendment would remove the small bank exemption that 
narrowly passed the Banking Committee. Small banks account for 70 
percent of the ``needs improvement'' ratings handed out to banks by the 
regulators last year. So the idea that we should exempt the 
institutions that are most likely to be in noncompliance seems ill-
advised.
  Finally, the amendment eliminates the safe harbor provisions in the 
Committee print. The safe harbor sets up an unnecessary burden of proof 
that is simply unnecessary.
  In sum, these provisions would restore CRA to today's potency.
  As I said yesterday, I say, it is my hope that we can set aside our 
partisanship for the sake of pragmatism.
  And set aside confrontation for the sake of compromise.
  Mr. President, I strongly support this amendment, and I urge my 
colleagues to support it.
  A vote for this amendment is a vote for modernization.
  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. SHELBY. Mr. President, I rise in opposition to the Bryan CRA 
amendment. This amendment not only strikes the small rural bank 
exemption that we have in the Banking Committee bill and that we 
adopted on a bipartisan vote, but it also replaces that language with a 
significant expansion in CRA--the same language Chairman Gramm and I 
vehemently opposed on the Senate floor this past year.
  Community banks, as the Presiding Officer knows, by their very 
nature, serve the needs of their communities and do not need a 
burdensome Government mandate to force them to allocate credit or to 
originate profitable loans. And, contrary to the assertions of critics, 
there is no evidence whatsoever that the small bank exemption would 
have ``devastating consequences'' for low- and moderate-income rural 
communities. There remains no documented evidence to prove such an 
assertion, just as there is no tangible evidence that CRA has ever 
helped rural communities in America.
  What is documented, though--and Chairman Gramm has worked tirelessly 
to do so--is the kinds of blackmail agreements and extortion practices

[[Page S4781]]

that the Community Reinvestment Act enables community groups to engage 
in. The truth of the matter is that the small bank exemption would 
exempt less than 3 percent of bank assets nationwide. Thus, 97 percent 
of all bank assets would still be subject to the Community Reinvestment 
Act.
  Just bear with me a minute on this chart. We have bank assets of 
$5.711 trillion. But banks above $100 million, rural and nonrural, 
control 97 percent of the bank assets in America. The small banks in 
America that we are talking about, those under $100 million in assets--
there are 3,667 of them--control only $165 billion, or 2.9 percent of 
all the banking assets. Can you imagine? BankAmerica, for example, has 
$614 billion in assets. And I commend them for that. They are a well-
run bank. But that is more than all 3,667 small rural banks in America 
put together; it is about 4 times more. So let's look at this in a 
realistic situation, as this chart here depicts.
  Mr. President, critics will point out that the small rural bank 
exemption which I and Senator Gramm have in the bill would exempt 3,700 
banks. That is true. But to put that into context again, and to 
reiterate, one needs to understand that BankAmerica, as I have just 
shown, is four times the size of all small rural banks in America.
  Indeed, BankAmerica possesses $614 billion in assets, or 10.7 percent 
of all bank assets in this country. If one looks at the list of large 
banks, one will soon realize that the vast majority of bank assets are 
concentrated in the large, multibillion-dollar banks that can most 
easily shoulder the burden of CRA.
  The assertions of those who oppose the small bank exemption that we 
have in the banking legislation also do not comport with the comments I 
have received from small banks across the country. In fact, I have many 
letters from small bankers who complain about the burden of CRA, as 
well as the regulators' subjective reporting requirements dealing with 
CRA.
  I would like to take a moment to read some letters from some small 
bankers in Alabama. I believe they have a right to be heard. I will 
quote from some of these. The first one says:

       I don't think, in these small community banks, that we have 
     to be examined by people who usually don't understand our 
     purpose, to enforce us to service our community * * *. 
     Small community banks are a Service Institution. I know 
     because I have just completed 39 years this month. All 
     this time in small home-owned banks that deliver services 
     that are essential to rural life. Where services have been 
     rendered over the years even before we knew anything about 
     CRA.

  That was from Charles Willmon, chairman of the First Bank of the 
South in the small town of Rainsville, AL.
  I have another letter, from John Mullins, president and CEO of First 
Commercial Bank of Cullman, AL, which says:

       Exempting small banks would be a wonderful opportunity for 
     me to spend less time on unnecessary and nonproductive 
     paperwork and more time helping the citizens of my market 
     area improve their financial well-being . . . CRA examiners 
     spend many unnecessary hours examining our loan track record. 
     Banks our size are an integral part of the local community 
     and we are always sensitive to the needs of our citizens. 
     They are not faceless names, but people whom we know. We 
     don't need a law to require us to help them with credit, we 
     do it anyway.

  I have another letter from a small banker in Clanton, AL. He is 
Leland Howard, Jr., of Peoples Southern Bank. He says:

       We in the community banks feel that the CRA exception for 
     banks with aggregate assets of $100 million or less is a very 
     good start on the road to easing the regulatory burden.

  I have a letter from John Hughes, CEO of First National Bank of 
Hartford, AL, a small town in south Alabama. He says:

       Extra work created by the CRA is tremendous. Most rural 
     banks know at least 95 percent of all their customers, their 
     family, and their situation. The rating system that most 
     examiners used is highly subjective and the rural banks have 
     a hard time to achieve a grade higher than satisfactory. 
     Again, it would be a great day in Alabama if you . . . could 
     get this amendment passed.

  Those are just a few letters, and they come from all over the Nation.
  Mr. President, the Federal Reserve Bank of Richmond published its 
1994 annual report on ``Neighborhoods and Banking,'' where it reported 
its findings on the costs of CRA. The report found:

       The regulatory burden [of CRA] would fall on bank-dependent 
     borrowers in the form of higher loan rates and on bank-
     dependent savers in the form of lower deposit rates. And to 
     the extent that lending induced by the CRA regulations 
     increases the risk exposure of the deposit insurance funds, 
     taxpayers who ultimately back those funds bear some of the 
     burden as well.

  The report goes on to say that, basically, the CRA imposes a tax on 
banks. CRA, then, is a tax on community banks and raises the costs of 
inputs to banks by increasing their regulatory burden and compliance 
costs. Mr. President, in addition, CRA forces banks to make loans 
according to a Federal quota, increasing the risks, and therefore the 
costs, of borrowing to consumers. Make no mistake about it, the 
Community Reinvestment Act raises the cost of borrowing through higher 
loan rates and punishes savers in the form of lower savings rates.
  Critics of the small bank exemption claim that small banks get the 
worst CRA ratings. The truth of the matter is that one size does not 
fit all in any business. These critics point to lower than average 
loan-to-deposit ratios of small banks as evidence that they are not 
serving their communities. That is nonsense. That is like saying the 
average male wears a size 42 regular suit and that every male in 
America who does not fit in that size suit should be reprimanded by the 
Federal Government.
  Every community in this great country is different. Most of us take 
pride in such diversity. That is the foundation on which this country 
was built.
  However, the Community Reinvestment Act punishes banks who do not 
comport with national averages. Indeed, the loan demand in Prattville, 
AL, is not the same as in Lafayette, LA. Nor is it the same as in 
Shelbyville, TN. Nonetheless, CRA judges banks based largely on their 
loan-to-deposit ratios that the regulators deem to be appropriate. 
That, my friends, is nothing but a quota. When everything is said and 
done, CRA promotes quotas and creates a regulatory burden.
  As if that is not bad enough, Mr. President, the Bryan amendment 
would also expand the reach and the scope of the Community Reinvestment 
Act.
  Specifically his amendment would:
  One, increase administrative enforcement authority of the regulators 
to fine directors and officers up to $1 million a day for CRA 
noncompliance. Just think about that.
  Two, it would make expanded activities subject to CRA compliance on 
all depository institution affiliates on an ongoing basis.
  And it would give the regulators the authority to shut down any 
affiliate within the holding company if just one subsidiary depository 
institution falls out of CRA compliance.
  The Bryan amendment dramatically expands, Mr. President, CRA 
enforcement authority to allow civil money penalties for bank directors 
and officers, as I have pointed out.
  The amendment would require bank holding companies who seek to become 
financial holding companies to be compliant with the Community 
Reinvestment Act of 1977 just in order to be eligible. If even one 
subsidiary depository institution ever falls out of compliance, the 
holding company, including the nonbank affiliate, would then be subject 
to section 8 of the Federal Deposit Insurance Act, which is 12 U.S.C. 
1818, which authorizes bank regulators to invoke cease and desist 
orders, civil penalties, and fines.
  Regulators would be authorized to fine bank directors and officers up 
to $1 million a day. This, Mr. President, is a dramatic expansion in 
the enforcement authority and reach of bank regulators.
  Such authority does not exist today. The Clinton Justice Department 
even agrees.
  In late 1994, Comptroller of the Currency, Eugene Ludwig, tried to 
invoke the administrative enforcement powers under Section 8 of FDIA 
(12 U.S.C. 1818) to enforce CRA. The Justice Department issued a 
memorandum stating:

       [T]o move from an enforcement scheme that relies upon a 
     system of regulatory incentives to a scheme that entails 
     cease-and-desist orders and potentially substantial monetary 
     penalties is a leap that we do not believe can be justified 
     on the basis of the text, purpose, and legislative history of 
     CRA. We therefore conclude that enforcement under 12 U.S.C. 
     1818 is not authorized by CRA.


[[Page S4782]]


  Bank trade associations were very pleased with the Justice Department 
decision. The Bankers Roundtable, the American Bankers Association, the 
Consumer Bankers Association, and the Savings and Community Bankers of 
America, filed joint letters focusing in substantial part on the 
regulators claims of enforcement authority.
  The Bryan amendment also permits regulators to force divestiture 
since banks cannot ``retain shares of any company'' if ever out of CRA 
compliance. This provision also explicitly states that a bank holding 
company may not ``engage in any activity'' unless the institution is 
CRA compliant always and forever.
  Think about it.
  If just one subsidiary depository institution of a financial holding 
company falls out of compliance with CRA, the substitute authorizes the 
Federal Reserve Board to ``impose such limitations on the conduct or 
activities of the company or any affiliate of the company as the Board 
determines to be appropriate * * * '' This, too, is a dramatic 
expansion of enforcement authority under CRA. For the first time, 
regulators will be able to impose restrictions on activities throughout 
the entire holding company. This means a bank regulator could prohibit 
a securities affiliate from underwriting securities or an insurance 
affiliate from underwriting insurance.
  Regulators do not have such authority today. Currently, CRA only 
allows regulators to prohibit the merger, acquisition or branch 
expansion of an institution that is not compliant with CRA.
  Current law does not give bank regulators the authority to prohibit 
eligible activities of a given charter due to CRA non-compliance. The 
Bryan amendment requires an operating subsidiary who wants to engage in 
agency activities to maintain CRA compliance on all depository 
institution affiliates.
  Thus, non-banking financial agency activities would be held hostage 
to CRA, with the bank regulators given the authority to enforce such 
law. This is the first time CRA has ever been expanded to cover the 
approval of non-depository activities.
  I urge my colleagues to vote against the Bryan amendment and support 
what is in the bill.
  I yield the floor.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, shortly we will be voting with respect 
to the Bryan amendment.
  I, again, want to underscore the very strong and powerful statement 
which I think Senator Bryan made shortly after noon at the outset of 
this debate, and I am deeply appreciative to him for the strong 
leadership he has shown with respect to this amendment.
  We have tried to give all Members a chance to speak. I, in fact, have 
refrained from doing so in the course of the day in order to make sure 
that our colleagues had a chance to speak. I would like to take just a 
few minutes now.
  I want to speak in support of the amendment. But I really do not want 
to repeat a lot of the extensive discussion of the issues which have 
taken place, both during opening statements on the bill, and on the 
alternative amendment, and now on this amendment itself, although they 
may well bear repeating.
  I want to make sure my colleagues appreciate the intense feeling and 
the critical importance which civil rights groups, mayors, rural 
groups, Hispanic groups, and Native American groups attach to this 
issue of CRA. They have all sent letters to the committee.
  I ask unanimous consent those letters be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. SARBANES. Mr. President, these letters reflect how CRA has 
benefited communities all over this country--small, urban, and rural. 
They demonstrate how CRA has expanded economic opportunities for people 
of all races, colors, and ethnic affiliations.
  Yesterday morning, the Leadership Conference on Civil Rights, our 
preeminent civil rights group, held a press conference in support of 
CRA. I would like briefly just to quote some of the comments made by 
civil rights leaders at the press conference, as well as comments made 
by individuals who benefited from CRA.
  Dr. Dorothy Height, chairman of the Leadership Conference on Civil 
Rights, president emeritus of the National Council of Negro Women, 
spoke, and said:

       Since its enactment in 1977, the Community Reinvestment Act 
     has served as one of the crowning achievements in the civil 
     rights movement.
       The premise of the legislation is simple--to make sure that 
     economic opportunity for families and communities is 
     available to every American.
       Opportunities for home ownership, small business 
     development, and sustaining rural communities are critical to 
     the strength of this Nation.
       With CRA our neighborhoods have a chance. Without it, they 
     are discriminated against.
       Just as civil rights legislation enacted a decade ago 
     sought to break down the walls of discrimination that 
     separated us in schools, restaurants, and places of work by 
     the color of our skin, the CRA has meant opportunity for 
     everyone, whatever race or color. As a result of CRA, 
     millions of minorities across this Nation now have access to 
     the capital that will allow them to build new homes, to 
     create new businesses, and to improve education.

  She concluded her introductory remarks at the press conference by 
saying:

       Leaders you see before you represent dozens of 
     organizations galvanized by an assault on the Community 
     Reinvestment Act. Those organizations represent millions of 
     Americans who have been touched by CRA and millions more 
     who deserve the same opportunity.

  Make no mistake about it, this issue is seen by the civil rights 
community as a critical civil rights issue. Fair access to credit is 
fundamental to hopes for economic progress in our minority communities.
  Another speaker at the press conference was Hugh Price, president of 
the National Urban League, who said:

       We of the National Urban League strongly support financial 
     services modernization because we believe it is in tune with 
     the times. But we staunchly oppose any effort to gut the CRA. 
     We at the Urban League work with the leaders of many 
     financial institutions. Just last week I talked with Kenny 
     Lewis, president of Bank America, who said that his bank 
     stands strongly behind the renewal of CRA.

  I know that belief is echoed by many leaders in the financial 
services and banking community who see it as good business for their 
corporations.
  Charles Kamasaki, senior vice president of the National Council of La 
Raza, stated:

       The National Council of La Raza is the Nation's largest 
     Hispanic civil rights organization. We represent more than 
     200 local community-based organizations who provide a range 
     of services, many of them supported by CRA-related funds in 
     over 32 States.

  Mr. Kamasaki, the head of the National Council of La Raza, introduced 
Richard Farias as president of the Tejano Center for Community Concerns 
in Houston, a member organization of La Raza. Mr. Farias stated, in 
speaking of the importance of CRA:

       Now because of CRA, a number of banks in Houston created a 
     consortium to help us purchase a $2.1 million school 
     building. The building has 7.5 acres and 80,000 square feet 
     of space, including a gymnasium, a cafeteria, an auditorium 
     and 25 classrooms. They now have a charter school for success 
     that houses 400 students and is expected to grow to 650 
     students.

  He goes on to say that it is very important to understand that CRA is 
not just about community development; it is about empowerment of the 
people; it is about being able to give low-income children and families 
the right that they have to not only good housing but to good education 
and to good health services.
  Daphne Kwok, executive director of the Organization of Chinese 
Americans, also took part in the press conference. She stated that the 
Organization of Chinese Americans supports the Community Reinvestment 
Act because it has enabled home ownership among minority and low- and 
moderate-income individuals:

       Asian Pacific-Americans, especially Chinese-Americans, 
     Korean-Americans, Vietnamese-Americans, Asian Indian-
     Americans are small business owners, and many of them are 
     seeking to open up businesses in low and moderate income 
     areas.

  JoAnn Chase, executive director of the National Congress of American 
Indians, then spoke and stated:

       Founded in 1944, the National Congress of American Indians 
     is the oldest, largest and most representative national 
     organization

[[Page S4783]]

     devoted to promoting and protecting the rights of American 
     Indian tribal governments and their citizens. One of our key 
     missions has been to continuously advocate for Indian self 
     determination and self sufficiency, and toward that end from 
     its very inception, our communities, our governments, our 
     people have supported the Community Reinvestment Act, which 
     has proven to be an effective means of encouraging federally 
     insured financial institutions to extend prudent and 
     profitable loans in traditionally underserved areas, 
     particularly in Indian country.
       Specifically, the CRA has helped focus attention to the 
     challenges of extending credit to reservations and has acted 
     as a catalyst to reservation-based economic development. 
     Since the implementation of the CRA, Native American 
     governments and citizens and our own banks have negotiated 
     agreements for lending more than $155 million within the 
     Indian country which has substantially advanced efforts 
     toward economic self-sufficiency. It is a law that has helped 
     build homes for our people, has inspired hope and has created 
     jobs in many native communities.

  The final speaker at the press conference was Hillary Shelton, 
Washington bureau director of the NAACP, who stated:

       * * * on behalf of the NAACP * * * we are honored to 
     strongly support and continue to endorse the Community 
     Reinvestment Act and consequently oppose any attempts to 
     weaken it.
       The CRA has been instrumental in the revitalization of 
     literally tens of thousands of communities nationwide, and 
     continues to be an important tool in the NAACP's ongoing 
     efforts to help people and communities achieve the goals of 
     community resurrection, development, and growth, at no cost 
     to American taxpayers.

  Mr. President, there has been printed in the Record a letter from the 
U.S. Conference of Mayors which was quoted from earlier, a letter from 
a coalition of 19 family farm and rural groups, which states:

       Rural areas continue to suffer from a serious shortage of 
     affordable housing. Farmers are facing the worst financial 
     conditions in more than a decade due to declining commodity 
     prices. Rural Americans continue to need the tools of the CRA 
     to ensure accountability of their local lending institutions. 
     CRA helps to meet the credit demands of millions of family 
     farmers, rural residents and local businesses.

  Mr. President, I ask unanimous consent to have printed in the Record 
other letters from a number of organizations which have written to us 
in very strong support of the CRA, as well as editorials.
  There being no objection, the material ordered to be printed in the 
Record, as follows:

                        Mischief From Mr. Gramm

       Cities that were in drastic decline 20 years ago are 
     experiencing rebirth, thanks to new homeowners who are 
     transforming neighborhoods of transients into places where 
     families have a stake in what happens. The renaissance is due 
     in part to the Federal Community Reinvestment Act, which 
     requires banks to reinvest actively in depressed and minority 
     areas that were historically written off. Senator Phil Gramm 
     of Texas now wants to weaken the Reinvestment Act, 
     encouraging a return to the bad old days, when banks took 
     everyone's deposits but lent them only to the affluent. 
     Sensible members of Congress need to keep the measure intact.
       The act was passed in 1977. Until then, prospective home or 
     business owners in many communities had little chance of 
     landing loans even from banks where they kept money on 
     deposit. But according to the National Community Reinvestment 
     Coalition, banks have committed more than $1 trillion to 
     once-neglected neighborhoods since the act was passed, the 
     vast majority of it in the last six years.
       In New York City's South Bronx neighborhood, the money has 
     turned burned-out areas into havens for affordable homes and 
     a new middle class. The banks earn less on community-based 
     loans than on corporate business. But the most civic-minded 
     banks have accepted this reduced revenue as a cost of doing 
     business--and as a reasonable sacrifice for keeping the 
     surrounding communities strong.
       Federal bank examiners can block mergers or expansions for 
     banks that fail to achieve a satisfactory Community 
     Reinvestment Act rating. The Senate proposal that Mr. Gramm 
     supports would exempt banks with assets of less than $100 
     million from their obligations under the act. That would 
     include 65 percent of all banks. The Senate bill would also 
     dramatically curtail the community's right to expose what it 
     consider unfair practices. Without Federal pressure, however, 
     the amount of money flowing to poorer neighborhoods would 
     drop substantially, undermining the urban recovery.
       Mr. Gramm argues that community groups are ``extorting'' 
     money from banks in return for approval, and describes the 
     required paperwork as odious. But community organizations 
     that build affordable housing in Mr. Gramm's home state 
     heartily disagree. Mayor Ron Kirk of Dallas disagrees as 
     well, and told the Dallas Morning News that he welcomed the 
     opportunity to explain to Mr. Gramm that ``there is no 
     downside to investing in all parts of our community.''
       In a perfect world, lending practices would be fair and the 
     Reinvestment Act would be unnecessary. But without Federal 
     pressure the country would return to the era of redlining, 
     when communities cut off from capital withered and died.
                                  ____


                [From the Washington Post, May 4, 1999]

                           Banking on Reform

       The Senate today is scheduled to begin considering a bill 
     that would remake the financial services industry, allowing 
     banks and insurance companies and investment firms to merge 
     and compete. Similar legislation is making its way through 
     the House. The thrust of both bills is sound. But while the 
     industries have lobbied hard to shape a law satisfactory to 
     them, the current legislation doesn't adequately protect low-
     income communities or consumers' privacy. Financial 
     modernization should apply to them, too.
       Since the Depression, federal law has sought to keep the 
     banking, insurance and securities industries separate. The 
     idea, in part, was to make sure that federally insured bank 
     deposits didn't wind up somewhere risky and unregulated. But 
     in recent years, even without a change in the law, that 
     separation has eroded. Banks have found ways to offer mutual 
     funds to their customers; investment firms function like 
     deposit institutions; etc. It makes sense now to bring 
     legislation--and regulation--in line with reality.
       Congress has been trying to do so, and failing, for more 
     than a decade, and may again. But on the major issues, the 
     administration, the Federal Reserve and Congress have pretty 
     well agreed. They would let the financial services industries 
     meld while for the most part keeping them out of other 
     businesses, a wise decision. They've come up with fire walls 
     and regulatory schemes that, while still not entirely agreed 
     upon, have satisfied most concerns about protecting federally 
     insured deposits.
       But there is no consensus yet on safeguarding the interests 
     of underserved communities. Since 1977 federally insured 
     banks have been subject to the Community Reinvestment Act, 
     requiring them to seek business opportunities in poor areas 
     as well as middle-class and wealthy neighborhoods. The law, a 
     response originally to clear evidence of bias in lending, has 
     worked well. It doesn't force banks to make unprofitable 
     loans, but it encourages them to look beyond traditional 
     customers, and it's had a beneficial effect on home ownership 
     and small-business lending.
       Sen. Phil Gramm, chairman of the Banking Committee, now 
     wants to scale the law way back. He argues that community 
     groups use it to extort money from banks; there's scant 
     evidence for that. The real danger is that, with financial 
     modernization, banks will gradually escape their community 
     obligations by transferring capital to affiliates that aren't 
     covered by the law. The law should be extended and modernized 
     to keep pace with a changing industry.
       Consumer privacy also could be in danger as barriers among 
     industries break down. An example: Should your life insurance 
     medical records be shipped over, without your knowledge, to 
     the loan officer considering your mortgage application? Sen. 
     Paul Sarbanes of Maryland and Rep. Ed Markey of 
     Massachusetts, among others, would give consumers more 
     control over the sale and sharing of personal data. As the 
     financial industry moves into a new era, privacy laws should 
     also keep pace.
                                  ____

         Jesuit Conference, The Society of Jesus in the United 
           States.
                                    Washington, DC, March 3, 1999.
     Hon. Paul Sarbanes,
     Seante Committee on Banking, Housing, and Urban Affairs, 
         Washington, DC.
       Dear Senator Sarbanes: We are writing you on behalf of the 
     Jesuit Conference Board of the Society of Jesus in the United 
     States. With the House and Senate Banking Committees 
     scheduled to mark-up financial modernization legislation this 
     week and vigorous discussions already underway we call your 
     urgent attention to the status of the Community Reinvestment 
     Act (CRA) in this debate. We urge your vocal and 
     unconditional support for safeguarding and effectively 
     applying CRA to any proposed financial modernization 
     legislation. By maximizing the capital available to 
     undeserved urban and rural areas, CRA has proven to be an 
     exceptional means of promoting vital and sustainable 
     communities. CRA should be allowed to continue its invaluable 
     work.
       There are approximately 4,000 U.S. Jesuit priests and 
     brothers working abroad and in our domestic projects which 
     include: 28 Jesuit-affiliated universities and colleges, more 
     than 50 Jesuit high schools and middle schools, nearly 100 
     Jesuit parishes, and various other apostolic programs 
     throughout the country. We have an overriding commitment to 
     empower individuals, families and communities who are most 
     at-risk in our society. In essential ways, CRA enables these 
     marginalized groups to fully integrate into society.
       Propelled by a mission of justice and social progress, 
     Jesuit institutions have CRA-type goals of investing in the 
     communities where they are located. For example, Fordham 
     University is situated in one of the poorest urban counties 
     in the nation. In 1983, Fordham formalized a long-standing 
     partnership

[[Page S4784]]

     with the Northwest Bronx Community and Clergy Coalition to 
     form the University Neighborhood Housing Corporation (UNHP). 
     UNHP believes in working aggressively to develop and preserve 
     innovative, community-controlled, affordable housing. With 
     the strength and leverage of CRA, UNHP, has built a positive, 
     working relationship with Chase Manhattan Bank. From the late 
     1980s, this relationship has resulted in millions of dollars 
     of capital for affordable housing and economic development in 
     the northwest Bronx. Recently, this successful partnership 
     yielded $25 million in housing rehabilitation funding from 
     Fannie Mae. The force of community leaders working with 
     university, banking and Fannie Mae representatives is not 
     merely a lifeline for the northwest Bronx; it has added self-
     sustaining stability and growth to an historically 
     distressed, densely populated neighborhood. This is one 
     example of an estimated $1 trillion in CRA-leveraged 
     financial commitments since 1977.
       We ask for your continued support for national economic 
     development policies which equip people with the means to 
     lead respectful and dignified lives. CRA is in the interest 
     of underserved communities; it is in the interest of our 
     Jesuit institutions; and it is in our collective, national 
     interest.
       Thank you for your consideration and efforts.
           Sincerely,
     Rev. Richard Ryscavage, S.J.,
       Secretary, Jesuit Social & International Ministries.
     Ms. British Robinson,
       National Director, Jesuit Social & International 
     Ministries.
                                  ____

                                  Department of Social Development


                                               and World Peace

                                     Washington DC, March 4, 1999.
     Hon. Paul Sarbanes,
     Banking, Housing, and Urban Affairs Committee, U.S. Senate, 
         Washington, DC.
       Dear Senator Sarbanes: I write to ask that you oppose any 
     provisions in the Financial Services Act of 1999 that may 
     eliminate consumer protections and/or dilute the fair lending 
     laws.
       The United States Catholic Conference has vigorously 
     supported the disclosure of lending patterns since 1975 and 
     was one of the original supporters of the Home Mortgage 
     Disclosure Act. We believe people must have access to 
     information about the lending practices and patterns of the 
     financial institutions in their communities that are seeking 
     their business. In the past banks, mortgage companies, 
     insurance brokers and other financial institutions have 
     discriminated against minority populations, low-income 
     individuals and the communities in which they live with 
     virtual impunity. The Community Reinvestment Act (CRA) and 
     the effective enforcement of its regulations have proved 
     significant tools in ensuring that financial institutions 
     meet the credit needs of the local communities in which they 
     are located, particularly by increasing the flow of credit to 
     low-income and minority communities.
       Since 1977, CRA has channeled tens of billions of dollars 
     profitably back into rural and urban communities. This 
     success of local communities gaining access to private 
     capital should not be jeopardized. Communities and 
     neighborhoods need the investment of private capital 
     particularly as government curtails its spending on housing 
     and social services programs and local communities are being 
     asked to assume more responsibility for their own 
     development. Low and moderate income families of all races 
     and ethnicities have benefited from CRA with increased 
     opportunities to purchase homes, open small businesses or 
     operate farms.
       As Congress seeks to modernize the banking and financial 
     industry, fair lending laws must not be undermined. Once 
     more, we urge you to oppose any efforts to diminish consumer 
     protections and to weaken fair lending laws.
           Sincerely,

                                        Cardinal Roser Mahony,

       Archbishop of Los Angeles, Chairman, Domestic Policy 
     Committee.
                                  ____

                                       National Low Income Housing


                                               Coalition/LIHIS

                                    Washington, DC, April 6, 1999.
     Hon. Paul S. Sarbanes,
     United States Senate, Washington, DC.
       Dear Senator Sarbanes: On behalf of the National Low Income 
     Housing Coalition, I must express in the strongest terms 
     possible our objection to the evisceration of the Community 
     Reinvestment Act in the Financial Services Modernization Act 
     of 1999 recently reported out of the Senate Banking 
     Committee.
       The National Low Income Housing Coalition represents 
     thousands of local housing organizations that are doing the 
     hard work at the local level to rebuild neighborhoods that 
     have been depleted by disinvestment, and to produce safe, 
     decent, and affordable housing for people at the low end of 
     the economic spectrum. These are organizations that are 
     masterful at the management of multiple funding streams, 
     bringing together the public and private resources required 
     to stimulate and produce new housing and economic development 
     initiatives at the local level. Each of our members can 
     attest to the necessity of the Community Reinvestment Act in 
     putting together the resources required to do the job we all 
     expect of them. At a time when responsibility for solving 
     serious community problems is being devolved to local 
     organizations, it is mystifying as to why one of their most 
     critical resource development tools would be pulled out from 
     underneath them.
       Especially serious is the provision in the Senate bill 
     which allows banks not in compliance with CRA to expand their 
     affiliations and engage in new powers. This would essentially 
     render the CRA useless in the new world of financial 
     modernization.
       We also object to the creation of so-called ``safe 
     harbors'' for institutions with at least a satisfactory CRA 
     rating, which in effect eliminates opportunity for public 
     comment on the community reinvestment activities of the 
     banks, while maintaining opportunity for public comment on 
     all other aspects of the institutions' functioning.
       Finally, the small bank exemption would mean that rural 
     communities have no options for acquiring credit, as small 
     banks are often the only source of credit in many rural parts 
     of the country.
       The Community Reinvestment Act is a model of the Federal 
     government at its best, stimulating investment in poor 
     neighborhoods and creating a true partnership among the 
     private, for profit sector; the private, not for profit 
     sector, and the public sector. As we move into an era of a 
     bigger and more comprehensive banking system, building on, 
     not tearing down, this core element of community reinvestment 
     should be an essential principle.
       We urge that the Senate not take this action, and prevent 
     the dire consequences that would result in its wake of its 
     passage.
           Sincerely,
                                                   Sheila Crowley,
                                                        President.

  Mr. SARBANES. Mr. President, as I draw to a close, let me again say 
to the distinguished Senator from Nevada we very much appreciate his 
very strong and powerful statement.

                               Exhibit 1

                                                     April 8, 1999
     Hon. Paul S. Sarbanes,
     Senate Hart Office Building,
     U.S. Senate, Washington, DC.
       Dear Senator Sarbanes:  The undersigned organizations write 
     to express strong opposition to the Financial Services 
     Modernization Act of 1999 as reported out of the Senate 
     Banking Committee on March 4th. The Act would restructure the 
     financial services industry in the United States by allowing 
     broad affiliations among banks, insurance companies, and 
     security firms. Currently, the law strictly limits ownership 
     among different financial entities and between financial 
     companies and commercial corporations. The Act seeks to ease 
     these restrictions, without commensurate expansion of the 
     Community Reinvestment Act (CRA) to cover insurance 
     companies, securities firms, mortgage companies, and other 
     financial entities allowed to affiliate with banks. The Act 
     would undermine one of the most effective revitalization 
     vehicles for underserved low-income and minority communities, 
     including Hispanic American communities across the country.
       We have found, and research confirms, that all too often 
     the credit and financial needs of these communities are 
     severely underserved. Historically, many financial 
     institutions have avoided investing in these communities due 
     to their perceived higher level of risk. Unfortunately, 
     ``perceived higher level of risk'' is often code for ``low-
     income'' or ``minority.'' But the facts show that low-income 
     and minority communities are not inherently riskier than 
     other communities. In fact, most financial institutions find 
     them to be quite profitable, once they begin investing in 
     them. Unfortunately, without the CRA, many financial 
     institutions have not and would not be encouraged to do so.
       As the data show, Hispanics are the fastest-growing 
     population in the United States. We are a growing force in 
     the expansion of homeownership and small business 
     development, two leading indicators of the economic well-
     being of this country. For example, between 1987 and 1992, 
     Hispanic-owned business grew by over 76%, compared to 26% for 
     U.S. businesses overall. According to a 1997 Harvard study, 
     ``the number of Hispanic homeowners has shown the most 
     spectacular rise'' in recent years compared to that of Whites 
     and of other minority groups. Population projections forecast 
     Hispanics to be the largest minority group in the U.S. by the 
     year 2005, causing the U.S. economy to be increasingly 
     dependent on the continued prosperity of the Hispanic 
     American community. Without the CRA, this growth may be 
     impeded.
       As reported out of the Senate Banking Committee, the 
     Financial Services Modernization Act of 1999 would hinder 
     that growth by weakening the CRA in the following three ways. 
     First, ``satisfactory'' CRA rating is not required in order 
     for financial institutions to enjoy the new powers 
     afforded to them by the legislation, thereby allowing 
     banks to exercise their privilege, even if they are not 
     meeting the credit needs of the communities where they do 
     business.
       Second, banks receiving a ``satisfactory'' CRA rating would 
     be given a ``safe harbor'' from public comment on CRA 
     performance. Since over 95% of banks receive a 
     ``satisfactory'' rating, this would undermine the 
     effectiveness of the law by restricting a community's right 
     to voice its experience with

[[Page S4785]]

     banks. While a ``satisfactory'' rating provides a helpful 
     guide to a bank's overall performance, it may not provide an 
     accurate picture at the neighborhood level.
       Third, the Act proposes to exempt all small rural banks 
     (those with less than $100 million in assets) from CRA, 
     thereby releasing 76% of all rural banks from their CRA 
     obligations. As with the safe harbor provision, this 
     undermines the spirit and the effectiveness of the law by 
     exempting most rural banks. This would have particularly 
     adverse consequences in low-income rural communities where 
     often the only source of credit is a small bank. Moreover, 
     researchers have found that small banks have 
     disproportionately poor CRA records compared to larger banks, 
     thereby highlighting the need for CRA in rural communities 
     and small towns.
       CRA is one of the strongest incentives to encourage 
     investment in low-income and minority communities. Over the 
     last twenty-two years, neighborhoods across the country have 
     benefited from CRA-encouraged investments. This has resulted 
     in increases in homeownership and business development, 
     leading to the rebirth of many American neighborhoods. 
     However, many communities remain underserved by capital and 
     investment vehicles. For this reason, reinforcement, not 
     weakening, of CRA is critically needed. We urge you to 
     support the continued strengthening of America's communities 
     by vigorously opposing the Financial Services Modernization 
     Act of 1999 as reported out of Committee, and supporting 
     amendments that would strengthen the Bill's CRA protections. 
     Thank you.
           Sincerely,
         Rick Dovalina, National President, League of United Latin 
           American Citizens; Arturo Vargas, Executive Director, 
           NALEO Educational Fund; Ruth Pagani, Executive 
           Director, National Hispanic Housing Council (NHHC); 
           Juan Figueroa, President and General Counsel, Puerto 
           Rican Legal Defense and Education Fund (PRLDEF); 
           Antonia Hernandez, President and General Counsel, 
           MALDEF; Raul Yzaguirre, President and Chief Executive 
           Officer, National Council of La Raza (NCLR); Manuel 
           Mirabal, President and Chief Executive Officer, 
           National Puerto Rican Coalition (NPRC).
                                  ____



                                       National Farmers Union,

                                   Washington, DC, March 24, 1999.
       Dear Senator: On behalf of the 300,000 farm and ranch 
     families of the National Farmers Union, I write to express 
     our strong opposition to the Financial Services Modernization 
     Act of 1999, as reported out of the Senate Banking Committee 
     earlier this month. Specifically, we are concerned that the 
     bill would undercut the Community Reinvestment Act (CRA)--a 
     law that has significantly expanded access to credit in rural 
     communities across the nation.
       The Community Reinvestment Act prohibits redlining, and 
     encourages banks to make affordable mortgage, small farm and 
     small business loans. Under the impetus of CRA, banks and 
     thrifts made $11 billion in farm loans in 1997. CRA loans 
     assisted small farmers in obtaining credit for operating 
     expenses, livestock and real estate purchases. Low- and 
     moderate-income residents in rural communities also benefited 
     from $2.8 billion in small business loans in 1997.
       In 1999, access to credit is tighter than usual, making it 
     critical to maintain the CRA. There are three provisions in 
     the pending legislation that jeopardize the CRA.
       First, the bill exempts banks and thrifts that are located 
     in rural areas and have less than $100 million in assets, 
     from CRA requirements. This provision would exempt 76 percent 
     of all banks and thrifts in rural communities. A 
     Congressional Research Service study of data from 1997 to 
     mid-1998 found that banks with less than $100 million in 
     assets receive 70 percent of the ``below satisfactory'' CRA 
     ratings.
       Second, the banking bill fails to require that banks have a 
     satisfactory CRA rating in order to affiliate with securities 
     and insurance firms. In the absence of this requirement, 
     banks could ignore local credit needs in favor of expanding 
     to other areas.
       Third, the bill has the effect of eliminating the public's 
     opportunity to comment on a bank's performance pending 
     expansion, if that bank has had a satisfactory CRA rating 
     during the previous 36 months.
       There is no compelling reason to weaken the CRA. In fact, 
     CRA regulations were revised in 1995 to reduce compliance 
     burdens on small banks and allow for streamlined examination.
       The CRA has been extremely successful in encouraging 
     financial institutions to help meet the credit needs of rural 
     communities across the nation. Therefore, we urge you to 
     oppose the Financial Services Modernization Act of 1999 until 
     the provisions against the CRA are removed.
           Sincerely,
                                                   Leland Swenson,
     President.
                                  ____



                                Small Business Administration,

                                      Washington, DC, May 3, 1999.
     Hon. Paul S. Sarbanes,
     Ranking Member, Committee on Banking, Housing and Urban 
         Affairs, U.S. Senate, Washington, DC.
       Dear Senator Sarbanes: I am writing to express my concern 
     with provisions of the Financial Services Modernization 
     legislation that would weaken the Community Reinvestment Act 
     (CRA). The President has made clear that he would veto 
     legislation that weakens CRA, and it is my hope that the U.S. 
     Senate will not move to undermine this important statute.
       The CRA is a vital tool in providing access to capital in 
     communities traditionally underserved and once perceived as 
     high-risk lending areas. Financial institutions have found, 
     through CRA, that creditworthy borrowers and sound 
     investments do exist in these areas. The CRA has resulted in 
     viable small businesses creating jobs and stimulating local 
     economies. Without CRA, lending institutions might never 
     realize the maximum potential of these marketplaces, and many 
     communities could lose access to bank credit, which is so 
     important to small businesses.
       The CRA focus for banks strikes at the heart of fulfilling 
     the U.S. Small Business Administration's (SBA) mission. SBA 
     is in the business of providing credit to those who cannot 
     obtain it elsewhere, and we do this largely through our 
     partners--local financial institutions. Everyday, SBA and 
     banks across the country help entire communities grow through 
     SBA-backed equity investments and guaranteed loans, many of 
     which fall under CRA goals. Additionally, studies analyzing 
     CRA data identify and quantify what would have been only 
     hunches just 4 years ago, and the result is a more accurate 
     depiction of the patterns and gaps of small business lending 
     across the Nation. The CRA is essential in meeting the credit 
     and investment needs of our America's small businesses.
       Weakening CRA could reverse the progress we have made in 
     small business lending in this country. As you seek to 
     modernize the financial industry, I urge you to oppose any 
     provision that actually moves us back in time.
           Sincerely,
                                                      Aida Alvarez
     Administrator.
                                  ____


                   Chairman Greenspan Comments on CRA

       ``Anecdotal information seems to suggest that loans to low- 
     and moderate-income people perform, with respect to 
     repayment, as well as loans to others, though some studies 
     have suggested that delinquency rates on some types of 
     affordable mortgage loans are higher. . . . there is little 
     or no evidence that banks' safety and soundness have been 
     compromised by such lending, and bankers often report sound 
     business opportunities.''--January 12, 1998.
       ``When conducted properly by banks who are knowledgeable 
     about their local markets, who use this knowledge to develop 
     suitable products, and have adequately promoted those 
     products to the low- and moderate-income segments of the 
     community, CRA can be a safe, sound and profitable 
     business.''--May 17, 1995.
       Chairman Greenspan noted during testimony before the House 
     Banking Committee on February 11, 1999 that CRA has ``very 
     significantly increased the amount of credit in communities'' 
     that the changes have been ``quite profound.''
       ``CRA has helped financial institutions to discover new 
     markets that may have been underserved before.''--May 17, 
     1995 repeated January 12, 1998.
                                  ____


              CRA Administration and Democratic Supporters

       ``We must pass a stronger Community Reinvestment Act that 
     challenges to lend to entrepreneurs and promotes development 
     projects that reinforce community and neighborhood goals.''--
     Governor Bill Clinton and Senator Al Gore, ``Putting People 
     First,'' 1992.
       ``[T]he town banker is doing pretty well where you live--in 
     a big city or a small town. And yet, unbelievably enough, 
     when we are proving it is working, the Community Reinvestment 
     Act is under fire again.''--President Clinton to the U.S. 
     Conference of Mayors, January 29, 1999.
       The CRA has ``helped to build homes, create jobs, and 
     restore hope in communities across America.''--President 
     Clinton, Letter to Senator Paul Sarbanes and Senator Phil 
     Gramm, March 2, 1999.
       ``We must protect the Community Reinvestment Act, which 
     expands access to capital from mainstream financial 
     institutions. We have greatly improved CRA by streamlining 
     its regulations so that they focus on performance, not 
     paperwork. CRA has been an enormous success.''--Treasury 
     Secretary Robert Rubin, Letter to Senator Phil Gramm, 
     February 1, 1999.
       ``It's very significantly increased the amount of credit 
     that's available in the communities, and if one looks at the 
     detailed statistics, some of the changes have been quite 
     profound.''--Federal Reserve Chairman Alan Greenspan, 
     Testimony before the House Banking and Financial Services 
     Committee, February 11, 1999.
       ``[C]redit is the key to the American dream. Without it, 
     people cannot share the tremendous wealth of our free market 
     system--cannot buy a home, own a car, or send a child to 
     college.''--Former Rep. Joseph Kennedy (D-MA), House Floor 
     Statement during the Debate on the Financial Institutions 
     Safety and Consumer Choice Act, November 1, 1991.

                 What Senator Gramm Has Said About CRA

       ``I believe that perhaps the greatest national scandal in 
     America . . . is a scandal

[[Page S4786]]

     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.''--Senate 
     Floor Statement, October 5, 1998.
       ``[A]ll 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.''--Senate Floor 
     Statement, October 5, 1998.
       ``[CRA] conjures up in my mind the ``protection'' racket of 
     an earlier era, where the little merchant had the gangster 
     come into his place of business and say, `You know, somebody 
     could come in here and do you some real harm, and I am 
     willing to protect you.' ''--Senate Floor Statement, 
     September 30, 1998.
       ``Let this evil, like slavery in the pre-Civil War period, 
     let it exist, but do not expand it.''--Senate Banking 
     Committee Markup Hearing, September 11, 1998.
       ``CRA has since been corrupted into a system of legalized 
     extortion, often with the assistance of regulators. Moreover, 
     it has increasingly replaced market-directed financial 
     activity with politically directed and motivated channeling 
     of private sector financial resources. . . . This cronyizing 
     (sic) of the American economy is more typical of a third 
     world economy and will undoubtedly be damaging to our 
     national economic growth.''--Letter to Senate Committee on 
     the Budget, March 5, 1999.
                                  ____



                                              The White House,

                                        Washington, March 2, 1999.
     Hon. Paul S. Sarbanes,
     U.S. Senate, Washington, DC.
       Dear Paul: This Administration has been a strong proponent 
     of financial legislation that would reduce costs and increase 
     access to financial services for consumers, businesses and 
     communities. Nevertheless, we cannot support the ``Financial 
     Services Modernization Act of 1999,'' as currently proposed 
     by Chairman Gramm, now pending before the Senate Banking 
     Committee.
       In its current form, the bill would undermine the 
     effectiveness of the Community Reinvestment Act (CRA), a law 
     that has helped to build homes, create jobs, and restore hope 
     in communities across America. The CRA is working, and we 
     must preserve its vitality as we write the financial 
     constitution for the 21st Century. The bill would deny 
     financial services firms the freedom to organize themselves 
     in the way that best serves their customers, and prohibit a 
     structure with proven advantages for safety and soundness. 
     The bill would also provide inadequate consumer protections. 
     Finally, the bill could expand the ability of depository 
     institutions and nonfinancial firms to affiliate, at a time 
     when experience around the world suggests the need for 
     caution in this area.
       I agree that reform of the laws governing our nation's 
     financial services industry would promote the public 
     interest. However, I will veto the Financial Services 
     Modernization Act if it is presented to me in its current 
     form.
           Sincerely,
     Bill Clinton.
                                  ____

                                      National Association for the


                                Advancement of Colored People,

                                    Washington, DC, March 2, 1999.
     Re the Financial Services Modernization Act and the Community 
         Reinvestment Act.

     Hon. Paul S. Sarbanes,
     U.S. Senate, Washington, DC.
       Dear Senator Sarbanes: The National Association for the 
     Advancement of Colored People (NAACP), the nation's oldest 
     and largest grassroots civil rights organization, strongly 
     supports the Community Reinvestment Act (CRA) and opposes any 
     attempts to weaken it. The CRA has been instrumental in the 
     revitalization of literally tens of thousands of communities 
     nationwide, and is an important tool in the NAACP's efforts 
     to help people and communities achieve their goals at no cost 
     to the taxpayer.
       Through CRA, financial institutions are discovering that 
     there are benefits to working in and with low to moderate 
     income and minority communities. Since its enactment in 1977, 
     CRA has helped lenders tap into previously unchartered areas 
     and consequently they are learning what a viable, profitable 
     market the low-moderate and minority communities are.
       One example of a CRA success story would be the NAACP's 
     Community Development and Resource Centers (CDRCs). The 
     NAACP, working together with NationsBank, opened our first 
     CDRC in 1992 in part to help NationsBank comply with CRA. 
     Since that time, NAACP-CDRCs have made mortgage, consumer and 
     small business loan referrals amounting to over $100 million, 
     and more than 10,000 individuals and businesses have received 
     counseling or technical assistance through CRDCs.
       Due to the vital role the banking industry plays in the 
     success or failure of every American neighborhood, CRA is a 
     necessary tool for the sustained economic development of our 
     nation. Thus the NAACP urges you, in the strongest terms 
     possible, to oppose any amendments or bills that would in any 
     way weaken the effectiveness of CRA. The NAACP also urges 
     you, again in the strongest terms possible, to support any 
     move to expand or modernize CRA as the financial services 
     industry is allowed to change and grow. By not including CRA 
     in any restructuring of the financial services industry, you 
     would effectively be denying whole communities access to 
     much-needed mortgages, consumer or small business loans, or 
     basic financial assistance.
       I hope that you will feel free to contact me if you have 
     any questions regarding the NAACP position on CRA, or if 
     there is any way that I can work with you to ensure that CRA 
     is allowed to continue to prosper and provide assistance to 
     people and communities across the nation.
           Sincerely,
                                                Hilary O. Shelton,
                                                         Director.

  Mr. BRYAN. I note that the distinguished chairman wants to speak. The 
Senator from Nevada would like to get 5 to 6 minutes at some point, if 
that can be accommodated.
  Mr. GRAMM. Mr. President, under the unanimous consent request, I was 
to be recognized next.
  I suggest we let Senator Mack speak for 4 minutes, have the 
distinguished Senator from Nevada speak for 4 minutes, and then I will 
speak for 4 minutes and we will be through. Would that work?
  Mr. BRYAN. That is fine.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Florida.
  Mr. MACK. Mr. President, I thank Senator Gramm and the other Members 
on the floor for this time. I will be brief.
  I have spoken on this issue throughout my time in the Senate serving 
on the Banking Committee which now is into its 11th year. I also make 
these comments from the perspective of an individual who was president 
of a small bank in southwest Florida for 5 years out of a 16-year 
banking career.
  One would think, listening to the comments that have been made by the 
distinguished Senator from Maryland, that we were proposing to repeal 
CRA. We are not proposing that at all. There may be Members who want to 
do that, but that is not what the issue is about. The issue is about 
regulatory overkill.
  This little bank that I was president of had about $60 million in 
assets--very small bank--in a community that was developed, one of 
these Florida developments, that began in the late 1950s. To suggest 
that this small community bank in a very well-defined and confined 
market was not providing resources to that market is just absurd. If we 
did not lend money into that market, we would, in fact, have gone 
broke. So all I am suggesting is the amendment being proposed here is 
being sold as if we were trying to repeal CRA. The information I have 
is with the committee position: Only 2.8 percent of the total assets of 
the banking industry in America are affected by this carve-out, 2.8 
percent. There were 16,000 banks audited over a 9-year period and only 
three of those banks--I am talking about small banks now--only three of 
those banks were found to be significantly out of compliance.
  Small banks in America need some regulatory relief. That is all we 
are suggesting here. Again, my experience was this little bank of $60 
million in assets had to assign one individual whose job it was to put 
pins into a map in our market showing where we had made real estate 
loans. That is all we had to do. But I had to assign one person to do 
that. She had to put programs into effect in the bank to make sure we 
were complying with lending to our community. It was the only place we 
could have loaned.
  So the idea that we needed to have the Community Reinvestment Act for 
my bank and for small community banks is absurd. I ask my colleagues to 
reject the amendment and to support the committee position.
  I yield the remainder of my time.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. BRYAN. I thank the chairman for accommodating me and allowing me 
to speak for 4 minutes.
  Let me say we had much debate and much discussion. There are 
amendments on bills that come and go. They really do not impact the 
overall outcome. This amendment is the most important amendment that 
will be considered in this debate. If the Bryan amendment loses, we 
convert what can be a bipartisan effort to get this legislation, which 
I strongly support and supported in the last Congress--and it becomes 
immediately a partisan vote, and that legislation has no chance in that 
form of becoming law. Whatever

[[Page S4787]]

one's view is on CRA, and I understand we have widely different views, 
I respectfully submit this is not the vehicle to make this the issue. 
If, as the distinguished chairman and others have said, CRA needs to be 
revisited, let's do so in the context of some type of other legislation 
that is presently before the Banking Committee. We have had no hearings 
at all on this.
  The Bryan amendment does two very simple things. One, it retains the 
current CRA provisions, including those provisions which relate to 
small banks that eliminate their need to even file a report. All they 
have to do is to point for the bank examiner and say the records are in 
the file cabinet. They need do no more. So this is not, in my judgment, 
an onerous burden.
  And with respect to the new services that we permit banks to 
participate in, if Secretary Rubin and other experts who are looking at 
the banking field are correct, that is the wave of the future. If we do 
not require CRA as the condition of availing oneself of these new 
financial services, securities and insurance, in effect we marginalize 
and relegate CRA to a much lesser role.

  What is accomplished? Hundreds of millions of dollars have been 
invested in the inner cities in our country. Thousands of minority 
businesses have had an opportunity to participate, which they would not 
otherwise have gotten, and home ownership opportunities have expanded 
for literally millions of Americans. It would seem to me those are the 
kind of issues we can agree on--Democrats, Republicans, conservatives 
and liberals. CRA has accomplished much.
  We have gone through this before. A year ago, we nearly got a bill. 
It passed by a bipartisan majority in the House, with virtually the 
identical provisions that relate to CRA as contained in the Bryan 
amendment. It passed 16 to 2 out of the Banking Committee in this 
session of Congress; in the House Banking Committee by a vote of 51 to 
8. This legislation has progressed with, again, virtually the identical 
provisions as it relates to CRA that the Bryan amendment contains.
  So why are we going through this? The protagonists, the bankers, the 
insurance companies and the securities industry, do not oppose this 
legislation. We are going through this because our able chairman, whom 
we all greatly respect, says he needs leverage in dealing with the 
House. The last time I looked at the record of the composition of the 
House, the Republican Party was in the majority. Among its leaders were 
people such as Tom Delay and Dick Armey, not exactly what you would 
call liberal exponents, bleeding-heart types.
  It seems to me the argument that we need leverage makes no sense at 
all.
  Finally, let me say this may be the only opportunity in this Congress 
to vote on a civil rights amendment, a process that has worked well and 
has served the nation well. It is not objected to by those who are 
struggling to reach the compromises on this piece of legislation. We 
should enact the Bryan amendment and move forward and get this bill 
over to the House, get it to conference and signed into law by the 
President. We have that opportunity only if the Bryan amendment 
prevails.
  The PRESIDING OFFICER. The Senator's time has expired. The Senator 
from Texas.
  Mr. GRAMM. Mr. President, this has been a long debate and I think a 
good debate. Rather than trying to go back and answer specific points 
that have been made, and correct statements, let me just try to cut to 
the heart of this. This is not about banks, even though the Independent 
Bankers, the American Bankers Association, the Bankers Roundtable 
oppose this amendment and support the underlying bill.
  This is not about insurance companies. This is not about securities 
companies. This is about right and wrong. I have presented today, from 
redacted agreements, secret agreements that have been entered into by 
community groups and banks, three examples, the only three we have, 
where over and over again community groups are paid cash payments in 
return for them withdrawing objections which they have made to banks 
taking specific action, or where they have agreed not to raise an 
objection.
  So the first thing we are trying to do is bring integrity to the 
process by preventing people, in essence, from paying witnesses. How do 
we try to do that? We try to do it in the following way: If you are a 
bank and you have an excellent CRA record, you have been in compliance 
for three audits in a row and you are in compliance now--we do not in 
any way limit the ability of anybody to object to that bank doing what 
it has a right to do under law--all we are saying is you are innocent 
until proven guilty if you have a long record of compliance. If you are 
going to come in and prevent a bank from taking an action they have 
earned the right to do based on audits on community lending, and you 
come in and say they are racists, or they are loan sharks, that is not 
enough. What we require is you present substantial evidence.

  How is that defined? The Supreme Court defines substantial evidence 
as ``more than a mere scintilla . . . such relevant evidence as a 
reasonable mind might accept as adequate to support a claim.''
  That is not a high standard. That is simply a credibility standard. 
And all over America--we have professional protesters in Boston who are 
protesting bank mergers in Illinois. What do they have to do with 
community lending in Illinois? Nothing. But they file a protest. The 
bank is deathly afraid of being held up in its merger, for example. 
Obviously, they do not want to be called bad names by people who are 
professionals at calling people bad names. So they end up paying these 
groups cash. That is not right.
  This is an issue of right and wrong. The second issue is the issue 
relating to small banks. Little banks in rural communities in total 
hold only 2 percent of the assets of banks, but in 16,300 audits of 
these banks, each one of them on average cost the bank $80,000 to 
comply with. They found three banks in 9 years that are substantially 
out of compliance. They made these little banks pay $1.3 billion to 
find three bad actors. And little banks all over America are threatened 
by this regulatory burden. So we exempt them from it.
  Mr. President, 44 percent of the enforcement effort is going to banks 
with 2.8 percent of the capital. Take that enforcement effort and put 
it where the money is and you will get more community lending, not 
less.
  Finally, it is not as if the Sarbanes amendment simply strikes our 
provisions. But the Sarbanes amendment is the largest expansion of CRA 
in American history.
  It would impose a million-dollar-a-day fine on bank officers and 
board members if they fell out of compliance. The American Bankers 
Association and the Independent Bankers Association have urged us not 
to do this, because they will not be able to get board members to serve 
and they will not be able to hire officers if they have to buy 
insurance to potentially pay a million-dollar-a-day fine if they fall 
out of compliance with this regulation.
  What is the justification for this regulatory overkill when you have 
had three cases of substantial noncompliance out of 16,300 audits over 
9 years? What is wrong with this picture?
  What is wrong with the picture is, sadly, that many of our Democrat 
colleagues have decided, even though the spokesman for CRA testifying 
before our committee said, yes, there are abuses and, yes, they hurt 
the process and, yes, there is what they call green mail. Most people 
call it blackmail. But our colleagues have taken the extreme position 
that not only will they not address these abuses, they are going to 
vastly expand this to insurance, to securities and, with these million-
dollar-a-day fines, producing a situation where every abuse we are 
concerned about today is going to be greatly expanded.
  I urge our Democrat colleagues, if you support CRA, to help us bring 
an end to these abuses. If you support CRA, end the regulatory 
paperwork burden overkill so we can focus in this law on the real 
problem. While groups claim we are endangering CRA, it is those who 
will not fix clear wrongs that scream out that endanger it.
  Mr. President, I move to table the pending amendment and ask for the 
yeas and the nays.
  The PRESIDING OFFICER (Mr. Brownback). Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion

[[Page S4788]]

to table amendment No. 303. The yeas and nays have been ordered. The 
clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FITZGERALD (when his name was called). Present.
  Mr. REID. I announce that the Senator from New Jersey (Mr. 
Lautenberg) is necessarily absent.
  I also announce that the Senator from Louisiana (Ms. Landrieu) is 
absent attending a funeral.
  I further announce that, if present and voting, the Senator from New 
Jersey (Mr. Lautenberg) and the Senator from Louisiana (Ms. Landrieu) 
would each vote ``no.''
  The result was announced--yeas 52, nays 45, as follows:

                      [Rollcall Vote No. 101 Leg.]

                                YEAS--52

     Abraham
     Allard
     Ashcroft
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Chafee
     Cochran
     Collins
     Coverdell
     Craig
     Crapo
     DeWine
     Domenici
     Enzi
     Frist
     Gorton
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Murkowski
     Nickles
     Roberts
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner

                                NAYS--45

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Bryan
     Byrd
     Cleland
     Conrad
     Daschle
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerrey
     Kerry
     Kohl
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Moynihan
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Sarbanes
     Schumer
     Specter
     Torricelli
     Wellstone
     Wyden

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                             NOT VOTING--2

     Landrieu
     Lautenberg
       
  The motion was agreed to.
  Mr. GRAMM. Mr. President, I move to reconsider the vote.
  Mr. SARBANES. I move to lay that motion on the table.
  The motion to table was agreed to.
  Mr. BUNNING. Mr. President, I rise today in support of S. 900, which 
will modernize our financial services laws.
  If our financial industries are going to be able to compete in the 
world market in the next century, we must modernize our depression-era 
banking laws.
  The next century is almost here. We all talk about a Y2K problem. 
What about the antique banking law problem? Entering the new century 
with antiquated banking laws would be foolhardy. We have to reform our 
financial service system.
  Most of the financial services and bank laws that are on the books 
today are based on the Glass-Steagall Act, legislation passed in 1935, 
over 60 years ago!
  The world has changed a great deal since then, and it is going to 
change further and faster as we move into the 21st century. We need to 
update our outdated laws to account for this change and to give 
flexibility to American companies.
  At the same time, we must make sure that any bill we pass treats all 
the segments of the financial industry fairly, and that there is a 
level playing field for all of the groups involved.
  If history is any indication, any new law we pass will be with us for 
a long time, so we had better get it right.
  We've been working to get it right for a long time. Eleven years ago, 
when I was a member of the House Banking Committee, we were able to 
report a financial services modernization bill to the floor.
  Last year the House passed a bill and the Senate was able to pass a 
bill out of committee.
  As a Member of the House last year, I supported the bill that passed 
by one vote in the House. It wasn't perfect. There were things I would 
have liked to change.
  But I believed at the time that we couldn't allow the search for 
perfection to block real progress.
  That's even more true this year.
  We can talk about banking reform--and negotiate issues--for another 
twelve years--and we won't ever be able to make everyone totally happy.
  There are too many competing interests and too much complexity is 
involved in the rapidly changing financial services industry for us 
ever to find a regulatory framework that will completely satisfy all of 
the players involved.
  It's not going to happen.
  At some point, we just have to do the best we can and move ahead. I'm 
convinced we have reached that point now--we should pass this bill.
  Fortunately, the bill our committee approved this year is even better 
than the bills we considered last year. Chairman Gramm and his staff 
did a good job--the committee did a good job.
  It is time to move ahead.
  We should pass a clean bill quickly and send a message to the other 
body that we are serious about financial services reform.
  This bill has many important provisions. And I'm not going to talk 
about them all, but I would like to mention one issue in particular.
  The one issue my bankers bring up every time they come to visit is 
Community Reinvestment Act or CRA reform.
  I am very pleased the chairman has agreed to put CRA provisions in 
the bill and that we were able to pass Senator Shelby's amendment in 
committee that will provide CRA relief, especially to small banks in my 
State and across the Nation.
  Senator Shelby's amendment will exempt 154 small banks in Kentucky 
from Federal CRA burdens.
  These banks have always invested in the community. That is where 
their business is. A bank in Clinton, Kentucky does not lend in 
Louisville or Lexington, it lends in Clinton.
  I have a letter from Robert Black, president and CEO of the Clinton 
Bank. Mr. Black says: ``We were using good CRA practices long before 
the burdensome regulation was passed. This regulation is now requiring 
much of our time preparing documentation and placing pins in a map just 
to prove that we made loans in every community.''
  I should mention that Clinton, Kentucky was not named after Bill 
Clinton.
  I would also like to read a passage from a letter from E.L. Williams, 
president of the Citizens Deposit Bank of Arlington, in Arlington 
Kentucky.
  Mr. Williams states: ``In our opinion, the time and money afforded to 
CRA compliance in small banks could be used to a much greater 
advantage, such as lending and assisting the low to moderate income 
population for which the CRA was originally implemented.''
  These small banks will lend in their own communities with or without 
CRA. They don't need Federal regulators breathing down their necks to 
make sure they are doing what they would be doing anyway.
  I would personally like to see even greater reform of CRA--across the 
board--but our small banks really need and deserve relief and this bill 
provides it.
  In closing, Mr. President, I repeat that this bill is not perfect. 
But it is a dramatic improvement over the antique financial laws we are 
operating under now and it is a dramatic improvement over the Sarbanes 
substitute.
  We must enter the 21st century ready to compete and this bill will 
make that possible.
  It is a good bill--I urge my colleagues to support it.

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