[Congressional Record Volume 145, Number 65 (Thursday, May 6, 1999)]
[Senate]
[Pages S4821-S4829]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

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

       A bill (S. 900) to enhance competition in the financial 
     services industry by providing a prudential framework for the 
     affiliation of banks, securities firms, insurance companies, 
     and other financial service providers, and for other 
     purposes.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Texas is recognized to offer an amendment.
  Mr. GRAMM. Mr. President, I want to urge my colleagues, if they have 
any amendments for this bill, to bring those amendments to the floor.
  We are going to try to gather up today the amendments that Members 
want to present. We are going to evaluate them. Hopefully, we can take 
many of those amendments without a rollcall vote. There will be some 
point this morning at which we will attempt to try to bring this to a 
conclusion in terms of setting a blueprint for the day. It is my 
intention to press forward today as long as it takes, as hard as it is, 
to see this bill dealt with and its work completed.
  Mr. DORGAN. Mr. President, I wonder if the Senator from Texas will 
yield for a question.
  Mr. GRAMM. I will be happy to yield for a question.
  Mr. DORGAN. Mr. President, I understand the Senator from Texas, based 
on the previous agreement, is to be recognized to offer two amendments. 
I heard his call for other Members to come with amendments. I have a 
couple of amendments which I intend to offer. I would not expect the 
Senator to include those in the list of amendments he intends to 
accept, but nonetheless I also wish to make a statement about the bill 
generally today. I have come over several times, as the Senator knows, 
and it has not been convenient to be able to do so with respect to 
other schedules, and I understand that. But I wonder if the Senator 
could give me some notion of when I might be able to be recognized, at 
which time I would make the statement I intend to make about the bill 
generally and then offer an amendment.
  Mr. GRAMM. Mr. President, I am awaiting Senator Sarbanes, so why 
don't I just ask, how long does the Senator need to make an opening 
statement?
  Mr. DORGAN. I wish to speak for about 20 minutes this morning.
  Mr. GRAMM. Mr. President, let me ask unanimous consent that the 
distinguished Senator from North Dakota might speak on the bill for 20 
minutes, and that at the end of that time I might be recognized for the 
purpose of offering the amendment. I am willing to step aside.
  Mr. DORGAN. Mr. President, the Senator from Texas is most courteous. 
I would like about 5 minutes to gather some charts.

[[Page S4822]]

  Mr. GRAMM. Fine.
  Mr. DORGAN. If the Senator would like to proceed----
  Mr. GRAMM. Why don't we do it this way. Let me ask unanimous consent 
that the Senator be recognized to speak for 20 minutes. I will suggest 
the absence of a quorum. He can take us out of the quorum call when he 
comes back and speak for 20 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, we are debating a piece of legislation in 
the Senate that is called the Financial Services Modernization Act of 
1999.
  I come today with the confession I am probably hopelessly old 
fashioned on this issue. For those who have a vision of re-landscaping 
the financial system in this country with different parts operating 
with each other in different ways and saying that represents 
modernization, then I am just hopelessly old fashioned, and there is 
probably nothing that can be said or done that will march me towards 
the future.
  I want to sound a warning call today about this legislation. I think 
this legislation is just fundamentally terrible. I hear all these words 
about the industry remaking itself--banks, security firms and insurance 
companies, and that we'd better catch up and put a fence around where 
they are or at least build a pasture in the vicinity of where they are 
grazing. What a terrible idea.
  What is it that sparks this need to modernize our financial system? 
And what does modernization mean? This chart shows bank mergers in 
1998, in just 1 year, last year, the top 10 bank mergers. We have 
discovered all these corporations have fallen in love and decided to 
get married. Citicorp, with an insurance company--that is a big one--
$698 billion in combined assets; NationsBank--BankAmerica, $570 
million; and the list goes on. This is a massive concentration through 
mergers.
  Is it good for the consumers? I don't think so. Better service, lower 
prices, lower fees? I don't think so. Bigger profits? You bet.
  What about the banking industry concentration? The chart shows the 
number of banks with 25 percent of the domestic deposits. In 1984, 42 
of the biggest banks had 25 percent of the biggest deposits. Now only 
six banks have the biggest deposits. That is a massive concentration.
  I didn't bring the chart out about profits, but it will show --this 
is an industry that says it needs to be modernized--banks have record-
breaking profits, security firms have very healthy profits, and most 
insurance companies are doing just fine. Why is there a need to 
modernize them?
  So we must ask the question, what about the customer? What impact on 
the economy will all of this so-called modernization have?
  It is interesting to me that the bill brought to the floor that says, 
``Let's modernize this,'' is a piece of legislation that doesn't do 
anything about a couple of areas which I think pose very serious 
problems. I want to mention a couple of these problems because I want 
to offer a couple of amendments on them.
  I begin by reading an article that appeared in the Wall Street 
Journal, November 16, 1998. This is a harbinger of things to come, just 
as something I will read that happened in 1994 is a harbinger of things 
to come, especially as we move in this direction of modernization.

       It was Aug. 21, a sultry Friday, and nearly half the 
     partners at Long-Term Capital Management LP [that's LTCM, a 
     company] were out of the office. Outside the fund's glass-
     and-granite headquarters, a fountain languidly streamed over 
     a copper osprey clawing its prey.
       Inside, the associates logged on to their computers and saw 
     something deeply disturbing: U.S. Treasurys were 
     skyrocketing, throwing their relationship to other securities 
     out of whack. The Dow Jones Industrial Average was swooning--
     by noon, down 283 points. The European bond market was in 
     shambles. LTCM's biggest bets were blowing up, and no one 
     could do anything about it.

  This was a private hedge funding.

       By 11 a.m., the [hedge] fund had lost $150 million in a 
     wager on the prices of two telecommunications stocks involved 
     in a takeover. Then, a single bet tied to the U.S. bond 
     market lost $100 million [by the same company]. Another $100 
     million evaporated in a similar trade in Britain. By day's 
     end, LTCM [this hedge fund in New York] had hemorrhaged half 
     a billion dollars. Its equity had sunk to $3.1 billion--down 
     a third for the year.

  This company had made bets over $1 trillion.
  Now, what happened? They lost their silk shirts. But of course, they 
were saved because a Federal Reserve Board official decided we can't 
lose a hedge fund like this; it would be catastrophic to the 
marketplace. So on Sunday night they convened a meeting with an 
official of the Federal Reserve Board, and a group of banks came in as 
a result of that meeting and used bank funds to shore up a private 
hedge fund that was capitalized in the Caymen Islands for the purpose, 
I assume, of avoiding taxes. Bets of over $1 trillion in hedges--they 
could have set up a casino in their lobby, in my judgment, the way they 
were doing business. But they got bailed out.
  This was massive exposure. The exposure on the hedge fund was such 
that the failure of the hedge fund would have had a significant impact 
on the market.
  And so we modernize our banking system. This is unregulated. This 
isn't a bank; it is an unregulated hedge fund, except the banks have 
massive quantities of money in the hedge fund now in order to bail it 
out.
  What does modernization say about this? Nothing, nothing. It says 
let's pretend this doesn't exist, this isn't a problem, let's not deal 
with it.
  So we will modernize our financial institutions and we will say about 
this problem--nothing? Don't worry about it?
  I find it fascinating that about 70 years ago in this country we had 
examples of institutions the futures of which rested on not just safety 
and soundness of the institutions themselves but the perception of 
safety and soundness, that is, banks. Those institutions, the future 
success and stability of which is only guaranteed by the perception 
that they are safe and sound, were allowed, 70 years ago, to combine 
with other kinds of risk enterprises--notably securities underwriting 
and some other activities--and that was going to be all right. That was 
back in the Roaring Twenties when we had this go-go economy and the 
stock market was shooting up like a Roman candle and banks got involved 
in securities and all of a sudden everybody was doing well and 
everybody was making massive amounts of money and the country was 
delirious about it.
  Then the house of cards started to fall. As investigations began and 
bank failures occurred and bank holidays were declared, from that 
rubble came a description of a future that would separate banking 
institutions from inherently risky enterprises. A piece of legislation 
called the Glass-Steagall Act was written, saying maybe we should learn 
from this, that we should not fuse inherently risky enterprises with 
institutions whose perception of safety and soundness is the only thing 
that can guarantee their future success. So we created circumstances 
that prevented certain institutions like banks from being involved in 
other activities such as securities underwriting.
  Over the years that has all changed. Banks have said, because 
everybody else has decided they want to intrude into our business--and 
that is right, a whole lot of folks now set themselves up in a lobby 
someplace and say we are appearing to be like a bank or want to behave 
like a bank--the banks say if that is the case, we want to get into 
their business. So now we have the kind of initiative here in the 
Congress that says: Let's forget the lessons of the past; let's believe 
the 1920s did not happen; let's not worry about Glass-Steagall. In 
fact, let's repeal Glass-Steagall; let's decide we can merge once again 
or fuse together banking enterprises and more risky enterprises, and we 
can go down the road just as happy as clams and everything will be just 
great. And of course it will not.
  I mentioned hedge funds--talk about risk. How about derivatives? 
Incidentally, those who vote for this bill will

[[Page S4823]]

remember this at some point in the future when we have the next 
catastrophic event that goes with the risks in derivatives. Fortune 
magazine wrote an article, ``The Risk That Won't Go Away; Financial 
Derivatives Are Tightening Their Grip on the World Economy and No One 
Knows How to Control Them.'' Somewhere around $70- to $80 trillion in 
derivatives.
  I wrote an article in 1994 for the Washington Monthly magazine and 
derivatives at that point were $35 trillion. You know something, today 
in this country banks are trading derivatives on their own proprietary 
accounts. They could just as well put a roulette wheel in the lobby. 
They could just as well call it a casino. Banks ought not be trading 
derivatives on their proprietary accounts. I have an amendment to 
prohibit that. I don't suppose it would get more than a handful of 
votes, but I intend to offer it.
  Is it part of financial modernization to say this sort of nonsense 
ought to stop; that banks ought not be able to trade derivatives on 
their own proprietary accounts because that is inherently gambling? It 
does not fit with what we know to be the fundamental nature of banking 
and the requirement of the perception of safety and soundness of these 
institutions. Does anybody here think this makes any sense, that we 
have banks involved in derivatives, trading on their own proprietary 
accounts? Does anybody think it makes any sense to have hedge funds out 
there with trillions of dollars of derivatives, losing billions of 
dollars and then being bailed out by a Federal Reserve-led bailout 
because their failure would be so catastrophic to the rest of the 
market that we cannot allow them to fail?
  And as banks get bigger, of course, we also have another doctrine. 
The doctrine in banking at the Federal Reserve Board is called, ``too 
big to fail.'' Remember that term, ``too big to fail.'' It means at a 
certain level, banks get too big to fail. They cannot be allowed to 
fail because the consequence on the economy is catastrophic and 
therefore these banks are too big to fail. Virtually every single 
merger you read about in the newspapers these days means we simply have 
more banks that are too big to fail. That is no-fault capitalism; too 
big to fail. Does anybody care about that? Does the Fed? Apparently 
not.
  Of course the Fed has an inherent conflict of interest. I think, if 
the Congress were thinking very clearly about the Federal Reserve 
Board, they would decide immediately that the Federal Reserve Board is 
not the locus of supervision of banks. The Federal Reserve Board is in 
charge of monetary policy. It is fundamentally a conflict of interest 
to be listening to the Fed about what is good for banks when they are 
involved in running the monetary policy of this country. If the Federal 
Reserve Board were, in my judgment, doing what it ought to be doing, it 
would be leading the charge, saying we need to regulate risky hedge 
funds because banks are involved in substantial risk on these hedge 
funds. Apparently hedge funds have become too big to fail. Then there 
needs to be some regulation.

  The Fed, if it were thinking, would say we need to deal with 
derivatives, and that bank trading on proprietary accounts in 
derivatives is absurd and ought not happen. Some will remember in 1994 
the collapse in the derivative area. You might remember the stories. 
``Piper's Managers' Losses May Total $700 Million.'' ``Corporation 
After Corporation Had to Write Off Huge Losses Because They Were 
Involved in the Casino Game on Derivatives.'' ``Bankers Trust Thrives 
on Pitching Derivatives But Climate Is Shifting.'' ``Losses By P&G May 
Clinch Plan to Change.''
  The point is, we have massive amounts of risk in all of these areas. 
The bill brought to the floor today does nothing to address these 
risks, nothing at all, but goes ahead and creates new risks by saying 
we will fuse and merge the opportunities for inherently risky economic 
activity to be combined with banking which requires the perception of 
safety and soundness.
  We have all these folks here who know a lot more about this than I 
do, I must admit, who say: Except we are creating firewalls. We have 
subsidiaries, we have affiliates, we have firewalls. They have 
everything except common sense; everything, apparently, except a primer 
on history. I just wish, before people would vote for this bill, they 
would be forced to read just a bit of the financial history of this 
country to understand how consequential this decision is going to be.
  I, obviously, am in a minority here. We have people who dressed in 
their best suits and they just think this is the greatest piece of 
legislation that has ever been given to Congress. We have choruses of 
folks standing outside this Chamber who spent their lifetimes working 
to get this done, to say: Would you just forget all that nonsense back 
in the 1930s about bank failures and Glass-Steagall and the requirement 
to separate risk from banking enterprises; just forget all that. Time 
has moved on. Let's understand that. Change with the times.
  We have folks outside who have worked on this very hard and who very 
much want this to happen. We have a lot of folks in here who are very 
compliant to say: Absolutely, let me be the lead singer. And here we 
are. We have this bill, which I will bet, in 5, 10, 15 years from now, 
we will be back thinking of this bill like we thought of the bill 
passed in the late 1970s and early 1980s, in which this Congress 
unhitched the savings and loans so some sleepy little Texas institution 
could gather brokered deposits from all around America and, like a 
giant rocket, become a huge enterprise. And guess what. With all the 
speculation in the S&Ls and brokered deposits and all the things that 
went with it that this Congress allowed, what did it cost the American 
taxpayer to bail out that bunch of failures? What did it cost? Hundreds 
of billions of dollars. I will bet one day somebody is going to look 
back at this and they are going to say: How on Earth could we have 
thought it made sense to allow the banking industry to concentrate, 
through merger and acquisition, to become bigger and bigger and bigger; 
far more firms in the category of too big to fail? How did we think 
that was going to help this country? Then to decide we shall fuse it 
with inherently risky enterprises, how did we think that was going to 
avoid the lessons of the past?
  Then the one question that bothers me, I guess, is--I understand what 
is in this for banks. I understand what is in it for the security 
firms. I understand what is in it for all the enterprises. What is in 
this for the American people? What is in it for the American people? 
Higher charges, higher fees? Do you know that some banks these days are 
charging people to see their money? We know that because we pay fees, 
obviously, to access our money at bank machines. But credit card 
companies, most of them through banks, are charging people who pay 
their bills on time because you cannot make money off somebody who 
wants to pay their bill every month.
  If you have a credit card balance--incidentally, you need a credit 
card these days, because it is pretty hard to do business in cash in 
some places. You know with all the bills, everybody wants to use credit 
cards. Many businesses want you to use credit cards. So you use credit 
cards, then you pay off the entire balance at the end of every month 
because you don't want to pay the interest. Some companies have decided 
you should be penalized for paying off your whole balance. Isn't that 
interesting? You talk about turning logic on its head, suggesting we 
don't make money on people who pay off their credit card balance every 
month, so let us decide that our approach to banking is to say those 
who pay their credit card bill off every month shall be penalized.
  Turning logic on its head? I think so. As I said when I started, I am 
likely to be branded as hopelessly old fashioned on these issues, and I 
accept that. I suspect that some day in some way others will scratch 
their heads and say, ``I wish we had been a bit more old fashioned in 
the way we assessed risk and the way we read history and the way we 
evaluated what would have made sense going forward in modernizing our 
financial institutions.''
  Oh, there is a way to modernize them all right, but it is not to be a 
parrot and say because the industry has moved in this direction, we 
must now move in this direction and catch them and circle them to say 
it is fine that you are here now. That is not the appropriate way to 
address the fundamental challenges we have in the financial services 
industry.

[[Page S4824]]

  I am not anti-bank, anti-security or anti-insurance. All of them play 
a constructive role and important role in this country. But this 
country will be better served with aggressive antitrust enforcement, 
with, in my judgment, fewer mergers, with fewer companies moving in to 
the ``too big to fail'' category of the Federal Reserve Board, with 
less concentration.
  This country will be better served if we have tighter controls, not 
firewalls that allow these companies to come together and do inherently 
risky things adjacent to banking enterprises, but to decide the lessons 
of the 1930s are indelible transcendental lessons we ought to learn and 
ought to remember.
  Mr. President, I have more to say, but I understand my time is about 
to expire.
  The PRESIDING OFFICER (Mr. Inhofe). The Senator's time has expired.
  Mr. DORGAN. Mr. President, at some point, I will have three 
amendments to offer, two of them on hedge funds and one of them on 
derivatives. I understand the Senator from Texas is in line and has the 
opportunity to offer two amendments.
  My hope is to offer my first derivative amendment following the 
Senator from Texas. I understand the Senator from Texas indicates he 
wants to try to finish the bill this evening. I understand managing the 
bill is difficult and he wants to get through these things. I will not 
speak at great length on my amendments.
  I appreciate the Senator's courtesy this morning in allowing me to 
make an opening statement. If he intends to finish the bill tonight, I 
will be here. He said if we have amendments to bring them over. I will 
be here. If the Senator wants my amendments, I will offer them and that 
will give us a chance to talk about them and deal with them.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Texas is recognized.
  Mr. GRAMM. Mr. President, this is an important bill. I have had 
problems myself with this bill in the past in other forms. I understand 
the Senator has strong feelings. It may well be that some of his 
amendments we can take. If the Senator will get them to us as quickly 
as he can, we will look at them, and if we can take them, we will. If 
we cannot, then the only thing we can do is have them presented, have 
him debate them, and then we will have a vote on them.
  Mr. SARBANES. Will the chairman yield?
  Mr. GRAMM. I will be happy to yield.
  Mr. SARBANES. On the point of amendments, I think it would be very 
helpful to the managers if Members could now let us know in the next 
hour or so whether they have amendments they intend to offer and what 
the subject matter will be. That will give us a chance to think about 
how we might structure the day.
  The leader's intent, as I understand it, is to try to finish this 
bill tonight. I think the chairman will probably agree with me that 
there is the real possibility that we could do that, but in order to 
accomplish that, it would be very helpful if Members who are thinking 
of offering amendments would let us know about them so we can 
incorporate that factor into our thinking as we think about how we are 
going to move the bill along. I would be most appreciative if people 
could do that.

  Mr. DORGAN. May I inquire, if I can ask a question of the manager, if 
we have amendments when will they likely be considered? The Senator 
from Texas has now an opportunity to offer two amendments, right? Will 
there be substantial debate on those amendments?
  Mr. GRAMM. I don't think so at this point. One of the reasons we are 
letting people go is to look at them. There will be a vote on one of 
them, sort of as a bed check to get everybody awake and ready to get 
going. I don't believe, or it is not my intention, that either one of 
them will be very controversial or be long debated.
  If the Senator can get his amendments to us and let us look at them 
so we know what he is offering, again, it might be possible we can work 
something out and take the amendments or some part of them. It is 
always better not to talk if one can win without talking, but if you 
can't win, talking is often the best thing to do. Maybe we can work it 
out. Again, we are in an accommodating mood this morning.
  Mr. DORGAN. I say the worst possible position is to not be able to 
win and not be able to talk.
  Mr. GRAMM. I can assure the Senator, we are not going to prevent him 
from talking.
  Mr. DORGAN. I will provide all three amendments to the chairman 
immediately and will be available all morning so I will not hold up his 
bill.
  Mr. GRAMM. Mr. President, I ask unanimous consent that, while holding 
our current order exactly as it is, I yield to the distinguished 
Senator from Pennsylvania to offer an amendment which he will debate 
and then withdraw.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. SANTORUM. Thank you, Mr. President.


                           Amendment No. 307

(Purpose: To require the obligations of the Financing Corporation to be 
 paid from certain excess funds of the deposit insurance funds and for 
                            other purposes)

  Mr. SANTORUM. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Pennsylvania [Mr. Santorum] proposes an 
     amendment numbered 307.

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

       At the appropriate place, insert the following:
       (e) Use of Fund Reserves To Pay FICO Obligations.--
       Section 7(b)(2) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)(2)) is amended by inserting after subparagraph 
     (C) the following:
       ``(D) Use of deposit insurance funds to pay certain 
     financing corporation obligations.--
       ``(i) In general.--Beginning on January 1, 2000, the Board 
     of Directors shall use the funds of the Bank Insurance Fund 
     and the Savings Association Insurance Fund in excess of 1.35 
     percent of estimated insured deposits or such level 
     established by the Board of Directors pursuant to Section 
     7(b)(2)(A)(iv)(II) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(b)(2)(A)(iv)(II)) to pay the bond interest 
     obligations of the Financing Corporation.
       ``(ii) Limitation.--If the funds available under clause (i) 
     are insufficient to meet the Financing Corporation's annual 
     interest obligations, the Board of Directors shall use such 
     amounts available under clause (i) and shall impose a special 
     assessment, consistent with 12 U.S.C. 1441(f)(2) and Section 
     2703(c)(2)(A) of the Deposit Insurance Funds Act of 1996, on 
     insured depository institutions in such amount and for such 
     period as is necessary to generate funds sufficient to permit 
     the Financing Corporation to meet all interest obligations 
     due.

  Mr. SANTORUM. Mr. President, I rise as a member of the Banking 
Committee to, first, express my support for the bill. I think the 
chairman has done an admirable job in trying to fashion a bill that 
takes what was a very complicated, overly complex measure last year and 
simplified it and streamlined a lot of the organizational structures 
and dealt with things in a much more straightforward fashion. I think 
as a result, we have a much cleaner and much better, more 
understandable, from an administrative point of view, proposal than 
what we were dealing with last year. I commend the chairman for that.
  Just like every other Member here, there are certain parts of the 
bill of which I am less supportive. In fact, some parts of the bill I 
am not supportive of at all and feel it is an obligation of mine to 
come forward and do what I can to make some of those changes.
  One section of the bill that I do not support is section 304. Section 
304 extends for 3 years the differential that savings institutions, 
thrifts, have to pay vis-a-vis banks on what are called FICO 
obligations or FICO bonds. That is the Financing Corporation bonds that 
were issued to resolve the Federal Savings and Loan Corporation during 
the savings and loan crisis a few years ago.
  These bonds were necessary. The industry that was involved--more 
responsible, some will argue--the thrift industry, was assessed a 
higher assessment to pay those bonds. The banking

[[Page S4825]]

industry, which had less problems, was assessed a lower assessment, 
five times lower. Without this bill, in a year's time, the amount of 
money, the amount of assessment would equalize. Instead of the thrifts 
paying 6 basis points and the banks paying 1.2 basis points, both the 
banks and thrifts would pay 2.2 basis points.
  I think that is fair. It should be equalized. Certainly the thrifts 
have paid their fair share, and then some, with respect to resolving 
the crisis that occurred in their industry. To continue this 
competitive disadvantage I think is not wise, given, in particular, the 
fact this bill has a lot in it for large banks, has a lot in it for the 
banking industry, and a lot of my small banks and thrifts have said 
there really is not much in it for the smaller, more community-oriented 
banks and for thrift institutions.
  While we are providing more opportunities for the larger banks, under 
the chairman's bill, the committee bill, we keep this additional 
disparity between savings institutions and banks. So I think it is a 
fair way to move forward given the state of play.

  The problem is that I do not think it is fair enough. Striking that 
section--I know there are several amendments out here to strike that 
section and allow the equalization of the assessments to go on--I think 
is a good step but, frankly, it is not a step that goes far enough. And 
the reason I say that needs a little explanation.
  Right now the interest that we need, the amount of money that we have 
to pay for the FICO bonds, the Financing Corporation bonds, that runs 
about $780 million a year. That is to pay the obligations on the FICA 
bonds. That money is paid by this assessment on thrifts and banks.
  Thrifts and banks also historically have another assessment that paid 
money into a reserve account, as is prudent, so we have a reserve fund 
that can pay on the guaranties for deposits in banks and savings 
organizations.
  That capital fund is overcapitalized. There is more money in that 
account than is necessary to meet the reserve requirement of 1.25 
percent of deposits. And so as a result, the assessments on banks and 
savings institutions have been basically eliminated with very few 
exceptions. But they continue to be assessed to pay the FICO bonds.
  What I have found, in looking at these accounts, is that there is far 
more money in the reserve accounts than is needed to meet the 1.25 
percent of deposits that we need in that reserve account. In fact, that 
reserve account, that money that was paid to capitalize the reserve 
account, is invested in Government bonds--should be invested, of 
course--and it is invested in Government bonds.
  The interest on that reserve account, through the investment in 
Government bonds, is about $2 billion a year. That is about how much 
interest we are bringing in and adding to the reserve account every 
year. And it is growing, by the way. Every year it continues to grow. 
We are adding about $2 billion a year in interest. So the reserve 
account, which is already overcapitalized, continues to grow.
  In fact, if you look at where this account has grown--remember, we 
are supposed to have in this reserve account 1.25 percent of deposits. 
In 1996, it was 1.3 percent; in 1997, it was 1.36; in 1998, it was 
1.39. That is in the SAIF fund, which is the savings account fund. In 
the BIF fund, which is the bank, it is 1.34; it is going up to 1.38 in 
1999. We are seeing a growth in both of those funds, and that is 
projected to continue to grow.
  You may ask the question, Why are we letting it continue to grow? 
Well, because there are no failures in banks. We are not having to 
insure the deposits and pay the money. But it is well in excess of the 
amount that we need. And it is earning $2 billion a year, thereby 
growing.
  What I am saying is that we have more than we need in this account; 
it is growing at a rate of about $2 billion a year, and yet we are 
still assessing banks and savings institutions money to pay FICO bonds. 
Why don't we use the interest that is being spun off from the 
investment in the reserve account to pay the FICO bonds and that way 
eliminate the assessment on banks completely, which is basically a $780 
million tax, when we have a fund that is growing far in excess of what 
we need in the reserve accounts?
  That is what my amendment would do. It would basically say that there 
isn't any reason to continue to assess banks and savings institutions 
to use that capital to pay FICO. Let the capital stay with the banks, 
stay with the savings institutions, be used to lend, to create more 
money, more capital available for more credit.

  It is estimated that with my amendment next year alone it would make 
$10 billion of credit available--$10 billion of new credit available if 
we pass my amendment. That money, again, which has already been 
generated in excess of what we need, would be used to pay the FICO 
obligations.
  I sort of like what is going on here with respect to the deposit 
insurance funds, the reserve funds, what goes on in a lot of trust 
funds in Government. We had almost the identical situation with the 
highway trust fund, and we had the courage, through the leadership of 
Chairman Shuster over in the House, to stand up and say, ``Look, we're 
paying all this money in gas taxes. It is going into the highway trust 
fund. But we are only appropriating a fraction of the money that is 
actually coming in.'' In other words, consumers--taxpayers--were paying 
much more money in taxes going into the trust fund than was ever going 
to be used in the trust fund.
  What was happening to the difference? What was happening to the 
difference was we were just building up this highway trust fund money 
that we would never use. Why would we want to do that?
  The same question here is, if we already have enough money to pay the 
FICO bonds with interest on the reserve accounts, why do we need to 
continue to assess banks? Well, there is only one reason why we 
continue to assess banks and savings institutions. It is because it 
counts as money to the Federal Government and it scores for the budget.
  Wait a minute. What does that mean? What that means is that we can 
show a lower deficit because we have $780 million coming in. That money 
will never be spent. It will never be spent. It will just continue, in 
some way, to grow within the reserve account, which money will never be 
used because we have far in excess of what anyone has anticipated. By 
the way, that number continues to grow.
  So we have in a sense here in the banking bill the identical 
situation as we had in the highway trust fund; which is, we are 
assessing somebody, ultimately the consumer, because they ultimately 
pay these taxes or these assessments, we are assessing them $780 
million a year to go into a fund that does not need the money, that is 
used purely--purely--to hide the deficit so we can spend money 
somewhere else. So what we want to do is say, let's do here what we did 
with the highway trust fund.
  The reason I am withdrawing my amendment--this is a good amendment. 
It is what we should do. This is truth in budgeting. We always talk 
about truth in budgeting and the Social Security trust fund and the 
highway trust fund. Here is another, in a sense, trust fund that we are 
putting money into that is never going to be used, simply to hide the 
deficit. But if we take that money out of the revenue stream, there 
will be some who will come down here to the floor and say, ``Aha, 
you're going to raise the deficit and thereby take money out of Social 
Security or thereby not have enough money for us to do a tax cut or 
thereby not have enough money to do whatever else we want to do.''
  The fact is, this is money that we should not be assessing because 
there isn't the need to assess it. But it is there. It is a tax. It is 
a tax going into a trust fund that does not need the money. But we are 
going to put it in there anyway because then we can issue bonds.

  Does this sound familiar to Social Security? We do not need the money 
in Social Security. We have enough money to pay, but we continue to 
charge people higher FICA taxes, higher Social Security taxes. We have 
a surplus. And what do we do with that surplus? We buy Government 
bonds. What does that surplus do? It hides the real deficit.
  What are we doing here with this FICO? It is interesting--FICA-FICO. 
What are we doing with FICO? We are

[[Page S4826]]

charging banks and savings institutions more money than is needed. To 
do what? To buy Government bonds. To do what? To hide the deficit. To 
do what? So we can spend the money somewhere else.
  The trust fund scams that go on here in Washington, when we set up 
these separate accounts--but we count them in the general fund. We 
count them in the overall budget calculations and create some very 
troubling policies.
  It is a policy that we fixed when it came to gas taxes in the highway 
trust fund. It is a policy we are going to try to fix when it comes to 
Social Security. It is a policy that we should fix when it comes to 
banks and savings institutions, although it is very difficult to come 
to the floor and say, we should reduce taxes on banks and thrifts 
because they are paying too much in taxes.
  It is not a very popular tax cut, if that is the way you are going to 
look at it. But this is not a tax cut; this is an assessment to make 
sure there is adequate money in reserves to pay the guarantee. These 
are banks putting money in there to make sure there is money available 
to pay insured deposits. That is what this is about. There is more 
money than we need in there right now, far in excess of the 
requirements, and yet we continue to assess it.
  That is wrong. That is not a tax to pay for government. That is not a 
tax to pay for something else. It is an assessment to do a specific 
thing. There is more money than we need to do that specific thing. Yet 
we continue to assess. Why? Because it counts in the general budget, 
and we do not want to reduce the amount of money coming into the 
general budget, even though that money doesn't go to the general fund; 
it goes to this trust fund. The trust fund then buys bonds and then we 
use the money.
  That is wrong. We should not allow that to happen. I will support the 
motion to strike section 304 because it is all we can accomplish, but I 
will continue to work, not just with this trust fund but with the other 
trust funds we have here in Washington that have been integrated into 
this budget, that hide the real cost of government. That is what we are 
dealing with here. We are hiding the real cost of government. We are 
making banks, savings institutions, pay money that there is no need for 
them to pay to hide the cost of government.
  That is wrong. That is not truthful budgeting. If we want to tax 
banks more money, if we want to go out there and tax them, say you are 
not paying enough in taxes, we are going to tax you $780 million a year 
so we can have more money in Washington, then let's be straightforward. 
Let's just go tax them and have a debate on that. But to continue to 
have them pay this assessment--don't call it a tax; it is an 
assessment--when there is plenty of money in there that would alleviate 
the need to pay that assessment is wrong.

  I am very disappointed that this amendment is subject to a budget 
point of order, which means I would have to get 60 votes to allow this 
amendment to go in. Why is it subject to a budget point of order? 
Because this assessment counts as revenue to the Government and would 
throw the budget out of balance, if we passed my amendment.
  Some will claim, you are going to take this money out of this, or 
this, or whatever. The fact is, this is not a tax; it is an assessment 
for a particular purpose, to capitalize a reserve fund to make sure 
there is money there to pay guaranteed deposits.
  There is more money. The reserve requirement is 1.25 percent. In the 
current accounts, it is almost 1.4 percent. There is almost a billion 
dollars more in the accounts than is necessary to pay to meet the 
minimum reserve requirement, yet we continue to assess more and more 
and more.
  Again, I can't tell you how disappointed I am that we continue this 
fraudulent budget practice. It is certainly my intent, while we will 
not be successful today with this amendment, to fight this battle and 
other battles for truth in budgeting where fraudulent trust funds are 
used to subsidize other government spending. That is not right. It is 
not right to this industry. It is not right to those who want available 
credit, because we are driving credit by having these assessments. It 
is certainly not right with respect to Social Security and the other 
trust funds that are being abused by the general government to hide 
deficits for this country.
  Mr. President, I ask unanimous consent to withdraw my amendment.
  The PRESIDING OFFICER. Without objection, the amendment is withdrawn.
  The amendment (No. 307) was withdrawn.
  Mr. SANTORUM. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative assistant proceeded to call the roll.
  Mr. GRAMM. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 308

(Purpose: To strike a provision relating to a 3-year extension for BIF-
 member FICO assessments, to provide for financial information privacy 
    protection, and to provide for the establishment of a consumer 
           grievance process by the Federal banking agencies)

  Mr. GRAMM. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative assistant read as follows:

       The Senator from Texas (Mr. Gramm) proposes an amendment 
     numbered 308.

  Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. GRAMM. Mr. President, the Senate Banking Committee has worked on 
this bill for a long time. In fact, this has been a live issue in the 
Congress for over 25 years. We are making progress toward at least 
having the Senate act. I think no one is under any delusion about the 
fact that we have a lot of work to do. We have a conference, and we 
have a President who ultimately is going to have a say in this through 
his ability to veto. Obviously, at some point we are going to sit down 
with him in the process and listen to his viewpoint and see to what 
degree we can come together.
  But I thought it was a good time in the process here in the Senate to 
take some action to try to clear out some differences that exist 
between proposals that Senator Sarbanes made in committee and positions 
which were adopted by the committee itself. There are two areas in this 
amendment where we adopt the position of the Sarbanes substitute which 
was considered by the Senate yesterday. What I would like to do is to 
explain these differences and then give Senator Sarbanes an opportunity 
to talk about it.
  The first has to do with striking the FICO provision. It is always 
dangerous to try to do good things on an important bill. No good deed 
goes unpunished. I had a provision in the underlying bill which was 
trying to deal with a problem, and the problem is that we have two 
separate insurance funds and they have had very different insurance 
premiums; but we had set out an automatic pilot process to bring those 
two funds to the same insurance rate, with the idea that Congress, 
while this was happening, was going to end up merging the two insurance 
funds.
  Well, as often happens, Congress ended up passing no bill related to 
merging the two insurance funds, and on the last day of the millennium, 
on December 31 of 1999, these two rates are going to be merged by law. 
And so I thought, well, this is a chance to have a good Government 
provision, so we will postpone that to give the conference and the 
Congress an opportunity to do what we said we would look at doing when 
we started merging these two rates.
  It is clear now that there is sufficient opposition to this 
provision, and I am not sure where the votes would be if we tried to 
leave it where it is. But it seemed to me, with all the big issues we 
have to deal with in this bill, that it is not worth fighting this 
issue. And so the first provision of this amendment strikes the so-
called FICO provision and allow current law to operate to assure that 
the insurance premiums of the two separate insurance funds for

[[Page S4827]]

deposit insurance will be harmonized on the last day of this year.
  The second provision deals with antifraud provisions and with this 
emerging issue of privacy. I want people to understand that by adopting 
the provisions of the Sarbanes bill on privacy, I am not saying to the 
Senate, nor is Senator Sarbanes, I am sure--and he will speak for 
himself--that this is the end of the debate. This is a very important 
issue. Privacy is a fundamental right that people have, and the 
question is trying to balance that right against the new technology 
which we all benefit from, and which we all find ourselves forced to 
operate within. It is not easy. This is a beginning.
  What I want to say to Members of the Senate is that, as a gesture 
toward promoting bipartisanship, I want to move to adopt these 
provisions from the Sarbanes substitute. But I want to go further than 
that. I want to commit that the Banking Committee will hold hearings on 
privacy issues. I want to commit that we will hold those hearings in 
both the subcommittee and at the full committee level; that we will 
begin the hearings with testimony from any Member of the House or 
Senate who wishes to testify; that we will hold comprehensive hearings 
so that anybody who has a legitimate viewpoint or represents any group 
which has a stake in this issue would have an opportunity to testify 
and have their position heard.
  Now, basically, in this amendment we make illegal a number 
of practices, where basically people are engaging in fraud and 
dishonest behavior. In addition, we require a GAO report on financial 
privacy. The amendment requires that GAO, in consultation with the 
Federal Trade Commission and the Federal banking agencies, report to 
the Congress on the efficacy and adequacy of the remedies provided to 
prevent false pretext calls to obtain financial information and 
recommendations for any additional legislation to prevent pretext 
calling.

  We have a Federal Trade Commission report to Congress on financial 
privacy. The amendment requires the Federal Trade Commission to submit 
an interim report to Congress on its ongoing study of consumer privacy 
issues.
  We establish a consumer grievance process. I think one of the things 
which has happened to every Member of the Senate is that we now find, 
in the absence of an organized process, that people tend to call us 
when they have problems of this nature. What we want to do in this 
amendment is require the Federal banking regulators to create a 
consumer grievance process for receiving and expeditiously addressing 
consumer complaints alleging a violation of regulations issued under 
this bill. These are regulations in section 202 having to do with 
consumer protection. Each Federal banking agency is required to (1) 
establish a group within each regulatory agency to receive consumer 
complaints; (2) develop procedures for investigating such complaints, 
(3) develop procedures for informing consumers of rights they may have 
in connection with such complaints, and (4) develop procedures for 
addressing concerns raised by such complaints, as appropriate, 
including procedures for the recovery of losses to the extent 
appropriate.
  This is not the end of the debate. This does not solve the privacy 
problems in America. But I believe Senator Sarbanes is correct that 
this is the beginning of the debate. I have just touched on a portion 
of the provisions. He is more expert than I on them. But I believe they 
represent an important step in beginning the debate on this issue of 
privacy.
  I think it is important we begin this debate on a bipartisan basis. 
Therefore, I have sent this amendment to the desk adopting the privacy 
portions of the Sarbanes substitute.
  I yield the floor.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, first of all, I want to indicate right 
at the outset that I am supportive of this amendment which the chairman 
has sent to the desk. I would like to address briefly the two aspects 
of it.
  First of all, it would preserve current law that ends the FICO 
assessment differential at the end of 1999.
  Actually, my colleague, Senator Johnson, was going to offer an 
amendment later, and part of that amendment would encompass this 
provision as well. That is an amendment that addresses the unitary 
thrift issue, which I believe is probably an amendment we will be able 
to get to fairly shortly this morning. In fact, the chairman and I are 
hopeful that when we do that, we will be able to work out a time 
agreement with those who are interested in the amendment so we could 
structure that debate, structure the vote, and Members would know how 
we are moving ahead.

  We indicated earlier, and I want to repeat the request--I will do it 
after we vote on this amendment--that Members who have amendments to 
let us know. Of course, we know about the unitary thrift amendment. We 
know about the op-sub amendment. We know that some Members are thinking 
of offering amendments. The chairman indicated earlier that, if we 
could see them, we might be able to work out accommodations with people 
offering amendments.
  It will be very helpful to us if Members will let us know. I think an 
opportune time will be when we have the vote on this amendment, or 
shortly thereafter we could begin to try to program and plan the day.
  The FICO assessment differential--let me briefly describe the 
legislative background and show why the current law should be 
preserved.
  In 1996, Congress passed the Deposit Insurance Funds Act of 1996 to 
resolve the disparity.
  Let me just say this amendment has two things: the FICO differential 
and this antifraud privacy provision in it. As the chairman has 
indicated, that is just a small step. I am going to address that 
shortly.
  Many Members have a very keen interest in the privacy issue. The 
privacy concerns which they have been focused on are sort of broader 
and separate and more extensive than what is in this amendment. But 
this amendment in and of itself, I think, is desirable, although it by 
no means addresses the privacy question in any broad or full manner.
  Coming back to the FICO assessment differential, when we passed the 
Deposit Insurance Funds Act of 1996 to resolve the disparity between 
the assessments being charged by the SAIFs and the BIFs to the thrifts 
and the banks for payment of interest on bonds issued by the financing 
corporation, so-called FICO bonds, it paid depositors of institutions 
that failed during the thrift crisis.
  Actually, the differential that caused thrifts to migrate assessable 
deposits to the BIF fund, the Bank Insurance Fund, in order to reduce 
their premiums, that obviously over time could have led to a 
destabilization of the SAIF funds.
  The legislation in 1996 required SAIF-insured institutions to pay a 
one-time $4.5 billion payment to the SAIF funds, and for 3 years, until 
the end of 1999, to pay assessments at a rate of 6.1 basis points of 
deposits, which was five times the rate at which BIF-insured funds were 
assessed. Then, as it were, as part of the arrangement for the thrifts 
undertaking these large payments, a one-time $4.5 billion payment and 
the five-time multiple on the assessment rate going into the SAIF 
funds, the Congress provided that the assessments would be equalized in 
the two funds no later than January 1, 2000, and the same rate would be 
assessed on BIF and SAIF-assessable deposits thereafter.
  The bill before has a provision in it, which the chairman has now 
proposed to strike, but that provision, if it remained, would extend 
the premium differential for another 3 years and, therefore, require 
SAIF-insured savings associations to pay a much higher deposit 
assessment for another 3 years, whereas the existing law would have 
eliminated that differential at the end of this year. This obviously 
would impose very significant additional and unexpected costs.
  I think, in thinking about this, that we have to really think about 
it in terms of in the sense of what the understanding was in 1996, what 
the expectations were, what the planning has been, and, of course, if 
we don't allow the law to take effect as it was laid out to do in 1996 
in the Deposit Insurance Funds Act, we markedly changed people's 
expectations and people's planning.
  OTS Director Seidman and FDIC Chairman Tanoue both testified before

[[Page S4828]]

the Senate Banking Committee opposing this section. Director Seidman 
testified that in a sense both BIF and SAIF-insured institutions have 
expected the FICO rate differential to end at the end of this year. 
Extending it could revive the incentive to shift deposits from the SAIF 
to the BIF.
  Deposit shifting represents a waste of resources and could 
unnecessarily lead the SAIFs less able to diversify to risks. FDIC 
Chairman Tanoue testified that faced with the possibility of a 
persistent rate differential, holders of SAIF-insured deposits may feel 
it is in their best interests to try to shift deposits to the BIF. This 
would result in the very inefficiencies that the Funds Act was intended 
to eliminate.
  Subsequently, FDIC Chairman Tanoue sent a letter to Chairman Gramm 
urging the elimination of section 304, and stating if the differential 
is extended ``inefficiency and waste will reemerge as institutions 
expend time and money to avoid this unequal fee structure.''
  Mr. President, I think obviously we need to give careful 
consideration to these arguments advanced by the FDIC and the OCC. The 
substitute which Senator Daschle and we proposed at the outset of these 
deliberations did not extend the differential. We did not have this 
provision in there, and, therefore, we stuck with existing law which 
would have eliminated the differential at the end of this year.
  No compelling reason has been brought to my attention that would 
require us to reopen this issue and extending the differential. The 
thrifts have been performing their obligations under the Funds Act by 
paying the $4.5 billion one-time payment, plus the payment on their 
deposits, which is five times the payment the banks are paying under 
the BIF on their deposits.
  I agree with the amendment in striking the provision that would have 
carried the differential out for another 3 years contrary to the 
understanding and everyone's assumption on the basis of the 1996 law.
  Now, Senator Johnson will be offering an amendment which addresses 
the unitary thrift issue, and I think that is a very important 
amendment. He had, as part of that amendment, this particular provision 
with respect to the differential. I think it is very important as 
Members consider the Johnson amendment to understand that what he will 
be offering on the unitary thrift issue is in the context of this 
change, as well, with respect to the differential.
  Looking at the Johnson amendment on the unitary thrift, to be fair to 
Senator Johnson and what he was seeking to accomplish, one would have 
to keep in mind or take into account that part of his approach 
encompassed this FICO assessment differential which is now contained in 
the amendment offered by the chairman.
  Members, therefore, as they examine the Johnson amendment--and I will 
make that point later, as well--need to appreciate his effort to try to 
come up with what I call a balanced, well-thought-through, reasoned, 
balanced approach in trying to deal with these issues which are in some 
ways connected with one another. Senator Johnson was trying very hard 
to put together a balanced package. The adoption of this amendment 
makes it unnecessary to be in the Johnson amendment, which ought not 
result in perceiving that the Johnson amendment is in any way 
unbalanced. Because of its approach it essentially encompassed this 
proposal, as well.
  Let me turn to the antifraud provision that is in this legislation. 
At the outset, let me be very clear. The chairman referred to the 
privacy provisions of the Sarbanes bill. There are two Sarbanes bills 
on this issue. I want to be very clear about it. One was the substitute 
which we offered which contained within it the provisions of last 
year's bill on the Financial Information Antifraud Act. Separately, 
there is a bill that I have introduced along with Senator Dodd, Senator 
Bryan, Senator Leahy, Senator Edwards, and Senator Hollings, and a 
number of other colleagues have expressed a very strong interest in 
this legislation which is a much more comprehensive approach to the 
privacy question.
  That bill would give customers notice about how their financial 
institutions share or sell their personally identifiable sensitive 
financial information. We think it is an extremely important issue. Of 
course, the chairman has indicated that he also regards it as an 
important issue, and he made the commitment this morning that the 
committee would undertake a comprehensive hearing with respect to this 
question of financial privacy.
  I support the specific provisions in this amendment. I am pleased 
that we are considering these welcomed and much needed antifraud 
provisions. However, I have to underscore, again, they do not begin to 
address the larger issues of financial privacy and the need to give 
customers an informed voice in what is happening with their most 
confidential financial data.
  Some have called the amendment that is before the Senate a so-called 
privacy amendment, but I think it is more appropriate to call it an 
antifraud measure. What people are now talking about as a privacy issue 
really is much more encompassed by this separate bill, which I 
indicated Senators Dodd, Bryan, Leahy, Edwards, and Hollings have 
joined with me in introducing, and which many of our colleagues on both 
sides of the aisle have expressed an interest in. I know there are 
colleagues on the Republican side of the aisle, as well as on this side 
of the aisle, who are very concerned about the broader privacy 
question.

  This amendment prohibits the use of fraud to obtain sensitive 
customer financial data from a bank. The use of fraud, in order to get 
this data from a bank, clearly is something we need to shut down. That 
is obviously a desirable and appropriate provision. However, this 
proposal does not require financial institutions to safeguard customer 
data. This goes to when people use fraud to somehow get that customer 
data out of the financial institution.
  This amendment doesn't address the increasingly common situation 
where companies pay banks for sensitive information without the 
knowledge or consent of their customers. Unfortunately, few Americans 
know that under current Federal law a bank, stockbroker, or insurance 
company may transfer information about a customer's transactions or 
experience to a third party without notifying the customer that the 
information is being shared, or obtaining the customer's consent. Such 
information can include savings and checking account balances, CD 
maturity dates, security purchases and insurance payouts. Americans are 
becoming increasingly concerned about the issue. That is very clear.
  Last month, the American Association of Retired Persons published a 
survey finding in which 78 percent of the people surveyed disagreed 
with this statement. Here is a statement that was put to people which 
78 percent disagreed with:

       Current Federal and State laws are strong enough to protect 
     your personal privacy from businesses that collect 
     information about consumers.

  Mr. President, 78 percent disagreed with that statement. In other 
words, they did not think that current Federal-State laws were strong 
enough to protect their personal privacy. Ninety-two percent of the 
respondents in this AARP survey said they would mind if a company they 
did business with sold information about them to another company.
  At the start of this Congress I introduced S. 187, the Financial 
Information Privacy Act of 1999 to which I referred, in which Senators 
Dodd, Bryan, Edwards, Leahy and Hollings joined. That bill will give 
customers the right to be told before their banks sell or share their 
account balances, their CD maturity dates, their credit card purchasing 
history and other sensitive financial information. It will give them 
the right to object to the sharing of this information.
  Think of the kind of information now that has no restraint upon it in 
terms of it being shared or sold. I think it is clear that most people 
have no real understanding or appreciation that this takes place and 
would not want it to happen.
  S. 187 has received strong support from leading consumer and privacy 
advocate groups. This is an issue that is high on the President's 
agenda. Just this week, the President unveiled a plan for financial 
privacy and consumer protection in the 21st century. This plan would 
require institutions to inform consumers of plans to share or sell 
their financial information and

[[Page S4829]]

give the consumer the power to stop it. In his radio address, the 
President said he was ``working to give you the right to control all 
the information on whom you write checks to, what you buy on your 
credit card and how you invest. We want to prevent anyone from 
encroaching on your privacy for their profit.''
  In conclusion on this issue, first of all, let me again indicate my 
strong support for the provision that is before the Senate which seeks 
to stop the use of fraud to obtain a consumer's confidential financial 
information. That provision was in the bill we brought out last year. 
It was in the alternative which was offered earlier. We welcome the 
chairman's willingness to place it in the bill that is before the 
Senate.
  However, I do want to note that this very limited amendment does not 
solve the serious problem of customers not knowing what is happening 
with their account balances, CD maturity dates and other transaction 
and experience information, and not having a choice as to whether this 
sensitive personal financial information is circulated to other 
companies.

  This issue has the potential of being a controversial issue. I also 
think it has the potential on which a consensus can be worked out 
between protecting the consumer interest and the assertions which the 
financial institutions are making with respect to the burdens that 
might be placed upon them or how it would inhibit them from conducting 
legitimate financial activities.
  That is something which needs to be carefully worked through, so I 
particularly welcome the indication by the chairman that we will hold 
hearings on these very important issues and undertake to develop real 
solutions to the growing problem of financial privacy. I think it is 
extremely important that we undertake that task. It is helpful this 
morning to have this indication and this commitment that the committee 
will do so.
  Mr. President, I had indications earlier there were some Members on 
this side who wanted to address this privacy question, and I think we 
would give them a brief period to follow through on that indication of 
interest. If not, I would be prepared to move to a vote on this 
amendment.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, we have a Kosovo briefing at 11:30. To try 
to accommodate our colleagues, since they are all going to be coming 
over here anyway, I ask unanimous consent that a vote occur on the 
pending amendment No. 308 at 11:30 this morning and the time until 
11:30 be equally divided in the usual form. I further ask consent that 
no amendment be in order to the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. Mr. President, let me say, if we have more Members on one 
side who want to speak than the other, I would have no concern about 
yielding more time to Senator Sarbanes' side if they have people who 
want to come over to speak on the general issue itself.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative assistant proceeded to call the roll.
  Mr. GRAMM. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. Mr. President, I yield 15 minutes to the distinguished 
Senator from Florida, Senator Mack, so he might speak on an unrelated 
subject as in morning business.
  The PRESIDING OFFICER. Without objection, the Senator from Florida is 
recognized.

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