[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Pages S4812-S4814]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

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              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

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                  BRYAN (AND OTHERS) AMENDMENT NO. 303

  Mr. BRYAN (for himself, Mr. Dodd, and Mr. Kerry ) proposed an 
amendment to the bill (S. 900) to enhance competition in the financial 
services industry by providing a prudential framework for the 
affiliation of banks, securities firms, insurance companies, and other 
financial service providers, and for other purposes; 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.
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                         REID AMENDMENT NO. 304

  (Ordered to lie on the table.)
  Mr. REID submitted an amendment intended to be proposed by him to the 
bill (S. 900), supra; as follows:

       At the appropriate place, insert the following:

     SEC.  . FEDERAL RESERVE AUDITS.

       (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et 
     seq.) is amended by inserting after section 11A the 
     following:

     ``SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE 
                   BANKS.

       ``(a) Audit Required.--Each Federal reserve bank shall 
     annually obtain an audit of the financial statements of each 
     Federal reserve bank (which shall have been prepared in 
     accordance with generally accepted accounting principles) 
     using generally accepted auditing standards from an 
     independent auditor that meets the requirements of subsection 
     (b).
       ``(b) Auditor's Qualifications.--The independent auditor 
     referred to in subsection (a) shall--
       ``(1) be a certified public accountant who is independent 
     of the Federal Reserve System; and
       ``(2) meet any other qualifications that the Board may 
     establish.
       ``(c) Certification Required.--In each audit required under 
     subsection (a), the auditor shall certify to the Federal 
     reserve bank and to the Board that the auditor--
       ``(1) is a certified public accountant and is independent 
     of the Federal Reserve System; and
       ``(2) conducted the audit using generally accepted auditing 
     standards.
       ``(d) Certification by Federal Reserve Bank.--Not later 
     than 30 days after the completion of each audit required 
     under subsection (a), the Federal reserve bank shall provide 
     to the Comptroller General of the United States--
       ``(1) a certification that--
       ``(A) the Federal reserve bank has obtained the audit 
     required under subsection (a);
       ``(B) the Federal reserve bank has received the 
     certifications of the auditor required under subsection (c); 
     and
       ``(C) the audit fully complies with subsection (a).
       ``(e) Detection of Illegal Acts.--
       ``(1) Audit procedures.--Each audit required by this 
     section shall include procedures designed to provide 
     reasonable assurance of detecting illegal acts that would 
     have a direct and material effect on the determination of 
     financial statement amounts.
       ``(2) Reporting possible illegalities.--If, in the course 
     of conducting an audit required by this section, the 
     independent auditor detects or otherwise becomes aware of 
     information indicating that an illegal act (whether or not 
     perceived to have an effect on the financial statements of 
     the Federal reserve bank) has or may have occurred, the 
     auditor--
       ``(A) shall determine whether it is likely that the illegal 
     act has occurred; and
       ``(B) shall, if the auditor determines that the illegal act 
     is likely to have occurred--
       ``(i) determine and consider the possible effect of the 
     illegal act on the financial statements of the Federal 
     reserve bank; and

[[Page S4813]]

       ``(ii) as soon as practicable, inform the Board that the 
     illegal act is likely to have occurred.
       ``(3) Report to congress.--The independent auditor under 
     this section shall, as soon as practicable, directly report 
     its conclusions to the Committee on Governmental Affairs of 
     the Senate and the Committee on Government Reform of the 
     House of Representatives with regard to any possible illegal 
     act that has been detected or has otherwise come to the 
     attention of the auditor during the course of the audit 
     required by this section, if, after determining that the 
     Board is adequately informed with respect to such possible 
     illegal act, the auditor concludes that--
       ``(A) the possible illegal act has a direct and material 
     effect on the financial statements of the Federal reserve 
     bank;
       ``(B) The Board has not taken timely and appropriate 
     remedial actions with respect to the possible illegal act; 
     and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard report of the 
     auditor when made, or warrant resignation from the audit 
     engagement.
       ``(4) Resignation of auditor.--If an independent auditor 
     resigns from its engagement to audit a Federal reserve bank 
     under paragraph (3), the auditor shall furnish to the 
     Committee on Governmental Affairs of the Senate and the 
     Committee on Government Reform of the House of 
     Representatives, not later than 1 business day after such 
     resignation, a copy of the report of the auditor (or 
     documentation of any oral report given).
       ``(f) Recordkeeping.--To facilitate compliance with this 
     section, each Federal reserve bank shall--
       ``(1) ensure that the books, records, and accounts of the 
     Federal reserve bank are maintained and kept in sufficient 
     detail to accurately and fairly reflect the transactions and 
     dispositions of the assets of the bank;
       ``(2) devise and maintain a system of internal controls 
     sufficient to provide reasonable assurance that transactions 
     are recorded as necessary to permit preparation of financial 
     statements in conformity with generally accepted accounting 
     principles and to maintain accountability for assets;
       ``(3) ensure that access to assets of the Federal reserve 
     bank is permitted only in accordance with the general or 
     specific authorization of the Board; and
       ``(4) ensure that--
       ``(A) the recorded accountability for assets is compared 
     with the existing assets at reasonable intervals; and
       ``(B) appropriate action is taken with respect to any 
     differences.
       ``(g) Reports to Board, Congress.--Not later than April 30 
     of each year, each Federal reserve bank shall submit a copy 
     of each audit conducted under this section to the Board, and 
     to the Committee on Governmental Affairs of the Senate and 
     the Committee on Government Reform of the House of 
     Representatives.

     ``SEC. 11C. INDEPENDENT AUDITS OF FEDERAL RESERVE SYSTEM AND 
                   FEDERAL RESERVE BOARD.

       ``(a) Audit of Reserve System.--The Board shall annually 
     obtain an audit of the consolidated financial statements of 
     the Federal Reserve System (which shall have been prepared in 
     accordance with generally accepted accounting principles) 
     from an independent auditor, using generally accepted 
     auditing standards, based on reports of audits of Federal 
     reserve banks submitted to the Board under section 11B(g) and 
     the audit of the Board under subsection (b) of this section.
       ``(b) Audit of Board.--
       ``(1) In general.--The Board shall annually obtain an audit 
     of the financial statements of the Board (which shall have 
     been prepared in accordance with generally accepted 
     accounting principles) from an independent auditor, using 
     generally accepted auditing standards.
       ``(2) Priced services audit.--
       ``(A) In general.--As part of each audit of the Board 
     required by this subsection, the auditor shall--
       ``(i) audit the calculation of the private sector 
     adjustment factor established by the Board by regulation 
     pursuant to section 11A(c)(3) for the year that is the 
     subject of the audit; and
       ``(ii) audit the pro forma balance sheet and income 
     statement for the services described in section 11A(b), 
     including the determination of revenue, expenses, and income 
     before income taxes for each service listed in that section 
     (in accordance with the criteria specified in section 
     11A(c)(3)).
       ``(B) Report to the board.--The auditor shall report the 
     results of the audit under subparagraph (A)(ii) to the Board 
     in written form.
       ``(3) Limitation.--The evaluations and audits required by 
     this subsection shall not include deliberations, decisions, 
     or actions on monetary policy matters, including discount 
     authority under section 13, reserves of national banks, 
     securities credit, interest on deposits, and open market 
     operations.
       ``(c) Auditor's Qualifications.--An independent auditor 
     referred to in this section shall--
       ``(1) be a certified public accountant and be independent 
     of the Federal Reserve System; and
       ``(2) meet any other qualifications that the Board may 
     establish.
       ``(d) Certificaiton Required.--In each audit required under 
     this section, the auditor shall certify to the Board that the 
     auditor--
       ``(1) is a certified public accountant and is independent 
     of the Federal Reserve System; and
       ``(2) conducted the audit using generally accepted auditing 
     standards.
       ``(e) Detection of Illegal Acts.--
       ``(1) Audit procedures.--Each audit required by this 
     section shall include procedures designed to provide 
     reasonable assurance of detecting illegal acts that would 
     have a direct and material affect on the determination of 
     financial statement amounts.
       ``(2) Reporting possible illegalities.--If, in the course 
     of conducting an audit of the Federal Reserve System or the 
     Board as required by this section, the independent auditor 
     detects or otherwise becomes aware of information indicating 
     that an illegal act (whether or not perceived to have an 
     effect on the financial statements of the Federal reserve 
     bank) has or may have occurred, the auditor--
       ``(A) shall determine whether it is likely that the illegal 
     act has occurred; and
       ``(B) shall, if the auditor determines that the illegal act 
     is likely to have occurred--
       ``(i) determine and consider the possible effect of the 
     illegal act on the financial statements of the Federal 
     Reserve System or the Board, as applicable; and
       ``(ii) as soon as practicable, inform the Board that the 
     illegal act is likely to have occurred.
       ``(3) Report to congress.--An independent auditor under 
     this section shall directly report, as soon as practicable, 
     its conclusions to the Committee on Government Affairs of the 
     Senate and the Committee on Government Reform of the House of 
     Representatives, with regard to any possible illegal act that 
     has been detected or has otherwise come to the attention of 
     the auditor during the course of an audit of the Federal 
     Reserve System or the Board required by this section, if, 
     after determining that the Board is adequately informed with 
     respect to such possible illegal act, the auditor concludes 
     that--
       ``(A) the possible illegal act has a direct and material 
     effect on the financial statements of the Federal Reserve 
     System or the Board, as applicable;
       ``(B) the Board has not taken timely and appropriate 
     remedial actions with respect to the possible illegal act; 
     and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard report of the 
     auditor when made, or warrant resignation from the audits 
     engagement.
       ``(4) Resignation of auditor.--If an independent auditor 
     resigns from its engagement to audit the Federal Reserve 
     System or the Board under paragraph (3), the auditor shall 
     furnish to the Committee on Governmental Affairs of the 
     Senate and the Committee on Government Reform of the House of 
     Representatives, not later than 1 business day after such 
     resignation, a copy of the report of the auditor (or 
     documentation of any oral report given).
       ``(f) Recordkeeping.--To facilitate compliance with this 
     section, the Board shall--
       ``(1) ensure that the books, records, and accounts of the 
     Board are maintained and kept in sufficient detail to 
     accurately and fairly reflect the transactions and 
     dispositions of assets;
       ``(2) devise and maintain a system of internal controls 
     sufficient to provide reasonable assurance that transactions 
     are recorded as necessary to permit preparation of financial 
     statements in conformity with generally accepted accounting 
     principles and to maintain accountability for assets;
       ``(3) ensure that access to assets of the Board is 
     permitted only in accordance with general or specific 
     authorization of the Board; and
       ``(4) ensure that--
       ``(A) the recorded accountability for assets is compared 
     with the existing assets at reasonable intervals; and
       ``(B) appropriate action is taken with respect of any 
     differences.
       ``(g) Reports to Congress.--Not later than May 31 of each 
     year, the Board shall make available all audits and reports 
     required by this section to the Committee on Governmental 
     Affairs of the Senate and the Committee on Government Reform 
     of the House of Representatives.''.
       ``(b) Federal Reserve Requirements.--
       ``(1) Clarification of fee schedule requirements.--
       ``(A) In general.--Section 11A(b) of the Federal Reserve 
     Act (12 U.S.C. 248a(b)) is amended--
       ``(i) by redesignating paragraphs (7) and (8) as paragraphs 
     (8) and (9), respectively; and
       ``(ii) by inserting after paragraph (6) the following:
       ``(7) transportation of paper checks in the clearing 
     process;''.
       (B) Publication of revised schedule.--Not later than 60 
     days after the date of enactment of this Act, the Board of 
     Governors of the Federal Reserve System shall publish a 
     revision of the schedule of fees required under section 11A 
     of the Federal Reserve Act that reflects the changes made in 
     the schedule in accordance with the amendments made by 
     subparagraph (A) of this paragraph.
       (2) Clarification of applicable pricing criteria.--Section 
     11A(c) of the Federal Reserve Act (12 U.S.C. 248a(c)) is 
     amended by striking paragraph (3) and inserting the 
     following:
       ``(3)(A) In each fiscal year, fees shall be established for 
     each service provided by the Federal reserve banks on the 
     basis of all direct and indirect costs actually incurred 
     (excluding the effect of any pension cost credit)

[[Page S4814]]

     in providing each of the services, including interest on 
     items credited prior to actual collection, overhead, and an 
     allocation of imputed costs, which takes into account the 
     taxes that would have been paid and the return on capital 
     that would have been provided had the services been provided 
     by a private business firm.
       ``(B) The pricing principles referred to in subparagraph 
     (A) shall be carried out with due regard to competitive 
     factors and the provision of an adequate level of such 
     services nationwide.
       ``(C)(i) Not later than 1 year after the date of enactment 
     of the Financial Services Modernization Act of 1999, and not 
     less frequently than once every 3 years thereafter, the Board 
     shall conduct a comprehensive review of the methodology used 
     to calculate the private sector adjustment factor pursuant to 
     section 11A(c)(3), including a public notice and comment 
     period.
       ``(ii) In conducting the review under clause (i), the Board 
     shall publish in the Federal Register all elements of the 
     methodology in use by the Board in the calculation of the 
     private sector adjustment factor pursuant to section 
     11A(c)(3) provide notice and solicit public comment on the 
     methodology, requesting commentators to identify areas of the 
     methodology that are outdated, inappropriate, unnecessary, or 
     that contribute to an inaccurate result in the calculation of 
     the private sector adjustment factor.
       ``(iii) The Board shall--
       ``(I) publish in the Federal Register a summary of the 
     comments received under this subparagraph, identifying 
     significant issues raised; and
       ``(II) provide comment on such issues and make changes to 
     the methodology to the extent that the Board considers to be 
     appropriate.
       ``(iv) Not later than 30 days after the completion of each 
     review under clause (i), the Board shall submit to Congress a 
     report which shall include--
       ``(I) a summary of any significant issues raised by public 
     comments relieved by the Board under this subparagraph and 
     the relative merits of such issues; and
       ``(II) an analysis of whether the Board is able to address 
     the concerns raised, or whether such concerns should be 
     addressed by legislation.''.

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